-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 M+r0IFEJOn2Gem33kgkakafUS7GPkdoIqFl+n1yCq1AFph4meS8LGEF9SXeiSyLZ
 yP1YBQ/b24rnWWpllMXuag==

<SEC-DOCUMENT>0001178913-08-001273.txt : 20080516
<SEC-HEADER>0001178913-08-001273.hdr.sgml : 20080516
<ACCEPTANCE-DATETIME>20080516141525
ACCESSION NUMBER:		0001178913-08-001273
CONFORMED SUBMISSION TYPE:	20-F
PUBLIC DOCUMENT COUNT:		26
CONFORMED PERIOD OF REPORT:	20071231
FILED AS OF DATE:		20080516
DATE AS OF CHANGE:		20080516

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MAGIC SOFTWARE ENTERPRISES LTD
		CENTRAL INDEX KEY:			0000876779
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-PREPACKAGED SOFTWARE [7372]
		IRS NUMBER:				330477418
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		20-F
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-19415
		FILM NUMBER:		08841627

	BUSINESS ADDRESS:	
		STREET 1:		5 HAPLADA STREET
		CITY:			OR YEHUDA ISRAEL
		STATE:			L3
		ZIP:			602
		BUSINESS PHONE:		97235389322

	MAIL ADDRESS:	
		STREET 1:		5 HAPLADA STREET
		CITY:			OR YEHUDA ISRAEL
		STATE:			L3
		ZIP:			602
</SEC-HEADER>
<DOCUMENT>
<TYPE>20-F
<SEQUENCE>1
<FILENAME>zk85238.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        \\Backup\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>



<HR WIDTH="100%" SIZE="4" noshade style="margin-top: -5px">
<HR WIDTH="100%" SIZE="1" noshade style="margin-top: -10px">

<P ALIGN=CENTER><FONT SIZE=4><B>SECURITIES AND EXCHANGE COMMISSION</B></FONT><BR>
<FONT SIZE=2><B>Washington D.C. 20549</B></FONT><BR><FONT SIZE=4><B>FORM 20-F</B></FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=3 FACE=WINGDINGS>o</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=3><B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
  THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><B>OR</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=3 FACE=WINGDINGS>x</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=3><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>For the
  fiscal year ended December 31, 2007</B></FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><B>OR</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=3 FACE=WINGDINGS>o</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=3><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934</B></FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><B>For the transition period from __________ to __________</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=3 FACE=WINGDINGS>o</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=3><B>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Date of event requiring this shell company report ____________</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2><B>Commission
file number: 0-19415</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=5><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT><BR>
<FONT SIZE=2>(Exact Name of Registrant as specified in its charter<BR>
and translation of Registrant&#146;s name into English)<BR>
<B>Israel<BR>(Jurisdiction of incorporation or organization)</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>5
Haplada Street, Or Yehuda 60218, Israel<BR>
</B>(Address of principal executive offices)</FONT></P>

<P><FONT SIZE=2>Securities registered or to be
registered pursuant to Section 12(b) of the Act:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="50%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="49%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>Title
  of each class</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>Name
  of each exchange on which registered</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2><B>Ordinary Shares, NIS 0.1 Par Value</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2><B>NASDAQ Global Market</B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE="2">Securities registered or to be
registered pursuant to Section 12(g) of the Act: <B>None</B></FONT></P>

<P><FONT SIZE="2">Securities for which there is
a reporting obligation pursuant to Section 15(d) of the Act: <B>None</B></FONT></P>

<div><FONT SIZE=2>Indicate the number of
outstanding shares of each of the issuer&#146;s classes of capital or common stock
as of the close of the period covered by the annual report:</FONT></div>

<div ALIGN=CENTER><FONT SIZE=2><B>Ordinary Shares, par value NIS 0.01 per share</B> 31,542,050<BR>
(as of December 31, 2007)</FONT></div>
<br>
<div><FONT SIZE=2>Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.</FONT></div>

<div ALIGN=CENTER><FONT SIZE=2>Yes <FONT FACE=WINGDINGS>o</FONT>
No <FONT FACE=WINGDINGS>x</FONT></FONT></div>
<br>
<div><FONT SIZE=2>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.</FONT></div>

<div ALIGN=CENTER><FONT SIZE=2>Yes <FONT FACE=WINGDINGS>o</FONT>
No <FONT FACE=WINGDINGS>x</FONT></FONT></div>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<div><FONT SIZE=2>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.</FONT></div>

<div ALIGN=CENTER><FONT SIZE=2>Yes <FONT FACE=WINGDINGS>x</FONT>
No <FONT FACE=WINGDINGS>o</FONT></FONT></div>
<br>
<div><FONT SIZE=2>Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of &#147;accelerated filer and large
accelerated filer&#148; in Rule&nbsp;12b-2 of the Exchange Act. (Check one):</FONT></div>

<div ALIGN=CENTER><FONT SIZE=2>Large accelerated filer&nbsp;<FONT FACE=WINGDINGS>o</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated
filer&nbsp;<FONT FACE=WINGDINGS>o</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated
filer <FONT FACE=WINGDINGS>x</FONT></FONT></div>
<br>
<div><FONT SIZE=2>Indicate by check mark which
financial statement item the registrant has elected to follow:</FONT></div>

<div ALIGN=CENTER><FONT SIZE=2>Item 17 <FONT FACE=WINGDINGS>o</FONT> Item 18 <FONT FACE=WINGDINGS>x</FONT></FONT></div>
<br>
<div><FONT SIZE=2>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).</FONT></div>

<div ALIGN=CENTER><FONT SIZE=2>Yes <FONT FACE=WINGDINGS>o</FONT>
No <FONT FACE=WINGDINGS>x</FONT></FONT></div>

<P><FONT SIZE=2>This annual report on Form 20-F is incorporated by
reference into the registrant&#146;s Registration Statements on Form S-8,
Registration Nos. 333-13270, 333-11220, 333-1946, 333-10794, 333-113552,
333-132221 and 333-149553</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><IMG SRC="magic.jpg"></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>INTRODUCTION</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Magic
Software Enterprises Ltd. develops, markets, sells and supports composite
application development and deployment platforms with a service-oriented
architecture, or SOA, including application integration and business process
management, or BPM, with existing and legacy systems. Our products and services
are available through a global network of subsidiaries, distributors,
value-added resellers and software solution providers in approximately 50
countries. As used in this annual report, the terms &#147;we,&#148; &#147;us,&#148; &#147;our,&#148; and
Magic mean Magic Software Enterprises Ltd. and its subsidiaries, unless
otherwise indicated.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over
the last twenty-four years we have developed an application development and
deployment technology, which facilitates change and empowers business users to
take an active part in the development process. Our technology is a metadata
driven, rule based platform and development framework. During that period, a
broad community of independent software vendors, or ISVs, and customers
worldwide, have been using our rapid application development and deployment
technology and products. In 2002, we recognized that the software application
market was changing. Organizations had built up a wide array of systems that
needed to communicate with each other more efficiently in order to streamline
business processes, improve productivity and ultimately reduce costs and
increase business revenues. The demand for technology enablement was no longer
coming exclusively from the information technology, or IT, department, but from
businesses charged with improving operations. In order to address the needs of
both developers and business users, we added to our eDeveloper two additional
layers, orchestration and graphical process design, as well as an activity
monitoring service, and created iBOLT - a single, unified and highly scalable
development and business integration suite. iBOLT allows our customers to
implement application integration layers, create service oriented architectures
and manage end-to-end processes.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have obtained trademark registrations for Magic&#174; in the United States as well
as in Canada, Israel, the Netherlands (Benelux), Switzerland, Thailand and the
United Kingdom. All other trademarks and trade names appearing in this annual
report are owned by their respective holders.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
consolidated financial statements appearing in this annual report are prepared
in U.S. dollars and in accordance with generally accepted accounting principles
in the United States, or U.S. GAAP. All references in this annual report to
&#147;dollars&#148; or &#147;$&#148; are to U.S. dollars and all references in this annual report
to &#147;NIS&#148; are to New Israeli Shekels.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statements
made in this annual report concerning the contents of any contract, agreement
or other document are summaries of such contracts, agreements or documents and
are not complete descriptions of all of their terms. If we filed any of these
documents as an exhibit to this annual report or to any previous filling with
the Securities and Exchange Commission, you may read the document itself for a
complete recitation of its terms.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
annual report on Form 20-F contains various &#147;forward-looking statements&#148; within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995, as amended, with respect to our
business, financial condition and results of operations. Such forward-looking
statements reflect our current view with respect to future events and financial
results. Statements which use the terms &#147;anticipate,&#148; &#147;believe,&#148; &#147;expect,&#148;
&#147;plan,&#148; &#147;intend,&#148; &#147;estimate,&#148; &#147;anticipate&#148; and similar expressions are intended
to identify forward looking statements. We remind readers that forward-looking
statements are merely predictions and therefore inherently subject to
uncertainties and other factors and involve known and unknown risks that could
cause the actual results, performance, levels of activity, or our achievements,
or industry results, to be materially different from any future results,
performance, levels of activity, or our achievements expressed or implied by
such forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. Except as required by applicable law, including the securities laws of
the United States, we undertake no obligation to publicly release any update or
revision to any forward looking statements to reflect new information, future
events or circumstances, or otherwise after the date hereof. We have attempted
to identify significant uncertainties and other factors affecting
forward-looking statements in the Risk Factors section that appears in Item 3D.
&#147;Key Information - Risk Factors&#148;</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2></FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P ALIGN=CENTER><FONT SIZE=2><B>TABLE OF CONTENTS</B></FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="10%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="80%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><B><A HREF="#A101"><small>PART I</small></A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2><B>1</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A102">ITEM 1.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A102">IDENTITY OF DIRECTORS, SENIOR
  MANAGEMENT AND ADVISERS</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A103">ITEM 2.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A103">OFFER STATISTICS AND EXPECTED
  TIMETABLE</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A104">ITEM 3.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A104">KEY INFORMATION</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A105">A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A105">Selected Financial Data</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A106">B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A106">Capitalization and Indebtedness</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A107">C.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A107">Reasons for the Offer and Use of
  Proceeds</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A108">D.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A108">Risk Factors</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A109">ITEM 4.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A109">INFORMATION ON THE COMPANY</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>12</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A110">A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A110">History and Development of the
  Company</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>12</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A111">B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A111">Business Overview</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>14</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A112">C.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A112">Organizational Structure</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>23</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A113">D.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A113">Property, Plants and Equipment</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A114">ITEM 4A.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A114">UNRESOLVED STAFF COMMENTS</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A115">ITEM 5.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A115">OPERATING AND FINANCIAL REVIEW AND
  PROSPECTS</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A116">A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A116">Results of Operations</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A117">B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A117">Liquidity and Capital Resources</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>37</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A118">C.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A118">Research and Development, Patents
  and Licenses</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>39</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A119">D.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A119">Trend Information</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>39</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A120">E.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A120">Off-Balance Sheet Arrangements</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>39</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A121">F.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A121">Tabular Disclosure of Contractual
  Obligations</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>40</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A122">ITEM 6.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A122">DIRECTORS, SENIOR MANAGEMENT AND
  EMPLOYEES</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>40</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A123">A</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A123">Directors and Senior Management</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>40</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A124">B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A124">Compensation</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>43</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A125">C.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A125">Board Practices</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>44</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A126">D.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A126">Employees</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>52</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A127">E.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A127">Share Ownership</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>52</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A128">ITEM 7.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A128">MAJOR SHAREHOLDERS AND RELATED PARTY
  TRANSACTIONS</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>56</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A129">A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A129">Major Shareholders</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>56</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A130">B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A130">Related Party Transactions</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>56</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A131">C.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A131">Interests of Experts and Counsel</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>57</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A132">ITEM 8.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A132">FINANCIAL INFORMATION</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>57</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A133">A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A133">Consolidated Statements and Other
  Financial Information</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>57</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A134">B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A134">Significant Changes</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>58</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A135">ITEM 9.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A135">THE OFFER AND LISTING</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>58</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A136">A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A136">Offer and Listing Details</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>58</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A137">B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A137">Plan of Distribution</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>59</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A138">C.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A138">Markets</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>60</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A139">D.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A139">Selling Shareholders</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>60</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A140">E.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A140">Dilution</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>60</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A141">F.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A141">Expense of the Issue</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>60</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A142">ITEM 10.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A142">ADDITIONAL INFORMATION</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>60</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A143">A.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A143">Share Capital</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>60</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A144">B.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A144">Memorandum and Articles of
  Association</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>60</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A145">C.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A145">Material Contracts</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>63</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A146">D.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A146">Exchange Controls</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>63</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A147">E.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A147">Taxation</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>63</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A148">F.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A148">Dividend and Paying Agents</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>72</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A149">G.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A149">Statement by Experts</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>72</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A150">H.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A150">Documents on Display</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>72</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A151">I.</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A151">Subsidiary Information</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>73</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A152">ITEM 11.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A152">QUANTITATIVE AND QUALITATIVE DISCLOSURE
  ABOUT MARKET RISKS</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>73</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A153">ITEM 12.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A153">DESCRIPTION OF SECURITIES OTHER THAN
  EQUITY SECURITIES</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>73</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>i</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="10%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="80%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><A HREF="#A154"><small>PART II</small></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>73</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A155">ITEM 13.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A155">DEFAULTS, DIVIDEND ARREARAGES AND
  DELINQUENCIES</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>73</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A156">ITEM 14.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A156">MATERIAL MODIFICATIONS TO THE RIGHTS
  OF SECURITY HOLDERS AND USE OF PROCEEDS</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>73</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A157">ITEM 15.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A157">CONTROLS AND PROCEDURES</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>73</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A158">ITEM 15T.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A158">CONTROLS AND PROCEDURES</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>73</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A159">ITEM 16.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A159">RESERVED</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>74</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A160">ITEM 16A.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A160">AUDIT COMMITTEE FINANCIAL EXPERT</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>74</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A161">ITEM 16B.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A161">CODE OF ETHICS</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>74</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A162">ITEM 16C.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A162">PRINCIPAL ACCOUNTING FEES AND
  SERVICES</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>75</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A163">ITEM 16D.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A163">EXEMPTIONS FROM THE LISTING
  REQUIREMENTS AND STANDARDS FOR AUDIT COMMITTEE</A></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>75</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A164">ITEM 16E.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A164">PURCHASE OF EQUITY SECURITIES BY THE
  ISSUER AND AFFILIATED PURCHASERS</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>75</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><A HREF="#A165"><small>PART III</small></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>75</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A166">ITEM 17.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A166">FINANCIAL STATEMENTS</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>75</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A167">ITEM 18.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A167">FINANCIAL STATEMENTS</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>76</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A HREF="#A168">ITEM 19.</A></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P><FONT SIZE=2><A HREF="#A168">EXHIBITS</A></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>76</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=BOTTOM>
<P><FONT SIZE=2>S I G N A T U R E S</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>79</FONT></P>
</TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>ii</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<P ALIGN=CENTER><A NAME=A101></A><FONT SIZE=2><B>PART I</B></FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><A NAME=A102></A><FONT SIZE=2><B>ITEM 1.</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><font size=2><B><U>IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><A NAME=A103></A><FONT SIZE=2><B>ITEM 2.</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><font size=2><B><U>OFFER
STATISTICS AND EXPECTED TIMETABLE</U></B></FONT></P>
</TD>
</TR>
</TABLE>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</FONT></P>


<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><A NAME=A104></A><FONT SIZE=2><B>ITEM 3.</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><font size=2><B><U>KEY
INFORMATION</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>A.<A NAME=A105></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S<small>ELECTED</small> F<small>INANCIAL</small> D<small>ATA</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents selected consolidated financial data as of the dates
and for each of the periods indicated. This data includes discontinued
operation for all presented periods (see note 1b and 1g to the financial
statements). You should read the selected consolidated financial data set forth
below together with Item 5. &#147;Operating and Financial Review and Prospects&#148; as
well as our consolidated financial statements and notes thereto appearing
elsewhere in this annual report.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have derived the following consolidated income statement data for the years
ended December 31, 2005, 2006 and 2007 and the consolidated balance sheet data
as of December 31, 2006 and 2007 from our audited consolidated financial
statements and notes included elsewhere in this annual report with the relevant
adjustments due to the discontinued operation. We have derived the consolidated
income statement data for the years ended December 31, 2003 and 2004 and the
consolidated balance sheet data as of December 31, 2003, 2004 and 2005 from our
audited consolidated financial statements that are not included in this annual
report with the relevant adjustments due to the discontinued operation.</FONT></P>

<P><FONT SIZE=2><B>Income
Statement Data:</B></FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="14" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="14" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2003</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2004</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="14" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>(<B>U.S. dollars in thousands, except share and per
  share data)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Revenues:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>22,327</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>


<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>



<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24,861</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>21,503</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>18,788</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>17,707</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Maintenance and technical support</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,495</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,233</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,238</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,531</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>12,605</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Consulting services</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>23,620</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>21,119</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>19,096</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>22,252</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>28,116</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>55,442</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>57,213</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>51,836</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>52,571</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>58,428</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cost of revenues:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,794</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,814</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>6,965</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,433</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,558</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Maintenance and technical support</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,424</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,072</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,179</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,873</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,602</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Consulting services</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>15,296</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>14,403</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>14,123</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>16,862</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>21,181</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total cost of revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>22,514</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>22,289</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>23,267</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>25,168</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>27,340</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Gross profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>32,928</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>34,924</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>28,569</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>27,403</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,088</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Operating expenses:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Research and development, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,573</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,545</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,413</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,462</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,716</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Sales, marketing, general and
administrative</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>27,842</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>29,685</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>31,707</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>29,496</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>27,090</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Restructuring and impairment and other
non-recurring costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,157</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Operating income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,513</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,694</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(5,551</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(6,712</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,282</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Financial income (expense), net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>338</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>917</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(809</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>332</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>161</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Other income (expenses)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(42</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>278</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>170</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss) before taxes on income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,809</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,611</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,360</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,102</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,613</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income taxes</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(36</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>254</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>462</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>310</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>362</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss) after taxes on income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,845</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,357</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,822</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,412</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,251</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Equity in earnings (losses) of affiliates</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(36</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>79</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>19</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(86</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Minority interest in losses (earnings) of subsidiaries</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(162</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>67</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>71</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss) before discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,647</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,369</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(6,811</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(6,326</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,143</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income from discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,420</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>721</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,204</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,320</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,465</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss) after discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,067</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,090</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(5,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>12,608</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Basic net earnings (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.10</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.13</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.40</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Diluted net earnings (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.10</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.13</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.39</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Shares used to compute basic earnings (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>29,624</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,029</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,124</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,184</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,443</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Shares used to compute diluted earnings (loss) per
share</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>29,909</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>32,426</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>31,124</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>31,184</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>32,023</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>1</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<div><FONT SIZE=2><B>Balance Sheet Data:</B></FONT></div>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="49%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>

<TD COLSPAN="14" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>At December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="14" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2003</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2004</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="14" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>(U.S. dollars in thousands)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Working capital</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>23,008</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>25,934</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>19,052</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>15,584</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>28,743</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cash, cash equivalents, short term deposits and marketable
  securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11,233</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10,982</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10,173</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11,653</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>16,357</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total assets including discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>77,799</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>80,285</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>73,722</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>71,172</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>82,298</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Shareholders&#146; equity</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>53,924</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>59,547</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>52,305</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>47,644</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>61,244</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>B.<A NAME=A106></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C<small>APITALIZATION AND</small></B> <B>I<small>NDEBTEDNESS</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>
<P><FONT SIZE=2><B>C.<A NAME=A107></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R<small>EASONS FOR THE</small></B> <B>O<small>FFER AND</small></B> <B>U<small>SE OF</small></B> <B>P<small>ROCEEDS</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>
<P><FONT SIZE=2><B>D.<A NAME=A108></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R<small>ISK</small></B> <B>F<small>ACTORS</small></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing
in our ordinary shares involves a high degree of risk and uncertainty. You
should carefully consider the risks and uncertainties described below before
investing in our ordinary shares. Our business, prospects, financial condition
and results of operations could be adversely affected due to any of the
following risks. In that case, the value of our ordinary shares could decline,
and you could lose all or part of your investment.</I></FONT></P>

<P><FONT SIZE=2><B>Risks
Related to Our Business and Our Industry</B></FONT></P>

<P><FONT SIZE=2><B><I>We have a history of losses and may not be
able to</I></B> <B><I>maintain profitability in the future.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we
reported net income of $12.6 million in the year ended December 31, 2007, we
incurred losses in the pervious two years. No assurance can be given that we
will be able to maintain our current level of revenues or profitability in the
future.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>2</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE="2"><B><I>We have
a history of quarterly fluctuations in our results of operations and expect
these fluctuations to continue.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have experienced and in the future may continue to experience significant
fluctuations in our quarterly results of operations and we expect these
fluctuations to continue. Factors that may contribute to fluctuations in our
quarterly results of operations include:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE="SYMBOL">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The size and
  timing of orders;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE=symbol>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The high
  level of competition that we encounter;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The timing of
  our product introductions or enhancements or those of our competitors or of
  providers of complementary products;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Market
  acceptance of our new products, applications and services;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The
  purchasing patterns and budget cycles of our customers and end-users;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The mix of
  product sales;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Exchange rate
  fluctuations; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>General
  economic conditions.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
customers ordinarily require the delivery of products promptly after we accept
their orders. With the exception of contracts for services, we usually do not
have a backlog of orders for our products. Consequently, revenues from our
products in any quarter depend on orders received and accepted by the customers
in that quarter. The deferral of the placing and acceptance of any large order
from one quarter to another could materially adversely affect our results of
operations for the former quarter. Our customers sometimes require an
acceptance test for services we provide and as a result, we may have a
significant backlog of orders for our services. Our revenues from services
depend on orders received and services provided by us and accepted by our
customers in that quarter. If sales in any quarter do not increase
correspondingly or if we do not reduce our expenses in response to level or
declining revenues in a timely fashion, our financial results for that quarter
would be materially adversely affected. For these reasons, quarter-to-quarter
comparisons of our results of operations are not necessarily meaningful and you
should not rely on the results of our operations in any particular quarter as
an indication of future performance.</FONT></P>

<P><FONT SIZE="2"><B><I>Currency
exchange rate fluctuations in the world markets in which we conduct business
and could have a material adverse affect on our business, results of operations
and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
financial statements are stated in U.S. dollars, our functional currency.
Nevertheless, a substantial portion of our revenues and expenses are incurred
in other currencies, particularly Euros, Japanese yen, NIS and the British
pound<B>.</B>
We maintain substantial non-U.S. dollar balances of assets, including cash and
accounts receivable, and liabilities, including accounts payable. Fluctuations
in the value of the currencies in which we do business relative to the U.S.
dollar may have a material adverse effect on our business, results of
operations and financial condition, by decreasing the U.S. dollar value of
assets held in other currencies and increasing the U.S. dollar amount of
liabilities payable in other currencies, or by decreasing the U.S. dollar value
of our revenues in other currencies and increasing the U.S. dollar amount of
our expenses in other currencies. From time to time we use derivative or other
instruments to hedge against part or all of our exposures.</FONT></P>

<P><FONT SIZE="2"><B><I>Our
widespread operations may strain our management, operational and financial
resources and could have a material adverse affect on our business, results of
operations and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
widespread operations have significantly strained our management, operational
and financial resources in the past. Any future growth may increase this
strain. To manage future growth effectively, we must:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Expand our
  operational, management, financial, marketing and research and development
  functions;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>3</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Train,
  motivate, manage and retain qualified employees; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2  FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Hire
  additional personnel.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may not succeed in managing future growth.</FONT></P>

<P><FONT SIZE="2"><B><I>We face
intense competition in the markets for our application development and
integration technologies and services, which are evolving into a new unified
market for composite applications development and deployment, which competition
could adversely affect our business, results of operations and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
companies compete with us in the areas of software development tools, business
integration and business process management, or BPM, tools, and in the
applications and services markets in which we operate. We expect that
competition will increase in the future, both with respect to our technology,
applications and services which we currently offer and applications and
services which we and other vendors are developing. Increased competition,
direct and indirect, could adversely affect our business, financial condition
and results of operations.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
of our existing and potential competitors are far larger, have substantially
greater resources including financial, technological, marketing, skilled human
resources and distribution capabilities, and enjoy greater market recognition
than us. We may not be able to differentiate our products from those of our
competitors, offer our products as part of integrated systems or solutions to
the same extent as our competitors, or successfully develop or introduce new
products that are more cost-effective, or offer better performance than our
competitors. Failure to do so could adversely affect our business, financial
condition and results of operations.</FONT></P>

<P><FONT SIZE="2"><B><I>We may
not succeed in increasing our market share in the business integration and
process management markets with our iBOLT products, or leverage our experience
in the composite applications field which could adversely affect our business,
results of operations and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2003, we launched the iBOLT Integration Suite, which provides business
integration and process management solutions to mid-size and large
organizations. As a comprehensive suite, iBOLT allows the seamless
integration and interoperability of diverse solutions, including legacy
applications, in a quick and efficient manner. We continued to develop this product and enhance it,
releasing successive versions in 2004 and 2005 (the current version is 2.5). In
2005 we also started a line of special editions of iBOLT tailored for specific
application packages, and to date we have released three such special editions,
for SAP, for Oracle JD Edwards, and for Salesforce.com. We
are currently developing the next release of iBOLT, which we intend to release
during the second half of 2008.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
business integration and BPM markets in which we compete are extremely
competitive and subject to rapid changes. Our competitors utilize varying
approaches to the provision of technology to business integration and BPM
markets. We may not have the resources, skills and product variety required to
successfully increase our market share in these markets. We do not have a long
history of selling products in the business integration and process management
markets and we will have to devote substantial resources to educating
prospective customers and the market about our products&#146; benefits. In addition,
even if we succeed in convincing prospective customers and the market that our
products are effective and provide real business benefits, our target customers
may not choose them for technical, cost, support or other reasons.</FONT></P>

<P><FONT SIZE=2><B><I>Our future success will be largely dependent on the
acceptance of future releases of our eDeveloper application development and
deployment product and if we are unsuccessful our business, results of
operations and financial condition will be adversely affected.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
future success will be in great measure dependent on the acceptance of future
releases of our eDeveloper application development and deployment product. The
acceptance of this product relies in part on the continued acceptance and
growth of diverse platforms, systems and databases, where eDeveloper operates
as the bridge for creating composite applications. In the future, organizations
may not implement multiple environments to serve their computing needs. If this
product is not accepted, our business, results of operations and financial
condition will be adversely affected.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>4</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>Changes in the ratio of our revenues generated from different
revenue elements may adversely affect our gross profit margins.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
derive our revenues from the sale of software licenses, applications,
maintenance and technical support and consulting services. Our gross margin is
affected by the proportion of our revenues generated from the sale of each of
those elements of our revenues. Our revenues from the sale of our software
licenses and maintenance and technical support have higher gross margins than
our revenues from the sale of consulting services. If the relative proportion
of our revenues from the sale of consulting services increases as a percentage
of our total revenues, our gross profit margins will decline. Our software
licenses revenues include the sale of the third party software license sales,
which have a lower gross margin than the sales of our software products. Any
increase in the portion of third party software license sales out of total
license sales will decrease our gross profit margin.</FONT></P>

<P><FONT SIZE=2><B><I>We derive a significant portion of our
revenues from independent distributors who are under no obligation to purchase
our products and the loss of such independent distributors could adversely
affect our business, results of operations and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
sell our products through our direct sales representatives, as well as through
third parties that use our technology to develop solutions for their customers,
referred to as Magic Software Partners, and through independent distributors as
well. These independent distributors then resell our products to end-users. We
are dependent upon the acceptance of our products by our independent
distributors and their active marketing and sales efforts. Typically, our
arrangements with our independent distributors do not require them to purchase specified
amounts of products or prevent them from selling non-competitive products. The
independent distributors may not continue, or may not give a high priority to,
marketing and supporting our products. Our results of operations could be
materially adversely affected by changes in the financial condition, business,
marketing strategies, local and global economic conditions, or results of our
independent distributors.</FONT></P>

<P><FONT SIZE=2><B><I>We may lose independent distributors on whom we currently
depend and we may not succeed in developing new distribution channels which
could adversely affect our business, results of operations and financial
condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of our distribution relationships are terminated, we may not be successful
in replacing them on a timely basis, or at all. In addition, we will need to
develop new sales channels for new products, and we may not succeed in doing
so. Any changes in our distribution and sales channels, particularly the loss
of a major distributor, or our inability to establish effective distribution
and sales channels for new markets, will impact our ability to sell our
products and result in a loss of revenues and profits.</FONT></P>

<P><FONT SIZE=2><B><I>Our efforts to increase our presence worldwide, including
the United States, Europe and Asia may not be profitable, which could adversely
affect our business, results of operations and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>Our success in
becoming a stronger competitor in the sale of software development and
deployment technology and a leading provider of applications is dependent upon
our ability to increase our sales in all our markets, including, but not
limited to the United States, Europe and Japan. Our efforts to increase our
penetration to these markets are subject to risks inherent to such markets,
including the high cost of doing business in such locations. Our efforts may be
costly and the may not result in profits, which could adversely affect our
business, results of operations and financial condition.</FONT></P>

<P><FONT SIZE=2><B><I>Our products have a lengthy sales cycle which could
adversely affect our revenues.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
customers typically use our technology to develop, deploy and integrate
applications that are critical to their businesses. As a result, the licensing
and implementation of our technology generally involves a significant commitment
of attention and resources by prospective customers. Because of the long
approval process that typically accompanies strategic initiatives or capital
expenditures by companies, our sales process is often delayed, with little or
no control over any delays encountered by us. Our sales cycle can be further
extended for sales made through third party distributors.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>5</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>Rapid technological changes may adversely affect the market
acceptance of our products and services, and our
business, results of operations and financial condition could  be adversely affected.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
compete in a market that is characterized by rapid technological change.  The introduction of new technologies could
render existing products and services obsolete and unmarketable and could exert
price pressures on our products and services.
Our future success will depend upon our ability to address the
increasingly sophisticated needs of our customers by:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Supporting
  existing and emerging hardware, software, databases and networking platforms;
  and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Developing
  and introducing new and enhanced software development technology and
  applications that keep pace with such technological developments, emerging
  new markets and changing customer requirements.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
release dates of any future products or enhancements are delayed or if, when
released, they fail to achieve market acceptance, our business, financial
condition and results of operations vould be materially adversely affected.</FONT></P>

<P><FONT SIZE=2><B><I>We may be unable to attract, train and retain qualified
persona, which could adversely affect our
business, results of operations and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event our business grows, we will need to hire additional qualified
personnel.  The process of locating,
training and successfully integrating qualified personnel into our operations
can be lengthy and expensive.  We may
not be able to compete effectively for the personnel we need.  Competition for employees in the industry in
which we operate is intense around the world, especially in Israel, India and
the United States.  Any loss of members
of senior management or key technical personnel, or any failure to attract or
retain highly qualified employees as needed, could have a material adverse
effect on our business, financial condition and results of operations.</FONT></P>

<P><FONT SIZE=2><B><I>Our products may contain defects that may be costly to
correct, delay market acceptance of our products and expose us to difficulties
in the collection of receivables and to litigation.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite
quality assurance testing performed by us, as well as by Magic Software
Partners and end-users who participate in our beta-testing programs, errors may
be found in our software products or in applications developed with our
technology.  This risk is exacerbated by
the fact that a significant percentage of the applications developed with our
technology were and are likely to continue to be developed by Magic Software
Partners over whom we exercise no supervision or control.  If defects are discovered, we may not be
able to successfully correct them in a timely manner or at all.  Defects and failures in our products could
result in a loss of, or delay in, market acceptance of our products, as well as
difficulties in the collection of receivables and litigation, and could damage
our reputation.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
standard license agreement with our customers contains provisions designed to
limit our exposure to potential product liability claims that may not be
effective or enforceable under the laws of some jurisdictions.  Accordingly, we could fail to realize
revenues and suffer damage to our reputation as a result of, or in defense of,
a substantial claim.</FONT></P>

<P><FONT SIZE=2><B><I>Our proprietary technology is difficult to protect and
unauthorized use of our proprietary technology by third parties may impair our
ability to compete effectively.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
success and ability to compete depend in large part upon our ability to protect
our proprietary technology.  We rely on
a combination of trade secret and copyright laws and confidentiality,
non-disclosure and assignment-of-inventions agreements to protect our
proprietary technology.  We do not have
any patents.  Our policy is to require
employees and consultants to execute confidentiality agreements upon the
commencement of their relationships with us.
These measures may not be adequate to protect our technology from
third-party infringement, and our competitors might independently develop
technologies that are substantially equivalent or superior to ours.  Additionally, our products may be sold in
foreign countries that provide less protection for intellectual property rights
than that provided under U.S. or Israeli laws.
</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>6</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>We are dependent on a limited number of product families and
a decrease in revenues from these products would adversely affect our
business, results of operations and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently,
we derive most of our revenues from sales of developments and integration
products primarily under our eDeveloper and iBolt brands, as well as related
revenues from software maintenance and support and other services.  We do not expect our revenue structure to
change in the foreseeable future.  Our
future growth depends heavily on our ability to effectively develop and sell
new and acquired products as well as add new features to existing products. A
decrease in revenues from our primary
products would adversely affect our business, results of operations and financial condition.</FONT></P>

<P><FONT SIZE=2><B><I>Third parties may claim that we infringe upon their
intellectual property rights and could harm our business.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third
parties may assert infringement claims against us or claims that we have
violated a patent or infringed upon a copyright, trademark or other proprietary
right belonging to them.  Any
infringement claim, even one without merit, could result in the expenditure of
significant financial and managerial resources to defend any such claims.</FONT></P>

<P><FONT SIZE=2><B><I>We may encounter difficulties with our international
operations and sales which could adversely affect our business, results of
operations and financial condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
our principal executive offices are located in Israel, 92% of our sales in
2005, 2006 and 2007 were generated from other countries.  This subjects us to many risks inherent to
international business activities, including:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Limitations
  and disruptions resulting from the imposition of government controls;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Changes in
  regulatory requirements;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Export
  license requirements;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Economic or
  political instability;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Trade
  restrictions;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Changes in
  tariffs;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Currency
  fluctuations;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Difficulties
  in the collection of receivables;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Greater
  difficulty in safeguarding intellectual property; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Difficulties
  in managing overseas subsidiaries and international operations.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may encounter significant difficulties in connection with the sale of our
products in international markets as a result of one or more of these factors  and our business, results of operations and financial condition
could be adversely affected.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>7</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>Because we are controlled by Formula Systems (1985) Ltd.,
investors will not be able to affect the outcome of shareholder votes.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Formula
Systems (1985) Ltd., whose shares trade on the NASDAQ Global Market and the Tel
Aviv Stock Exchange, or TASE, directly owns
17,036,018 or 53.3% of our outstanding ordinary
shares.  Formula Systems Ltd. is and may
continue to be in a position to exercise control over most matters requiring
shareholder approval, including the election of our directors, approval of
significant corporate transactions and the general ability to direct our
affairs.  Such concentration of ownership
may have the effect of delaying or preventing a change in control.</FONT></P>

<P><FONT SIZE=2><B><I>If
we are unable to maintain effective internal controls in accordance with
Section 404 of the Sarbanes-Oxley Act of 2002, the reliability of our financial
statements may be questioned and our share price may suffer.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Sarbanes-Oxley Act of 2002 imposes certain duties on us and our executives and
directors.  Our efforts to comply with
the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 governing
internal controls and procedures for financial reporting, which started in
connection with this Annual Report on Form 20-F have resulted in increased
general and administrative expense and a diversion of management time and
attention, and we expect these efforts to require the continued commitment of
significant resources.  We may identify
material weaknesses or significant deficiencies in our assessments of our
internal controls over financial reporting.
Failure to maintain effective internal controls over financial reporting
could result in investigation or sanctions by regulatory authorities, and could
have a material adverse effect on our operating results, investor confidence in
our reported financial information, and the market price of our ordinary
shares.</FONT></P>

<P><FONT SIZE=2><B><I>Risk Factors Related to Our Ordinary Shares</I></B></FONT></P>

<P><FONT SIZE=2><B><I>Our share price has been very volatile in the past and may
continue to be susceptible to significant market price and volume fluctuations
in the future.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ordinary shares have experienced significant market price and volume
fluctuations in the past and may experience significant market price and volume
fluctuations in the future in response to factors such as the following, some
of which are beyond our control:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Quarterly
  variations in our operating results;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Operating
  results that vary from the expectations of securities analysts and investors;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Changes in
  expectations as to our future financial performance, including financial
  estimates by securities analysts and investors;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Announcements
  of technological innovations or new products by us or our competitors;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Announcements
  by us or our competitors of significant contracts, acquisitions, strategic
  partnerships, joint ventures or capital commitments;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Changes in
  the status of our intellectual property rights;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Announcements
  by third parties of significant claims or proceedings against us;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Additions or
  departures of key personnel;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Future sales
  of our ordinary shares;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Stock market
  price and volume fluctuations; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P STYLE="margin-top:-2px"><FONT SIZE=2 FACE=SYMBOL>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>General
  trends of the stock markets.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>8</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Domestic
and international stock markets often experience extreme price and volume
fluctuations.  Market fluctuations, as
well as general political and economic conditions, such as a recession or
interest rate or currency rate fluctuations or political events or hostilities
in or surrounding Israel, could adversely affect the market price of our
ordinary shares.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its
securities.  We may in the future be the
targets of similar litigation.  Securities
litigation could result in substantial costs and divert management&#146;s attention
and resources.</FONT></P>

<P><FONT SIZE=2><B><I>We have not paid any cash dividends on our ordinary shares
in the last four fiscal years and may not do so in the future.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we paid a dividend in 2003 we did not pay any cash dividends on our ordinary
shares in the last four fiscal years.
Future dividend distributions are subject to the discretion of our board
of directors and will depend on various factors, including our operating
results, future earnings, capital requirements, financial condition, tax
implications of dividend distributions on our income, future prospects and any
other factors deemed relevant by our board of directors.  The distribution of dividends also may be
limited by Israeli law, which permits the distribution of dividends only out of
profits (as defined by Israeli law) or otherwise upon the permission of the
court.  You should not rely on an
investment in our company if you require dividend income from your
investment.  The success of your
investment will likely depend entirely upon any future appreciation of the
market price of our ordinary shares, which is uncertain and unpredictable.  There is no guarantee that our ordinary
shares will appreciate in value or even maintain the price at which you
purchased your ordinary shares.</FONT></P>

<P><FONT SIZE=2><B><I>Our ordinary shares are traded on more than
one market and this may result in price variations.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ordinary shares are traded primarily on the NASDAQ Global Market and on the Tel
Aviv Stock Exchange.  Trading in our
ordinary shares on these markets is made in different currencies (U.S. dollars
on the NASDAQ Global Market, and New Israeli Shekels, or NIS, on the Tel Aviv
Stock Exchange), and at different times (resulting from different time zones,
different trading days and different public holidays in the United States and
Israel).  Consequently, the trading
prices of our ordinary shares on these two markets may differ.  Any decrease in the trading price of our
ordinary shares on one of these markets could cause a decrease in the trading
price of our ordinary shares on the other market.</FONT></P>

<P><FONT SIZE="2"><B>Risks Relating to Our Location in Israel</B></FONT></P>

<P><FONT SIZE=2><B><I>Political, economic
and military instability in Israel may disrupt our operations and negatively
affect our business condition, harm our results of operations and adversely
affect our share price.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are incorporated under the laws of, and our executive offices and research and
development facilities are located in, the State of Israel.  Although most of our sales are made to
customers outside Israel, we are influenced to a limited extent by the
political, economic and military conditions affecting Israel.  Specifically, we could be adversely affected
by any major hostilities involving Israel, the interruption or curtailment of
trade between Israel and its present trading partners, or a significant
downturn in the economic or financial condition of Israel.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
the establishment of the State of Israel in 1948, Israel and its Arab neighbors
have engaged in a number of armed conflicts.
A state of hostility, varying from time to time in intensity and degree,
has led to security and economic problems for Israel.  Major hostilities between Israel and its neighbors may hinder
Israel&#146;s international trade and lead to economic downturn.  This, in turn, could have a material adverse
effect on our operations and business.
There has been an increase in unrest and terrorist activity in Israel,
which began in September 2000 and which has continued with varying levels of
severity through 2007.  The future
effect of this deterioration and violence on the Israeli economy and our
operations is unclear.  Recently, there
was an escalation in violence among Israel, Hamas, the Palestinian Authority
and other groups, as well as extensive hostilities along Israel&#146;s northern
border with Lebanon in the summer of 2006, and extensive hostilities along
Israel&#146;s border with the Gaza Strip since June 2007 when the Hamas effectively
took control of the Gaza Strip, which have intensified since February
2008.  Ongoing violence between Israel
and the Palestinians as well as tension between Israel and the neighboring
Syria and Lebanon may have a material adverse effect on our business, financial
conditions and results of operations.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>9</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore,
there are a number of countries, primarily in the Middle East, as well as
Malaysia and Indonesia, that restrict business with Israel or Israeli
companies, and we are precluded from marketing our products to these
countries.  Restrictive laws or policies
directed towards Israel or Israeli businesses may have an adverse impact on our
operations, our financial results or the expansion of our business.</FONT></P>

<P><FONT SIZE=2><B><I>Our results of operations may be negatively affected by the
obligation of our personnel to perform military service.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
of our executive officers and employees in Israel are obligated to perform
annual reserve duty in the Israeli Defense Forces and may be called for active
duty under emergency circumstances at any time.  If a military conflict or war arises, these individuals could be
required to serve in the military for extended periods of time.  Our operations could be disrupted by the
absence for a significant period of one or more of our executive officers or
key employees or a significant number of other employees due to military
service. Any disruption in our operations could adversely affect our business.</FONT></P>

<P><FONT SIZE=2><B><I>We may be adversely affected if the rate of inflation in
Israel exceeds the rate of devaluation of the New Israeli Shekel against the
U.S. dollar.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
substantial portion of our expenses, primarily labor expenses, are incurred in
NIS.  As a result, we are exposed to the
risk that the rate of inflation in Israel will exceed the rate of devaluation
of the NIS in relation to the U.S. dollar or that the timing of this
devaluation lags behind inflation in Israel.
During 2007, the NIS appreciated against the U.S. dollar, which resulted
in a significant increase in the U.S. dollar cost of our NIS expenses.  We may be materially and adversely affected
in the future if the rate of inflation in Israel continues to  exceed the devaluation of the NIS against
the U.S. dollar or if the timing of this devaluation lags behind increases in
inflation in Israel.</FONT></P>

<P><FONT SIZE=2><B><I>We currently benefit from government tax benefits, which may
be discontinued or reduced in the future.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are currently eligible to receive tax benefits under Government of Israel
programs.  In order to maintain our
eligibility for these tax benefits, we must continue to meet specific
conditions, including making specified investments in fixed assets.  If we or our subsidiary fail to comply with
these conditions in the future, the tax benefits received could be canceled and
we could also be required to pay significantly increased taxes for prior years
and for the future.</FONT></P>

<P><FONT SIZE=2><B><I>Service and enforcement of legal process on us and our
directors and officers may be difficult to obtain.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are incorporated in Israel and some of our directors, executive officers and
the Israeli experts named in this annual report reside outside the United States.  Service of process upon them may be
difficult to effect within the United States.
Furthermore, most of our assets and the assets of some of our executive
officers and directors and some of the experts named in this annual report are
located outside the United States.
Therefore, a judgment obtained against us or any of them in the United
States, including one based on the civil liability provisions of the U.S.
federal securities laws, may not be collectible in the United States and may
not be enforced by an Israeli court. It also may be difficult for you to assert
U.S. securities law claims in original actions instituted in Israel.  For more information regarding the
enforceability of civil liabilities against us, our directors and executive
officers and the Israeli experts named in this prospectus, including the
terms under which certain judgments may be enforced by an Israeli court, please
see &#147;Enforceability of Civil Liabilities.&#148;</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>10</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>Provisions of Israeli law may delay, prevent or make
difficult an acquisition of us, which could prevent a change of control and
therefore depress the price of our shares.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
corporate law regulates mergers, requires tender offers for acquisitions of
shares above specified thresholds, requires special approvals for transactions
involving directors, officers or significant shareholders and regulates other
matters that may be relevant to these types of transactions.  Furthermore, Israeli tax considerations may
make potential transactions unappealing to us or to some of our shareholders.
These provisions
of Israeli corporate and tax law may have the effect of delaying, preventing or
complicating a merger with, or other acquisition of, us.  This could cause our ordinary shares to
trade at prices below the price for which third parties might be willing to pay
to gain control of us. Third parties who are otherwise willing to pay a premium
over prevailing market prices to gain control of us may be unable or unwilling
to do so because of these provisions of Israeli law.</FONT></P>

<P><FONT SIZE=2><B><I>Your rights and responsibilities as a shareholder will be
governed by Israeli law and differ in some respects from the rights and
responsibilities of shareholders under U.S. law.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are incorporated under Israeli law.  The
rights and responsibilities of holders of our ordinary shares are governed by
our memorandum of association, articles of association and by Israeli law.  These rights and responsibilities differ in
some respects from the rights and responsibilities of shareholders in typical
U.S. corporations.  In particular, a
shareholder of an Israeli company has a duty to act in good faith in exercising
his or her rights and fulfilling his or her obligations toward the company and
other shareholders and to refrain from abusing his power in the company,
including, among other things, in voting at the general meeting of shareholders
on certain matters.  Israeli law
provides that these duties are applicable in shareholder votes at the general
meeting with respect to, among other things, amendments to a company&#146;s articles
of association, increases in a company&#146;s authorized share capital, mergers and
actions and transactions involving interests of officers, directors or other
interested parties which require the shareholders&#146; general meeting&#146;s
approval.  In addition, a controlling
shareholder of an Israeli company or a shareholder who knows that he or she
possesses the power to determine the outcome of a vote at a meeting of our
shareholders, or who has, by virtue of the company&#146;s articles of association,
the power to appoint or prevent the appointment of an office holder in the
company, or any other power with respect to the company, has a duty of fairness
toward the company.  The Israeli
Companies Law does not establish criteria for determining whether or not a
shareholder has acted in good faith.
Moreover, the law is relatively new and there is no case law available
on the duty of a non-controlling shareholder to act in good faith.</FONT></P>

<P><FONT SIZE=2><B><I>As a foreign private issuer whose shares
are listed on the NASDAQ Global Market, we may follow certain home country
corporate governance practices instead of certain NASDAQ requirements.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a foreign private issuer whose shares are listed on The NASDAQ Global Market,
we are permitted to follow certain home country corporate governance practices
instead of certain requirements of the NASDAQ Marketplace Rules.  A foreign private issuer that elects to
follow a home country practice instead of such requirements, must submit to
NASDAQ in advance a written statement from an independent counsel in such
issuer&#146;s home country certifying that the issuer&#146;s practices are not prohibited
by the home country&#146;s laws. In addition, a foreign private issuer must disclose
in its annual reports filed with the Securities and Exchange Commission or on
its website each such requirement that it does not follow and describe the home
country practice followed by the issuer instead of any such requirement.  As a foreign private issuer listed on The
NASDAQ Global Market, we may follow home country practice with regard to, among
other things, composition of our board of directors, director nomination
procedure, compensation of officers, and quorum at shareholders&#146; meetings.  In addition, we may follow our home country
law, instead of the NASDAQ Marketplace Rules, which require that we obtain
shareholder approval for certain dilutive events, such as for the establishment
or amendment of certain equity based compensation plans, an issuance that will
result in a change of control of the company, certain transactions other than a
public offering involving issuances of a 20% or more interest in the company
and certain acquisitions of the stock or assets of another company.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>11</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><A NAME=A109></A><FONT SIZE=2><B>ITEM 4.</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><font size=2><B><U>INFORMATION
ON THE COMPANY</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><A NAME=A110></A><FONT SIZE=2><B>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; H<SMALL>ISTORY AND</SMALL>
D<SMALL>EVELOPMENT OF THE</SMALL> C<SMALL>OMPANY</SMALL></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
were incorporated under the laws of the State of Israel in February 1983 as Mashov Software Export (1983) Ltd. and
we changed our name to Magic Software
Enterprises Ltd. in 1991.  We are
a public limited liability company and operate under the Israeli Companies Law
1999 and associated legislation.  Our
registered offices and principal place of business are located at 5 Haplada
Street, Or Yehuda 60218, Israel, and our telephone number is
+972-3-538-9292.  Our U.S. subsidiary,
Magic Software Enterprises Inc., is located at 23046 Avenida de la Carlota,
suite 300, Laguna Hills, CA 926653.  Our
address on the Internet is <U>www.magicsoftware.com.</U>  The information on our website is not
incorporated by reference into this annual report.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
develop, market and support eDeveloper, an application platform for software
development and deployment, with SOA, and iBOLT, a technology for business
integration and business process management, or BPM.  The eDeveloper and the iBOLT enable enterprises to accelerate the
process of building and deploying applications that can be rapidly customized
and integrated with existing systems.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
application platform, the eDeveloper, is used by thousands of enterprises and
independent software vendors that use our technology to develop solutions for
their customers in approximately 50
countries.  We refer to the independent
software vendors as Magic Software Partners.
We also provide maintenance and technical support as well as professional
services to our enterprise customers and to Magic Software Partners.  In addition, we sell our technology for
business integration, the iBOLT, to customers of specific popular software
applications, such as SAP, Salesforce.com or Oracle JD Edwards via such
entities.  We refer to these vendor
centered market segments as ecosystems.
</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;eDeveloper
enables the rapid development and deployment of business applications.  The eDeveloper technology can be deployed on
multiple platforms operating with interoperability under various information
technology, or IT, architectures and can operate on multiple databases.  During 2006, we released eDeveloper Version
10, which highlights SOA.  eDeveloper
Version 10 supports enhanced compliance with industry standards, provides
improved functionality in comparison to prior versions and provides a composite
application development environment.  In
February 2007, we released two new editions of eDeveloper Version 10, the Discovery
edition and Xpress edition, which target different developer needs.  The Discovery edition is targeted at
students, new developers and those developing basic Windows client and web
applications for personal use.  The
Xpress edition is designed to meet the needs of users developing and deploying
small- to mid-scale desktop and web applications that are based on either
Pervasive or MySQL tables.  eDeveloper
Xpress is affordable for small- and home-office developers.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2007, recognizing the growing market demand for rich internet applications, or
RIA, and software-as-a-service, or SaaS, we engaged in developing new
functionality and extensions to our application platform, with the objective of
enabling the development of RIA and SaaS applications.  SaaS is a new business and technical model
for delivering software applications, similar to a phone or cable TV model, in
which the software applications are installed and operated in dedicated data
centers and users subscribe to these centers and use the applications over an
internet connection.  This model
requires the ability to deliver RIA.  We
currently support function-rich applications in a client-server architecture,
necessitating that users dispose of a powerful PC to install and run these
applications.  The new development is
aimed at providing a similar level of functionality to users who only have an
internet connection and a light device, such as a mobile device or an internet
terminal, without having to install the application locally.  We intend to develop a new product, packaged
as a SEAP, available later this year, initially for Japanese clients.  Following the development, we intend to
extend the availability of this product worldwide.  This new product will include, among other features, the
functionality of the current eDeveloper platform in addition to rich internet
client functionality.  As of December
31, 2007, no revenues from SaaS were recognized.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>12</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iBOLT
provides affordable business integration solutions to mid-sized and large
enterprises and system integrators.  As
a comprehensive suite, iBOLT allows the seamless integration and
interoperability of diverse solutions, including legacy applications, in a
quick and efficient manner.  In 2005, we
released iBOLT Version 2.5 and since then we have continued to develop the
iBOLT channel and entered into
agreements with additional system integrators, consultancies and service
providers, who acquired iBOLT skills and offer iBOLT licenses and related
services to their customers.  During the last two years we have developed
a new version of iBOLT, Version 3, which we expect to release during 2008.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2004, we entered into a partnership with SAP, an international provider of
business software solutions.  The
agreement focused on providing a special edition of iBOLT as a collaborative
platform for the SAP Business One product, an integrated business management
solution designed specifically for small and midsize businesses.  In January 2005, we launched iBOLT Special Edition
for the SAP Business One product and subsequently expanded and intensified our
joint activities with SAP worldwide.
The iBOLT Special Edition was accepted by the SAP community with
enthusiasm, and SAP awarded our company its
ISV Partner Leadership in Innovation 2005 Award.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2006, our software was recognized by SAP for the best overall achievement in
quality and excellence among SAP Business One software solution partners with
the SAP Software Solution Partner Quality Excellence Award.  Our iBOLT Special Edition partner program
was endorsed by over 150 SAP Business One resellers across the globe who have
signed a partnership agreement with us and became a significant new addition to
the Magic partner community.  In the
beginning of 2007, we expanded our portfolio to include iBOLT Special Edition
for SAP ERP R/3 for mid-size businesses and organizations. In the beginning of
2007, we also received SAP&#146;s xAPPS certification. During the third quarter of
2007, we completed several successful new deployments of iBOLT Special Edition
for SAP ERP R3.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 2007, more than 230 SAP business partners in 27 countries worldwide
were part of our iBOLT for SAP Partner Program.  We have also received certification in Japan for the &#147;iBOLT for
SAP&#148; product. A significant addition to the international certifications we had
already received, it reinforced and expanded SAP&#146;s level of co-operation with
us.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2006, we continued to work closely with IBM as an Advanced Partner of the IBM
Partnerworld for Developer business partner program and as a Member Partner of
IBM Partnerworld for Software.  IBM has
awarded us with its ServerProven&reg; certification for our eDeveloper and iBOLT
products following a rigorous testing and evaluation process.  Only those products that are validated by
IBM to install quickly, start up easily and run reliably on IBM servers are
awarded this certification, designed by IBM to assist its customers to easily
identify complete solutions for their business-critical e-business needs.  During 2006, we also became part of IBM&#146;s
System i Tools Innovation Program.  As
part of our activities with the IBM System i customers and business partners,
we released our JDE Connect, a fully functional version of our iBOLT
integration technology targeted to users of JD Edwards Enterprise One Oracle
enterprise resource planning, or ERP, software on the IBM System i platform.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
January 2007, we sold the intellectual property relating to the technology
known as iBOLT Portal to Axcepia Technologies Ltd.  Under the agreement, in consideration for the transfer and
assignment of our rights in and to the technology, Axcepia agreed to pay us a
commission equal to 50% of its revenues derived from sales to customers who
held licenses to use the iBOLT Portal technology for a period of five years as
of the date of the agreement.  In
addition, commencing as of six months from the date of the agreement,
Axcepia  agreed to pay us a commission
equal to 20% of the revenues it derived from the provision of maintenance and support
services relating to the iBOLT Portal technology for a period of five years
from the date of the agreement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 30, 2007, we sold our wholly-owned subsidiary, Advanced Answers on
Demand Holding Corporation, or AAOD, a Florida corporation that develops and
markets application software targeted at the long-term care industry to Fortissimo Capital for $17 million.
Fortissimo paid us $1 million of the sale price in December 2007 and the
remaining $16 million in the beginning of 2008.  In addition, as part of the transaction, we entered into a three
years license agreement with AAOD according to which AAOD will continue to sell
our products, as an OEM partner, in consideration for $3 million, to be paid
quarterly over three years starting in 2008.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>13</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
sales described above were part of our strategy to focus on our core
products.  In the fourth quarter of
2006, we announced a restructuring and impairment plan designed to increase our
profitability by focusing on the marketing and sale of our flagship
products.  The restructuring and
impairment plan included the appointment of three new members to our board of
directors in January 2007, the appointment of a new chief executive officer who
began to serve in such capacity on July 1, 2007, and the appointment of a new
chief financial officer on July 26, 2007.
In November 2007, Mr. Guy Bernstein replaced David Assia as chairman of
our board of directors.  The
organizational restructuring was completed at the beginning of 2008, with the
formation of a dedicated product group, and the rationalization of our
territorial structure.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
capital expenditures totaled $0.8 million in the year ended December 31, 2007
and $1.0&nbsp;million, in the years ended December 31, 2006 and 2005.  Of the $0.8 million of capital expenditures
in 2007, $0.6 million, was invested in network equipment and computers, $0.1
million was invested in furniture and office equipment and&nbsp;$0.1 million,
was invested in leasehold improvements.</FONT></P>

<P><FONT SIZE=2><A NAME=A111></A><B>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B<SMALL>USINESS</SMALL> O<SMALL>VERVIEW</SMALL></B></FONT></P>

<P><FONT SIZE=2><B>Industry Overview</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
recent years the multiplication of enterprise applications has lead to a level
of complexity in enterprises&#146; information system that is actually obstructing
business progress and evolution, reducing business agility and is often
resulting in multiple versions of similar data objects such as customer
records.  We believe that one of the
main challenges the modern enterprise faces today is &#147;creating a single view of
the truth&#148;, which is the better way to make effective and relevant business
decisions.  Business integration is
employed to facilitate this.
Traditionally, given their cost and complexity, business integration
solutions were targeted at large enterprises.
Consequently, business integration tools are mostly complex, require
significant implementation resources, take a long time to implement and are
costly.  This constituted a barrier to
small and medium enterprises, who could not afford to embark on such projects.  Yet, given the critical need for business
integration across the demand and supply chain, enterprises of all sizes
require such solutions.  We recognized
this trend and emerging need when we designed iBOLT, and are one of the first
vendors to provide business integration solutions to small and medium
enterprises.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Another
major evolution in enterprises is the trend of reusing information technology,
or IT, assets, such as enterprise applications, driving the move towards SOA.  Due to the large investments in enterprise
applications, such as ERP (enterprise resource planning) and CRM (customer
relationship management), on the one hand, and the accelerating business
change, on the other, organizations need to find a way to continue to leverage
and amortize their IT investments while increasing their ability to change
business processes and support new ones.
The software industry&#146;s response is a new SOA, a new paradigm of
application development, service oriented development of applications, or SODA,
and composite applications.  Most of these
involve metadata (which is data that describes other data, similar to a table of content describing a
book), rather than traditional programming.  We have developed and enhanced this paradigm over the last twenty
years, and we believe that we have the one of the largest installed base of
products employing such technology.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
SaaS is becoming a well-established phenomenon in some areas of enterprise IT.
It is growing into a mainstream option for software-based business solutions and
will affect most of  enterprise IT
departments in the next three years in one way or another.  SaaS enabled application platform, or SEAP,
seems to become a dominant player in the SaaS growing application
industry.  We are developing our
technology to provide the functionality of a SEAP, as a result of the growing
demand from application vendors to repackage their applications as a SaaS
offering.</FONT></P>

<P><FONT SIZE=2><B>General</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We develop, market and support eDeveloper, an application platform for
software development and deployment, and iBOLT, a technology for business
integration and BPM.  Our technology
enables enterprises to accelerate the process of building and deploying
business software applications that can be rapidly customized to meet current
and future needs.  Our development and
integration products empower customers to dramatically improve their business
performance and return on investment by enabling the affordable and rapid
integration of diverse applications, systems and databases to streamline
business processes from within one comprehensive framework.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>14</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
technology and solutions are especially in demand when time-to-market
considerations are critical, budgets are tight, integration is required with
multiple platforms or applications, databases or existing systems and business
processes, or a high degree of application maintenance and customization is
anticipated.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
address the critical business needs of companies so that they are able to
quickly respond to changing market forces and demands. Robust business
solutions are created, deployed and maintained with unrivaled productivity and
time-to-market results. Our proprietary development methodology enables
developers to create better solutions in less time and with fewer resources.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Development
communities have become increasingly focused on specific solutions, creating an
even greater need for a development environment that provides open interfaces
to leading technologies and standards. eDeveloper and iBOLT provide developers
with the ability to rapidly build integrated applications in a more productive
manner, lowering IT maintenance costs and decreasing time-to-market.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>With the launch of iBOLT, we started a process of
  expanding from the application development field to the business integration
  and process management fields, which are, presently converging, from a
  technology perspective, to the composite application field. Products for
  these fields require service-oriented architecture, application integration
  capabilities, process management, orchestration capabilities, and information
  delivery capabilities. Our technology and products provide all of these
  capabilities.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>With the impending introduction of our SEAP, we
  expect to strengthen our position a leading application platform provider
  opening the path for us to address the top-tier segment of the market. The
  increasing adoption of the SaaS delivery and business model requires the use
  of a new generation application platforms, which support the relevant
  functions required for SaaS deployment. We are one of the first vendors to
  offer such a platform, which is based on the combined features of our iBOLT
  and eDeveloper products. By leveraging the easy migration of applications
  between the different versions of each of the iBOLT and eDeveloper, our Magic
  Software Partners have the potential to become among the first and most
  versatile sources of SaaS applications. Industry analysts as well as several
  of our major Magic Software Partners have recognized this, and we have begun
  to work with some of them in this context.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Our
Solution</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
eDeveloper and iBOLT technologies offer system integrators, software developers
and end-users of deployed applications the following benefits:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Shorter Time to Market</I>.
  We believe that our technology and products allow enterprises to prototype
  and develop, integrate and deploy complex, mission-critical components and
  applications rapidly and in a cost-effective manner. Most program
  functionality that usually requires repetitive, tedious coding is provided by
  our underlying core technology, eDeveloper. In today&#146;s dynamic and
  competitive business environment, the development community is under pressure
  to produce and integrate applications faster and with more meaningful
  business processes and information than ever before, while reducing costs.
  This requires organizations to build a service-oriented architecture and
  develop on top of it composite applications. Both eDeveloper and iBOLT enable
  organizations to meet these needs.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Scalability and Adaptability</I>.
  Applications developed and integrated with eDeveloper and iBOLT can be easily
  modified as business requirements change, computing environments evolve and
  end-user usage and transaction volumes increase. As a result, implementations
  of our technology can be quickly adapted to support increased functionality
  and wider use throughout an organization. Applications developed with our
  products can grow within an enterprise from the departmental level to the
  enterprise level by accommodating additional platforms, databases and
  operating systems and increased usage and application complexity. Our
  technology also enables partitioning of applications by allowing application
  logic to be distributed across a system in order to achieve optimal system
  performance and flexibility. Our eDeveloper and iBOLT technologies enable
  enterprises to respond quickly to unanticipated changes in their business
  requirements to protect their investments in software and hardware.</FONT></P>
</TD>
</TR>
</TABLE>



<P ALIGN=CENTER><FONT SIZE=2>15</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Portability</I>. We
  designed our products to enable enterprises to develop and integrate
  applications that can be used with most hardware platforms, operating systems
  and databases. Applications developed with our technology for one platform
  also can be deployed on other supported platforms. Simply changing the
  relevant parameters in an application and migrating the metadata accomplish
  porting an application developed with our technology from
  one platform to another. As a result, porting applications can be
  accomplished without the lengthy coding, compiling, linking and testing
  phases typically required with other development methodologies. Applications
  developed with our technology can also be partitioned across multiple
  platforms. Developers can therefore take advantage of the flexibility and
  performance advantages inherent in multi-tiered architectures. The
  portability of applications developed with our software development
  technology enables enterprises to migrate quickly to new computing
  environments without having to rewrite their applications.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Database Access and Technology
  Independence</I>. eDeveloper and iBOLT allow enterprises to
  access and manipulate data from multiple databases, each based on a different
  technology, into a single integrated application. Developers and end-users
  can access multiple legacy and relational databases across the enterprise
  from within the same application and from within the same data view. Our
  technology can easily move data across platforms and convert the data from
  one database format to another.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Comprehensiveness</I>.
  Our technology delivers what enterprises need to achieve business integration
  into a single product stack, including a composite application framework,
  SODA, enterprise service bus (ESB, or also referred to as a message broker), enterprise application
  integration, BPM, and service and business activity monitoring. Our single
  product stack provides small and medium enterprises as well as large
  enterprises with top tier power, which is simple to learn and fast to deliver
  value even with small business budgets.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Innovation and experience</I>.
  We provide a service oriented platform which includes application
  integration, business process management and composite applications, to
  rapidly develop, change and deploy solutions integrated with existing and
  legacy systems. We enable enterprises to increase their agility and rapidly
  adapt to business changes, by aligning their IT with their business
  operations, accelerating the evolution to a SOA through application
  integration and BPM. Our customers develop and deploy applications that are
  rapidly customized and integrated with existing and legacy systems. Our
  products are built on twenty years of research and development, as well as
  customer experience.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Our
Strategy</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
goal is to achieve a leadership position in the application development,
deployment and business integration markets. We focus on providing technology,
applications and services that enable enterprises to meet their business needs
on time and budget. The key elements of our strategy to achieve this goal are:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Target midsize enterprises, with focus on
  organizations that require rapid solutions for critical projects at an
  affordable price;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Focus our sales efforts on our core products iBOLT
  and eDeveloper;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Focus our efforts on building a strong partner base
  of system integrators and resellers of our core technologies;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Increase the number of software houses and
  independent software vendors using eDeveloper to build their applications;</FONT></P>
</TD>
</TR>
</TABLE>



<P ALIGN=CENTER><FONT SIZE=2>16</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Strengthen our alliance with SAP. The SAP solutions
  for small businesses (such as the SAP Business One products) and midsize
  companies (such as the SAP ERP R/3 solution and SAP Business All-in-One
  solution) address a broad horizontal market. As a result of our alliance with
  SAP, our offerings and resources (such as sales, marketing and research and
  development) more effectively address the SAP market;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Develop additional alliances with leading
  application vendors and develop offerings and partner programs in their
  ecosystems, such as Oracle&#146;s JD Edwards and Salesforce.com; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Focus on recruiting OEM partners who will
  incorporate our iBOLT integration technology into their product offerings.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Our
Products</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
driving principles behind our technology are:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Abstraction - to hide complexity and facilitate
  change;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Automation of mundane tasks - to accelerate
  development and maintenance and reduce risk; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Interoperability - to support business logic across multiple
  hardware and software platforms, operating systems and geographies.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
design our tools for use by system architects, business analysts and
consultants rather than by programmers. Over the years, we have enriched our
technology with emerging features such as messaging, application partitioning,
browser based rich client, graphical design studio for business processes,
event and service provision and consumption, orchestration and many more.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
offer two complementary products that address the wide spectrum of composite
applications<I>.</I></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;eDeveloper</I> is an interactive composite
applications toolset,
delivering an extremely productive, state-of-the-art technology for developing
and deploying web and client/server applications across and beyond the
enterprise. eDeveloper automates the mundane repetitive tasks of the software
development cycle, drastically shortening the process, reducing project risk
and minimizing human errors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February 2007, we released two new editions of eDeveloper Version 10, the
Discovery edition and Xpress edition, which target different developer needs.
The Discovery edition is targeted at students, new developers and those
developing basic Windows client and web applications for personal use. The
Xpress edition is designed to meet the needs of users developing and deploying
small- to mid-scale desktop and web applications that are based on either
Pervasive or MySQL tables. eDeveloper Xpress is affordable for small- and
home-office developers.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;eDeveloper
Version 10 highlights SOA
architecture, supports enhanced compliance with industry standards, provides
improved functionality in comparison to prior versions and provides a composite
application development environment. In this product version we made a
significant paradigm shift, facilitating and shortening significantly the
learning and mastering of the tool while maintaining and enhancing its key
productivity features. eDeveloper
Version 10 further enhances our position as provider of service oriented
development of applications (SODA) technology and the feature set provided by
our iBOLT and eDeveloper product
lines fully complies with the prevailing industry requirements of a
comprehensive composite applications and SOA platform. Gartner, a
leading global information technology industry research and analyst firm,
defines an integrated services environment, or ISE, as an integrated
development platform or framework that is focused on developing applications
using a composite (assemble-first) metaphor based on SOA and process centricity
through a lightweight BPM. According to Gartner, ISEs should have a
productivity layer that makes developers more productive through hiding
complexity (such as frameworks or prepackaged functions), automation (or
code-generation or parameterization), and simplification (such as visual
modeling), and forms the basic value proposition of an ISE. Gartner further
describes ISE as intended to be used by developers and business analysts alike
together, but is targeted at process-centric developers. Through these
products, the focus of the user shifts from writing code to assembling and
managing business processes. Through these processes, flexible business
solutions can be assembled or composed. In the beginning of 2006, Gartner
recognized us as a visionary ISE vendor.</FONT></P>



<P ALIGN=CENTER><FONT SIZE=2>17</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iBOLT
Business Integration Suite</I> is a
flow oriented composite applications toolset, delivering a comprehensive,
business-driven integration framework that empowers enterprises to dramatically
improve business performance. iBOLT enables customers to easily design, develop
and deploy automated business processes, including BPM and business activity
monitoring. Increasing the usability and life span of existing legacy and other
IT systems, iBOLT allows fast enterprise application integration, development
and customization of diverse applications, systems and databases, assuring
rapid return on invested capital and time-to-market, increased profitability,
and customer satisfaction. We also offer special editions of iBOLT targeted at
specific enterprise application vendor ecosystems, such as SAP, JD Edwards or
Salesforce.com. These special editions contain specific features and pricing
tailored for these market segments.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
technology, comprised of both iBOLT and eDeveloper, is a comprehensive and
proven ISE in the market. It can be applied to the full range of software
development market, from the implementation of micro-vertical solutions, through
tactical application renovation and process automation solutions, to enterprise
spanning SOA migrations and composite applications initiatives. Unlike most
competing ISEs, we offer a coherent and unified toolset stemming from the same
proven metadata driven and rules based declarative technology, resulting in
unprecedented cost savings through fast and easy implementation and reduced
project risk.</FONT></P>

<P><FONT SIZE=2><B>Product
Development</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
software industry is characterized by rapid technological changes and is highly
competitive with respect to timely product innovation. We must maintain
compatibility and competitiveness in the face of ongoing changes in industry
standards.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
place considerable emphasis on research and development in order to improve and
expand the functionality of our technology and to develop new applications. We
believe that our future success depends upon our ability to maintain our
technological leadership, to enhance our existing products and to introduce new
commercially viable products addressing the needs of our customers on a timely
basis. We also intend to support emerging technologies as they are introduced
in the same way we have supported new technologies in the past. We will
continue to devote a significant portion of our resources to research and
development. We believe that internal development of our technology is the most
effective means of achieving our strategic objective of providing an extensive,
integrated and feature-rich development technology.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2007, we invested mainly in the development of the following products:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>eDeveloper Version 10.1. During 2007, in response to
  customers needs and service requests, we released eDeveloper Version 10.1 as
  well as service packs for the eDeveloper Version 10.1. The eDeveloper Version
  10.1 service packs include many new features such as Report Generator, Hebrew
  Support, XML views enhancements, UDDI and others. In addition we issued
  numerous bug fixes.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Rich
  Intranet Application Technology.</I> This is a new technology
  for eDeveloper Intranet solution. Based on eDeveloper browser client engine,
  we developed a Java-based client module that provides full thin-client
  functionality using standard widget toolkit open source technology. The
  advantage of the new technology is its ability to run on any platform,
  significantly reducing the cost of maintenance. We are continuing to develop
  the technology targeting the SaaS market. We plan to release a version of the
  eDeveloper that will include the RIA technology for the use of Japanese
  customers during the first quarter of 2008.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>A new
  version of iBOLT.</I> iBOLT Version 3 was the main focus of the
  iBOLT development in 2007. The new version delivers a full range of new
  functionalities for the mid size integration market as well as a massive
  performance improvements. Some of the main functionalities include new data
  mapper, expression editor, user defined storages, resource management and
  component software development kit. We plan controlled and limited release of
  the first version of iBOLT Version 3 during the second quarter of 2008.</FONT></P>
</TD>
</TR>
</TABLE>



<P ALIGN=CENTER><FONT SIZE=2>18</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>Intercompany
  iBOLT solution.</I> We developed a generic solution for
  inter-company synchronization with iBOLT Version 2.5. Some of the main
  functionalities include mail and HTTP synchronization, object management,
  synchronization process monitoring and more. We released the first version
  during the fourth quarter of 2007 and continue to improve the functionality
  of this product.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT FACE="symbol" SIZE=2>&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>The
  Hermes software</I>. In 2007 we continued to develop the Hermes
  software. HERMES Releases 3.1 and 3.2 incorporate new and advanced
  functionalities. HERMES Release 3.1 software is operating in full production
  at Amsterdam Schiphol Airport, with KLM Cargo, and HERMES 3.2 is being
  launched by HERMES users in India. During the second half of 2008, HERMES
  Release 3.2 is expected to be deployed at major air cargo centers in Europe,
  such as in Frankfurt.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Vertical
Solutions</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
of our subsidiaries develop, market, and support vertical applications, including
for long-term care, banking and cargo handling solutions.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nextstep
Infotech PVT. Ltd</I>., in which we have a 40% interest, develops
and markets Cheq Mate&#153;, a banking application that provides most of the
functionality required to run a retail bank branch, including support for
various deposit types, advances, time deposits, bank guarantees, letters of
credit and portfolio management.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CoreTech
Consulting Group LLC,</I> our wholly-owned subsidiary, is an
information technology consulting firm offering flexible and creative solutions
in the areas of infrastructure design and delivery, application development,
technology planning and implementation services, as well as supplemental
staffing services.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hermes
Logistics Technologies Ltd., (formerly
Magic eCargo),</I> our
wholly-owned subsidiary, develops and markets a comprehensive solution
for cargo handling and inventory control that is designed to increase
productivity, improve efficiency, and reduce costs. Hermes handles many aspects
of a cargo operation including inventory control, automated build-up of
flights/manifesting, messaging to CARGO-IMP standards, customs clearance,
weight and balance departure control systems, interfacing, scanning and
verification of cargo, secured tracking and a comprehensive financial package
for all aspects of billing and collecting fees.</FONT></P>

<P><FONT SIZE=2><B>Services
</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional
Services.</I> We provide a broad range of consulting and software
development project management services to customers developing, deploying and
integrating distributed applications. We believe that the availability of
effective consulting services is an important factor in achieving widespread
market acceptance.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
offer fee-based consulting services in connection with installation assurance,
application audits and performance enhancement, application migration and
application prototyping and design. Consulting services are aimed at both
generating additional revenues and ensuring successful implementation of
eDeveloper and iBOLT projects through knowledge transfer. As part of our
restructuring and impairment plan to focus on license sales, our goal is to
provide such activities as a complementary service to our customers and
partners.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Services
are offered as separately purchased add-on packages or as part of an overall
software development and deployment technology framework. Over the last several
years, we have built upon our established global presence to form joint
ventures with our Magic Software Partners who use our technology to develop
solutions for their customers, and distributors to deliver successful solutions
in focused market sectors.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintenance.</I>
We offer our customers annual maintenance contracts providing for upgrades and
new versions of our products for an annual fee.</FONT></P>



<P ALIGN=CENTER><FONT SIZE=2>19</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technical
Support.</I> We believe that a high level of customer support is
important to the successful marketing and sale of our products. Our in-house
technical support group provides training and post-sale support. We believe
that effective technical support during product evaluation as well as after the
sale has substantially contributed to product acceptance and customer
satisfaction and will continue to do so in the future.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
offer an online support system for the Magic Software Partners, which provides
members of the Magic Software Partners with the ability to instantaneously
enter, confirm and track support requests via the Internet. It provides support
to Magic Software Partners and end-users worldwide.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Training.</I>
We conduct formal and organized training on our development tools through the
Magic University International. We develop courses, pertaining to our principal
products, eDeveloper and iBOLT and provide trainer and student guidebooks.
Course materials are available both in traditional, classroom courses and as
web-based training modules, which can be downloaded and studied at the
student&#146;s own pace and location. The courses and course materials are designed
to accelerate the learning process, using an intensive technical curriculum in
an atmosphere conducive to productive training</FONT></P>

<P><FONT SIZE=2><B>Customers,
End-Users and Markets</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
market and sell our products and services in more than 50 countries worldwide.
The following table presents our revenues by revenue type and geographical
market for the periods indicated:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="66%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>(In thousands)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>


<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Software sales</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>21,503</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>18,788</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>17,707</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Maintenance and technical support</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11,238</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11,531</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>12,605</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Consulting services</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>19,095</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>22,252</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>28,116</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>51,836</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>52,571</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>58,428</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=4 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=4 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=4 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="66%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>(In thousands)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Israel</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,013</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,307</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,471</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Europe</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>22,636</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>21,713</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24,916</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>United States</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,529</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>13,995</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>18,612</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Japan</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10,107</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10,223</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,080</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,551</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,333</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,349</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>51,836</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>52,571</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>58,428</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=4 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=4 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=4 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industries
that are significantly represented in our Magic Software Partners base include
finance, government, health care, logistics, manufacturing media, retail and
telecommunications. Our eDeveloper and iBOLT technologies are used by a wide
variety of developers, integrators and solution providers who can be generally
divided into two segments: in the first segment are those performing in-house
development (corporate IT departments) and in the second segment are Magic
Software Partners, including large system integrators and smaller independent
developers, and value added resellers, or VARs, that use our technology to
develop or provide solutions to their customers. Magic Software Partners who
are packaged software publishers use our technology to write standard packaged
software products that are sold to multiple clients, typically within a
vertical industry segment or a horizontal business function.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Among
the thousands of end-users running their business systems with our technology
are the following: Adidas-Solomon, Allstate, Athlon Group, Burger King, Club
Med, Compass Group PLC, Danish Ministry of Economic, Deka Bank, Euroclear,
Financial Times, FMRP, Fraport AG, GAP, Hitachi, Johnson &amp; Johnson, John
Menzies, Kodak, Marconi Mobile, Merrill Lynch, Matsushita, Minolta, NEC, Nestle
Nespresso, Nintendo, Philip Morris, TEVA, the State of Washington, Vodafone,
the United Nations, UPS and Victorinox.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>20</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Sales, Marketing and Distribution</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
market and support our products through our own direct sales force, a network
of distributors, Magic Software Partners and system integrators. We sell and
support our products directly through our subsidiaries in the United States,
Japan, the United Kingdom, France, Germany, the Netherlands, Hungary, India and
Israel, and through local distributors elsewhere.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direct
Sales.</I> We maintain a direct sales force that pursues local
accounts and software solution providers. Our sales personnel carry out
strategic sales with a direct approach to decision makers, managing a
constantly monitored consultative type of sales cycle. At March 31, 2008, we
had approximately 67 sales personnel including a team of 14 sales engineers who
provide pre-sale technical support, presentations and demonstrations in order
to support our sales force. Sales efforts are targeted at large enterprises
performing internal application development and Magic Software Partners who use
our technology to develop solutions for their customers. We also employ an
in-house and external telemarketing staff to generate and qualify leads.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indirect
Sales.</I> We maintain an indirect sales channel for iBOLT,
through system integrators, value added distributors and resellers, OEM
partners, as well as consultancies and service providers. We carry out marketing
activities with our Magic Software Partners and indirect channels, such as
publishing solutions directories and newsletters. We have a marketing program
that supports Magic Software Partners and supports iBOLT general partners, and
special partner program for those that are also SAP and IBM reseller/partners
by providing a wide range of features and advantages in the areas of sales and
marketing and technical knowledge transfer.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributors.
</I>In general, we distribute our products through local distributors
in those countries where we do not have a sales subsidiary. A local distributor
is typically a software marketing organization with the capability to add value
with consulting, training, and support. Distributors are generally responsible
for the localization of our software development technology and applications
into their native language. The distributors also translate our marketing
literature and technical documentation. Distributors must undergo our program
of sales and technical training. Marketing, sales, training, consulting,
product and client support are provided by the local distributor. We are
available for backup support for the distributor and for end-users. In
coordination with the local subsidiaries and distributors, we also provide
sales support for large and multinational accounts. We have approximately 25
distributors in Europe, Latin America and Asia, many of whom are also Magic
Software Partners.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marketing
Activities.</I> We carry out a wide range of marketing activities
aimed at generating awareness of our products and sales leads, including an
extensive program of Internet-based webcasts, exhibitions, advertising and
public relations, attendance at trade shows, fairs and exhibitions, direct
mail, response mail, telemarketing campaigns and user and distributor
conferences and seminars. We also devote substantial efforts to marketing our
products on the Internet. We regularly advertise our products in prominent
trade publications. These activities are intended both to maintain the general
public awareness of our products and to generate sales leads. We conduct
distributor and user conferences to update our worldwide affiliates and user
base concerning our new releases, marketing strategies, pricing, technical
information and the like. These events are conducted approximately once a year.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to foster improved relationships with our iBOLT channel partners, we
periodically sponsor local events and other marketing programs and activities.
On our corporate Internet website, we host an online solutions directory, which
highlights applications developed by our Magic Software Partners, and an
information sharing section, which enables our Magic Software Partners to
participate alongside our representatives at trade shows and conferences.
Strategic Alliances</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>21</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
important strategic alliances formed by us to date include:</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SAP</I>.
During 2004, we entered into a partnership with SAP that focused on providing a
special edition of iBOLT as a collaboration platform for the SAP Business One
product, an integrated business management solution designed specifically for
small and midsize businesses. Our iBOLT Special Edition was accepted by the SAP
community with enthusiasm, and our company was awarded by SAP the ISV Partner
Leadership in Innovation 2005 award and in 2006 we were awarded the SAP
Software Solution Partner Quality Excellence Award. Our iBOLT Special Edition
partner program is endorsed by over 230 SAP Business One partners across the
globe who have signed a partnership agreement with us and became a significant
new addition to the Magic partner community. In the beginning of 2007, we
announced a new iBOLT Special Edition for SAP R/3 ERP software and we received
SAP&#146;s xAPPS certification. In addition to the direct economic impact of iBOLT
sales, we are experiencing the following benefits that arise from our
partnership with SAP: (i) recognition and validation of our technology as a
mainstream player in the business integration and composite application
development domains; (ii) privileged access to a pre-qualified partner
community that can also employ iBOLT in non-SAP related projects; and (iii)
revitalization of our Magic Software Partners community, by offering them
access to the SAP Partner Program and branding of their existing applications.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IBM</I>.
In March 2007, we qualified for the IBM Business Partner SOA Specialty. For this specialty, IBM selects business
partners who market SOA content, services, or both that demonstrate compatibility
with or complement the IBM SOA Foundation products, who endorse the IBM SOA strategy, and whose
marketing activities IBM determines to be in agreement with its own. We offer
SOA capabilities in the System i (iSeries / AS/400) market] and we qualified for this specialty with
respect to one of our SOA projects that was performed in France during 2006.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;W4</I>.
In 2005, we entered
into agreements with W4, a leading European provider of BPM software for human
resources related processes. W4&#146;s BPM technology has over nine years of proven
use by hundreds of customers. W4 has embedded iBOLT into its BPM platform, W4
BPMSuite V6, which was launched in December 2005. We have added the W4 BPM
engine to our extensive list of components, which enables iBOLT developers to
seamlessly integrate human resources related activities as a component of any
composite applications developed with the iBOLT Integration Suite. In 2007,
Forrester Research recognized W4 as a strong performer in the Human Centric BPM
Suites industry, pointing out the partnership between us and W4 as a strong
element. This alliance extends our exposure to BPM areas in which we are less
active directly, and in particular the Human Centric and Workflow Oriented
areas.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iWay
Software</I>. During
2003, we initiated a partnership with iWay Software to provide intelligent,
prepackaged adapters for the iBOLT Integration Suite. iWay Software is an
information builder company and a leading adapter vendor, engaged in
acceleration of business integration. The availability of over 250 iWay
Software adapters to the iBOLT Integration Suite enables organizations to
connect to virtually any packaged application, mainframe and legacy system,
traditional database, and to external data sources. iWay Software adapters
interface seamlessly into the iBOLT environment without requiring complex
coding or application modifications.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
late 2007, we joined the partner program of Salesforce.com and became an
AppExchange certified. This enables us to address the Salesforce.com ecosystem
and introduce our iBOLT Special Edition for Salesforce.com to its partners and
customers.</FONT></P>

<P><FONT SIZE=2><B>Competition
</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
markets for our eDeveloper and iBOLT technologies and applications are
characterized by rapidly changing technology, evolving industry standards,
frequent new product introductions and rapidly changing customer requirements.
These markets are therefore highly competitive and we expect competition to
intensify in the future. We constantly follow and analyze the market trends and
our peers in order to effectively compete in these markets and avoid losing
market share to other players and to our competitors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
the introduction of eDeveloper Version 10 in mid 2006, we further shifted our
activities from the integrated development environment market, in which we were
competing with eDeveloper in the past, towards the service oriented
architecture market, which we entered into with iBOLT. Our current competitors
include Above All, Agentis, Appian, BEA, Bowstreet, Broadvision, ClearNova,
Computer Associates, Cordys, FileNet, GT Software, IBM, Microsoft, OutSystems,
Oracle, Pegasytems, Progress, Skyway, Sun (SeeBeyond), TIBCO, Ultimus, Unify,
and Software AG. Additional competitors may enter each of our markets at any
time. Moreover, our customers may seek to develop internally the products that
we currently sell to them and thereafter compete with us.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>22</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
goal is to maintain our technology superiority, time to market and worldwide
channel network, as well as our constant market analysis to quickly address
changing market dynamics. We believe that the principal competitive factors
affecting the market for our products include developer productivity, rapid
results, product functionality, performance, reliability, portability,
interoperability, ease-of-use, demonstrable economic benefits for developers
and users relative to cost, quality of customer support and documentation, ease
of installation, vendor reputation and experience, financial stability as well
as intuitive and out of the box solutions to extend the capabilities of ERP
and/or CRM and other application vendors for enterprise integration.</FONT></P>

<P><FONT SIZE=2><B>Intellectual
Property</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
do not hold any patents and rely upon a combination of copyright, trademark,
trade secret laws and contractual restrictions to protect our rights in our
software products. Our policy has been to pursue copyright protection for our
software and related documentation and trademark registration of our product
names. Also, our key employees and independent contractors and distributors are
required to sign non-disclosure and secrecy agreements.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
provide our products to customers under a non-exclusive, non-transferable
license. Usually, we have not required end-users of our products to sign
license agreements. However, in some accounts license agreements are required
to be signed by the end-users. Generally, a &#147;shrink wrap&#148; license agreement is
included in the product packaging, which explains that by opening the package
seal, the user is agreeing to the terms contained therein. It is uncertain
whether license agreements of this type are legally enforceable in all of the
countries in which the software is marketed.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
trademark rights include rights associated with our use of our trademarks, and
rights obtained by registration of our trademarks. We have obtained trademark
registrations in South Africa, Canada, Chile, China, Israel, the Netherlands
(Benelux), Switzerland, Thailand, the United Kingdom and the United States. The
initial terms of the registration of our trademarks range from 10 to 20 years
and are renewable thereafter. Our use and registration of our trademarks do not
ensure that we have superior rights to others that may have registered or used identical
or related marks on related goods or services. We do not believe that patent
laws are a significant source of protection for our products. We have
registered a copyright for our software in the United States and Japan. Also,
we have registered copyrights for some of our manuals in the United States and
have acquired an International Standard Book Number (ISBN) for some of our
manuals. Our copyrights expire 70 years from date of first publication.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
the software industry is characterized by rapid technological changes, the
policing of the unauthorized use of software is a difficult task and software
piracy is expected to continue to be a persistent problem for the packaged
software industry. As there can be no assurance that the above-mentioned means
of legal protection will be effective against piracy of our products, and since
policing unauthorized use of software is difficult, software piracy can be
expected to be a persistent potential problem.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that because of the rapid pace of technological change in the software
industry, the legal protections for our products are less significant factors
in our success than the knowledge, ability and experience of our employees, the
frequency of product enhancements and the timeliness and quality of our support
services.</FONT></P>

<P><FONT SIZE=2><A NAME=A112></A><B>C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;O<small>RGANIZATIONAL</SMALL> S<SMALL>TRUCTURE</SMALL></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are a member of the Formula Systems (1985) Ltd. (NASDAQ: FORTY), or Formula
Systems, group. Formula Systems is an international IT company principally
engaged, through its subsidiaries and affiliates, in providing software
consulting services, developing proprietary software products and producing
computer-based solutions. In addition, Formula Systems manages a venture
capital fund, which invests in early stage companies that develop software
products for the international market. Formula Systems, an Israeli corporation,
beneficially owns a 53.3% equity interest in our ordinary shares.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>23</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the legal name, location and country of
incorporation and percentage ownership of each of our subsidiaries and
affiliates:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="51%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="19%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="17%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1><B>Subsidiary/Affiliate Name</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Country of<BR>
  Incorporation</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Ownership<BR>
  Percentage</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Software Enterprises Inc.</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>United States</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>CoreTech Consulting Group, LLC</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>United States</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>CoreTech Consulting Group, Inc.</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>United States</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Magic Software Enterprises (UK) Ltd.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>United Kingdom</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Hermes Logistics Technologies Limited</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>United Kingdom</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Magic Beheer B.V</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Netherlands</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Software Enterprises Netherlands B.V.</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Netherlands</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Magic Software Enterprises Spain Ltd.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Spain</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Software Enterprises GmbH</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Germany</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Magic Software Enterprises France S.A.R.L.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>France</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Benelux B.V.</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Netherlands</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Magic Software Enterprises (Israel) Ltd.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Israel</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Software Enterprises Italy S.r.l</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Italy</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Magic Software Japan K.K.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Japan</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Software Enterprises India Pvt. Ltd.</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>India</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Onyx Magyarorszag
  Szsoftverhaz</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Hungary</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;100%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>CarPro Systems Ltd.</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Israel</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>90.48%</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Nextstep Infotech Prt. Ltd.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>India</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;40%</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><A NAME=A113></A><B>D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P<SMALL>ROPERTY</SMALL>, P<SMALL>LANTS AND</SMALL> E<SMALL>QUIPMENT</SMALL></B></FONT></P>

<P><FONT SIZE=2><B>Facilities</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
headquarters and principal administrative, finance, sales, marketing and
research and development operations are located in an office building of
approximately 39,321 square feet that we own in Or Yehuda, Israel, a suburb of
Tel Aviv. The building was constructed on a parcel of land leased from the
Israel Land Authority. The lease expires in 2040 and can be renewed for an
additional period of 49 years.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Hungarian subsidiary owns a 4,850 square foot office facility in Budapest,
Hungary.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
U.S. subsidiaries lease approximately 12,796 square feet of office space in
Laguna Hills, California; and King of Prussia, Pennsylvania. In addition, our
subsidiaries also lease office spaces in Paris, France; Munich, Germany; Pune,
India; Bangalore, India; Tokyo, Japan; Houten, the Netherlands; and Bracknell,
United Kingdom. The aggregate annual cost for such facilities was $1,401,000 in
the year ended December 31, 2007.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the year ended December 31, 2007, we invested approximately $0.8 million in capital assets, mainly
in computers and peripheral equipment.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A NAME=A114></A><B>ITEM 4A.</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><font size=2><B><U>UNRESOLVED STAFF COMMENTS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>


<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><A NAME=A115></A><B>ITEM 5.</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><font size=2><B><U>OPERATING
AND FINANCIAL REVIEW AND PROSPECTS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><A NAME=A116></A><B>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R<SMALL>ESULTS OF</SMALL> O<SMALL>PERATIONS</SMALL></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following discussion of our results of operations should be read together with
our consolidated financial statements and the related notes, which appear
elsewhere in this annual report. The following discussion contains
forward-looking statements that reflect our current plans, estimates and
beliefs and involve risks and uncertainties. Our actual results may differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include those discussed below and
elsewhere in this annual report.</I></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>24</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Background
</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
develop, market and support software development, deployment and integration
technologies and business solutions that enable enterprises to accelerate the
process of building and deploying applications that can be rapidly customized
and integrated with existing systems. We were incorporated under the laws of
Israel in February 1983. We have 17 wholly-owned subsidiaries and one
controlled subsidiary, incorporated in the United States, Europe, Asia and
Israel. Our subsidiaries are engaged in developing, marketing and supporting
vertical applications, as well as in selling and supporting our products. One
of our subsidiaries provides software consulting services. Our ordinary shares
are traded on the NASDAQ Global Market under the symbol &#147;MGIC&#148; and on the Tel
Aviv Stock Exchange.</FONT></P>

<P><FONT SIZE=2><B>Overview
</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
develop, market and support our software development and deployment technology
called eDeveloper, and technology for business integration and process
management called iBOLT. Our technology enables enterprises to accelerate the
process of building, deploying and integrating business software applications
that can be rapidly customized to meet current and future needs. Our technology
and applications based on our technology are used by software solution
providers and thousands of enterprises in approximately 100 countries. We refer
to these vendors and enterprises as the Magic Software Partners. We also
provide maintenance and technical support as well as professional services to
the Magic Software Partners.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
began operations in 1986 and completed an initial public offering of our
ordinary shares in the United States in August 1991. In the first quarter of
2000, we completed a follow-on offering of 4,000,000 of our ordinary shares in
the United States at $25.00 per share. Of these shares, 3,500,000 ordinary
shares were offered by us and 500,000 ordinary shares were offered by our major
shareholder, Formula Group (1985) Ltd. Our net proceeds from the offering,
after deducting the underwriting discount and expenses, were $79.6 million. We
paid a one-time cash dividend of approximately $11.8 million in February 2003.</FONT></P>

<P><FONT SIZE=2><B>General</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
consolidated financial statements appearing in this annual report are prepared
in U.S. dollars and in accordance with generally accepted accounting principles
in the United States, or U.S. GAAP. All references in this annual report to
&#147;dollars&#148; or &#147;$&#148; are to U.S. dollars and all references in this annual report
to &#147;NIS&#148; are to New Israeli Shekels. Transactions and balances originally
denominated in dollars are presented at their original amounts. Transactions
and balances in other currencies are remeasured into dollars in accordance with
the principles set forth in Financial Accounting Standards Board Statement No.
52. The majority of our sales are made outside Israel and a substantial part of
them are in dollars. In addition, substantial portions of our costs are
incurred in dollars. Since the dollar is the primary currency of the economic
environment in which we and certain of our subsidiaries operate, the dollar is
our functional and reporting currency and, accordingly, monetary accounts
maintained in currencies other than the dollar are remeasured using the foreign
exchange rate at the balance sheet date. Operational accounts and non monetary
balance sheet accounts are measured and recorded at the exchange rate in effect
at the date of the transaction. All balance sheet accounts have been translated
using the exchange rates in effect at the balance sheet date. Statement of
operations amounts have been translated using the average exchange rate for the
period. The resulting translation adjustments are reported as a component of
shareholders&#146; equity in accumulated other comprehensive income (loss).</FONT></P>

<P><FONT SIZE=2><B>Discussion
of Critical Accounting Policies and Estimations</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have identified the policies below as critical to the understanding of our
financial statements. The preparation of our consolidated financial statements
in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions in certain
circumstances that affect the amounts reported in the accompanying financial
statements and the related footnotes. Actual results may differ from these
estimates. To facilitate the understanding of our business activities, certain
of our accounting policies that we believe are the most important to the
portrayal of our financial condition and results of operations and that require
management&#146;s subjective judgments are described below. We base our judgments on
our experience and various assumptions that we believe are reasonable.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>25</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2><B><I>Revenue Recognition</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
date, we have derived our revenues from licensing the rights to use our
software, maintenance and technical support and providing professional
services. We sell our products primarily through our direct sales force and indirectly
through distributors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
account for software sales in accordance with Statement of Position, or SOP,
No. 97-2, &#147;Software Revenue Recognition,&#148; as amended by Statement of Position
98-9, &#147;Modifications of SOP 97-2, Software Revenue Recognition with Respect to
Certain Transactions,&#148; or SOP No. 97-2. Revenue is recognized when the
following four criteria are met: (i) persuasive evidence of an arrangement
exists; (ii) delivery has occurred; (iii) the fee is fixed or determinable; and
(iv) collectibility is probable.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SOP
No. 97-2 generally requires revenue earned from software arrangements involving
multiple elements to be allocated to each element based on the relative fair
values of the elements determined by the vendor&#146;s specific objective evidence,
or VSOE, of fair value. Revenue is recognized under the &#147;residual method&#148; when VSOE of fair value exists for
all undelivered elements and VSOE of fair value does not exist for all of the
delivered elements, and when all SOP No. 97-2 criteria for revenue recognition
are met, as described above. The VSOE of fair value of the undelivered elements
included in multiple element arrangement (maintenance, support and services) is
determined based on the price charged for the undelivered element when sold
separately.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
from license fees is recognized when persuasive evidence of an agreement
exists, delivery of the product has occurred, no significant obligations with
regard to implementation remain, the fee is fixed or determinable, and
collectibility is probable. We do not generally grant a right of return to our
customers. When a right of return exists, we defer revenue until the right of
return expires, at which time revenue is recognized provided that all other
revenue recognition criteria are met.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintenance
and technical support revenue is deferred and recognized on a straight-line
basis over the term of the maintenance and support agreement. Revenue from
consulting services consists of billable hours for services provided, and is
recognized as the services are rendered.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Arrangements
that include consulting 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 based on Statement of
Position No. 81-1, &#147;Accounting
for Performance of Construction-Type and Certain Production-Type Contracts,&#148; or SOP 81-1, on a percentage of
completion method based on input measures. 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 for the entire contract. As of
December 31, 2007, no such estimated losses were identified.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
consulting services are not considered essential, the revenue allocable to the
consulting services is recognized as the services are performed. In most cases
to date, we have determined that the services are not considered essential to
the functionality of other elements of the arrangement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
revenue includes unearned amounts received under maintenance and support
contracts, and amounts received from customers but not yet recognized as
revenues.</FONT></P>

<P><FONT SIZE=2><B><I>Capitalization of Software development costs</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
software development costs are capitalized subsequent to the establishment of
technological feasibility in accordance with Financial Accounting Standards Board, or FASB, Statement
of Financial Accounting Standard, or SFAS, No. 86 &#147;Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed.&#148; Based on our
product development process and that of our subsidiaries, technological
feasibility is established upon completion of a detailed program design and a
working model.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
and development costs incurred in the process of developing product
improvements or new products, are generally charged to expenses as incurred.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>26</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
costs incurred by us and our subsidiaries between completion of the detailed
program design and the point at which the product is ready for general release,
have been capitalized.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capitalized
software costs are amortized by the greater of the amount computed using the:
(i) ratio that current gross revenues from sales of the software to the total
of current and anticipated future gross revenues from sales of that software,
or (ii) the straight-line method over the estimated useful life of the product
(three to five years). We assess the recoverability of this intangible asset on
a regular basis by determining whether the amortization of the asset over its
remaining life can be recovered through undiscounted future operating cash
flows from the specific software product sold. As of December 31, 2005, 2006
and 2007, no impairment losses have been identified.</FONT></P>

<P><FONT SIZE=2><B><I>Goodwill</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill
and intangible assets with an identifiable useful life are no longer amortized
but are subject to annual impairment tests based on estimated fair value in
accordance with SFAS No. 142 &#147;Goodwill and Other Intangible Assets,&#148; or SFAS
No. 142. We conduct our annual test of impairment for goodwill in December of
each year. In addition we test for impairment periodically whenever events or
circumstances occur subsequent to our annual impairment tests that indicate
that the asset might be impaired. Indicators we consider important which could
trigger an impairment include, but are not limited to, significant
underperformance relative to historical or projected future operating results,
significant changes in the manner of use of acquired assets or the strategy for
our overall business, significant negative industry or economic trends, a
significant decline in our stock price for a sustained period and our market
capitalization relative to net book value.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 31, 2007, we had two reporting units. Goodwill attributable to each
of the reporting unit is measured separately. The first step of the goodwill
impairment test compares the carrying value of each reporting unit with its
fair value on that date. Since the fair value of the reporting units exceeded
their carrying amount, no impairment was identified in 2005, 2006 and 2007.</FONT></P>

<P><FONT SIZE=2><B><I>Other Intangible Assets</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible
assets are comprised of distribution rights, acquired technology and customer
relations, and are amortized over their useful life using a method of
amortization that reflects the pattern in which the economic benefits of the
intangible assets are consumed or otherwise used up. Distribution rights,
acquired technology and customer relations are amortized on a straight line
basis over a period of five years.</FONT></P>

<P><FONT SIZE=2><B><I>Impairment of long-lived assets</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
review our long-lived assets for impairment in accordance with SFAS No. 144,
&#147;Accounting for the Impairment or Disposal of Long-Lived Assets,&#148; or SFAS No.
144, whenever a sale event or change in circumstances indicate that the
carrying value of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying value of an asset
to the future undiscounted cash flows expected to be generated by the assets.
If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying value of the assets exceeds the
fair value of the assets. In 2006 we identified impairment (see Note 1 (e)
inour Financial Statements). As of December 31, 2007 and 2005, no impairment
indicators have been identified.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>27</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>Marketable Securities</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
account for investments in marketable securities in accordance with SFAS No.
115, &#147;Accounting for Certain Investments in Debt and Equity Securities,&#148; or
SFAS No. 115. Our management determines the appropriate classification of its investments
in marketable debt securities at the time of purchase and reevaluates such
determinations at each balance sheet date. Debt securities are classified as
available for sale and reported at fair value.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt
securities that are designated as available-for-sale are stated at fair value,
with unrealized gains and losses reported in accumulated other comprehensive
income (loss), a separate component of shareholders&#146; equity. Realized gains and
losses on sales of investments, as determined on a specific identification
basis, are included in financial income, net. No impairment has been identified
as of December 31, 2007.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FASB
Staff Position (&#147;FSP&#148;) No. 115-1, &#147;The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investment&#148; (&#147;FSP 115-1&#148;) and SAB
Topic 5M &#147;Other Than Temporary Impairment Of Certain Investments In Debt And
Equity Securities&#148; provides guidance for determining when an investment is
considered impaired, whether impairment is other-than temporary, and
measurement of an impairment loss. An investment is considered impaired if the
fair value of the investment is less than its carrying amount. If, after
consideration of all available evidence to evaluate the realizable value of its
investment, impairment is determined to be other than- temporary, then an
impairment loss should be recognized equal to the difference between the
investment&#146;s carrying amount and its fair value. FSP 115-1 nullifies certain
provisions of Emerging Issues Task Force (&#147;EITF&#148;) Issue No. 03-1, &#147;The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments&#148;
(&#147;EITF 03-1&#148;) while retaining the disclosure requirements of EITF 03-1 which we
adopted in 2003. No other temporary loss has been recognized as of December 31,
2007.</FONT></P>

<P><FONT SIZE=2><B><I>Stock-based compensation</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FASB
SFAS No. 123 (revised 2004), &#147;<I>Share-Based Payment</I>,&#148; or SFAS 123(R), requires companies to estimate the fair value
of equity-based payment awards on the date of grant using an option-pricing
model. The value of the portion of the award that is ultimately expected to
vest is recognized as an expense over the requisite service periods in our
consolidated income statement. Prior to the adoption of SFAS 123(R), we
accounted for equity-based awards to employees and directors using the
intrinsic value method in accordance with Accounting Principles Board No. 25,
or APB 25, as allowed under SFAS No. 123, &#147;<I>Accounting for Stock-Based Compensation.</I>&#148;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
adopted SFAS 123(R) using the modified prospective transition method, which
requires the application of the accounting standard starting from January 1,
2006, the first day of our fiscal year 2006. Under the transition method, since
all the unvested options had been accelerated prior to the adoption of SFAS
123(R) (see Note 12 to the consolidated financial statements), compensation
cost recognized in the year ended December 31, 2007 includes compensation cost
for all share-based payments granted subsequent to January 1, 2007, based on
the grant-date fair value estimated in accordance with the provisions of SFAS
123(R). Results for prior periods have not been restated.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recognize compensation expenses for the value of our awards, which have graded
vesting based on the straight line method over the requisite service period of
each of the awards, net of estimated forfeitures. Estimated forfeitures are
based on actual historical pre-vesting forfeitures.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
used the Black-Scholes option-pricing model through December 31, 2006 and the
Cox, Ross and Rubinstein&#146;s Binomial model for options granted thereafter.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>28</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>Discontinued Operation</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recorded the results of the sale of AAOD and the liquidation of one of our
subsidiaries as discontinued operation, according to Exhibit 03-13A of EITF
03-13, which applies to FAS 144 par. 42, or the Exhibit. The Exhibit generally
requires that in order to record the disposal&#146;s group results as a discontinued
operation, the disposal group must meet all of the following criteria:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="6%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="89%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>1.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The activity needs to be qualified as a &#147;component
  of an entity&#148;.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>2.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The results of operations of a component of an
  entity that either has been disposed of or is classified as held for sale
  shall be reported in discontinued operations if both of the following conditions
  are met:</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="11%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="84%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=LEFT><FONT SIZE=2>a.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The operations and cash flows of the component have
  been (or will be) eliminated from the ongoing operations of the entity as a
  result of the disposal transaction</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=LEFT><FONT SIZE=2>b.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The entity will not have any significant continuing
  involvement in the operations of the component after the disposal
  transaction.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to Exhibit 03-13A of EITF 03-13 the
above mentioned activities are classified as a discontinued operation for all
presented periods.</FONT></P>

<P><FONT SIZE=2><B><I>Accounting for income tax</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
January 1, 2007, we adopted FIN&nbsp;48, &#147;Accounting for Uncertainty in Income
Taxes,&#148; which contains a two-step approach to recognizing and measuring
uncertain tax positions accounted for in accordance with Statement 109,
&#147;Accounting for Income Taxes.&#148; The first step is to evaluate the tax position
taken or expected to be taken in a tax return by determining if the weight of
available evidence indicates that it is more likely than not that, on an
evaluation of the technical merits, the tax position will be sustained on
audit, including resolution of any related appeals or litigation processes. The
second step is to measure the tax benefit as the largest amount that is more
than 50% likely to be realized upon ultimate settlement. Prior to January&nbsp;1,
2007, we estimated our uncertain income tax obligations in accordance with SFAS
No.&nbsp;109, &#147;Accounting for Income Taxes&#148; (SFAS No.&nbsp;109) and SFAS
No.&nbsp;5 &#147;Accounting for Contingencies&#148; (&#147;SFAS No.&nbsp;5&#148;).</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recognize accrued interest related to unrecognized tax benefits in tax expense.
Accounting for tax positions requires judgments, including estimating reserves
for potential uncertainties. We also assess our ability to utilize tax
attributes, including those in the form of carry forwards, for which the benefits
have already been reflected in the financial statements. We do not record
valuation allowances for deferred tax assets that we believe are more likely
than not to be realized in future periods. While we believe the resulting tax
balances as of December&nbsp;31, 2007 and 2006 are appropriately accounted for
in accordance with FIN 48, SFAS No.&nbsp;5 and SFAS No.&nbsp;109 as applicable,
the ultimate outcome of such matters could result in favorable or unfavorable
adjustments to our consolidated financial statements and such adjustments could
be material. See Note 11 to Consolidated Financial Statements for further
information regarding income taxes. We have filed or are in the process of
filing local and foreign tax returns that are subject to audit by the respective
tax authorities. The amount of income tax we pay is subject to ongoing audits
by the tax authorities, which often result in proposed assessments. Our
estimate of the potential outcome for any uncertain tax issue is highly
judgmental. We believe that we adequately provided for any reasonably
foreseeable outcomes related to tax audits and settlement. However, our future
results may include favorable or unfavorable adjustments to our estimated tax
liabilities in the period the assessments are made or resolved, audits are
closed or when statutes of limitation on potential assessments expire. As a
result of the adoption of FIN 48, we recorded a change of $530,000 in our
shareholder&#146;s equity and a change of $50,000 in our tax expenses.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
associated with uncertain income tax positions and penalties expense are
classified as income tax expenses. We have not recorded any material interest
or penalties during the years 2005, 2006 and 2007.</FONT></P>

<P><FONT SIZE=2><B>Significant
Expenses</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost
of Revenues.</I> Cost of revenues for software sales consist
primarily of software production costs royalties and licenses payable to third
parties, as well as amortization of capitalized software. Cost of revenues for
maintenance and technical support and professional services consists primarily
of personnel expenses, subcontracting and other related costs.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>29</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
and Development Expenses, Net.</I> Research and development costs
consist primarily of salaries of employees engaged in on-going research and
development activities and other related expenses. The capitalization of
software development costs is applied as reductions to gross research and
development costs to calculate net research and development expenses.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the gross research and development costs,
capitalized software development costs, and the net research and development
expenses for the periods indicated:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="57%" VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>(U.S. dollars in thousands)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Gross research
  and development costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>6,322</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,944</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,743</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Less
  capitalization of software development costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(3,909</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(3,482</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(3,027</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Research and
  development expenses, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,413</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,462</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,716</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling
and Marketing Expenses.</I> Selling and marketing expenses
consist primarily of salaries and related expenses for sales and marketing
personnel, sales commissions, marketing programs, web site related expenses,
public relations, promotional materials, travel expenses and trade show exhibit
expenses.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
and Administrative Expenses.</I> General and administrative
expenses consist primarily of salaries and related expenses for executive,
accounting, human resources and administrative personnel, professional fees,
provisions for doubtful accounts, and other general corporate expenses.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial
income (expenses), net.</I> Net financial income (expenses)
consists primarily of interest earned on cash equivalents and marketable securities,
interested paid on loans received and currency translation adjustments.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents selected consolidated statement of operations data for
the periods indicated:</FONT></P>

<TABLE ALIGN="CENTER" BORDER="0" CELLSPACING="0" CELLPADDING="0" WIDTH="90%">
<TR style="font-size:1px" >
<TD WIDTH="57%" VALIGN="BOTTOM">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>(U.S. dollars in thousands, except share and<BR> per share data)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Revenues:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>21,503</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>18,788</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>17,707</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Maintenance and
  technical support</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,238</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,531</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>12,605</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Consulting
  services</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>19,095</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>22,252</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>28,116</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>51,836</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>52,571</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>58,428</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cost of
  revenues:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>6,965</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,433</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,558</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Maintenance and
  technical support</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,179</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,873</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,602</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Consulting
  services</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>14,123</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>16,862</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>21,181</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total cost of
  revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>23,267</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>25,168</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>27,340</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Gross profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>28,569</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>27,403</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,088</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Operating
  expenses:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Research and
  development, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,413</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,462</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,716</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Sales and marketing,
  net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>17,197</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,712</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,558</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>General and
  administrative</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>14,510</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>13,784</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,532</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Restructuring
  and impairment expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,157</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total operating
  expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>34,120</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>34,115</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>29,806</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Operating income
  (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(5,551</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(6,712</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,282</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Financial income
  (expenses), net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(809</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>332</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>161</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Other income</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>278</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>170</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss)
  before taxes on income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,360</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,102</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,613</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income taxes</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>462</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>310</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>362</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss)
  after taxes on income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,822</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,412</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,251</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Equity in earnings
  (losses) of affiliates</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>19</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(86</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Minority
  interest in losses (earnings) of consolidated subsidiaries</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>71</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income
  (loss) before discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(6,811</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(6,326</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,143</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income from
  discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,204</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,320</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,465</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income
  (loss) after discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(5,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>12,608</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Basic earnings
  (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.40</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Diluted earnings
  (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.39</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Shares used to
  compute basic earnings (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,124</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,184</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,443</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Shares used to
  compute diluted earnings (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>31,124</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>31,184</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>32,023</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>30</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents selected consolidated statement of operations data for
the periods indicated as a percentage of total revenues:</FONT></P>

<TABLE ALIGN="CENTER" BORDER="0" CELLSPACING="0" CELLPADDING="0" WIDTH="90%">
<TR style="font-size:1px" >
<TD WIDTH="57%" VALIGN="BOTTOM">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Revenues:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>41.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>35.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>30.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Maintenance and
  technical support</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>21.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>21.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>21.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Consulting
  services</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>36.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>42.4</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>48.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cost of
  revenues:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>13.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>10.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>7.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Maintenance and
  technical support</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Consulting
  services</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>27.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>32.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>36.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total cost of
  revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>44.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>47.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>46.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Gross profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>55.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>52.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>53.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Operating
  expenses:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Research and
  development, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Selling and
  marketing, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>33.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>29.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>26.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>General and
  administrative</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>28.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>26.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>19.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Restructuring
  and impairment expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total operating
  expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>65.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>64.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>51.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Operating income
  (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(10.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(12.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Other income
  (expenses)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Financial income
  (expenses), net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss)
  before taxes on income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(12.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(11.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income taxes</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Equity in
  earnings (losses) of affiliates</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Minority
  interest in (earnings) losses of consolidated subsidiaries</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income
  (loss) before discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(13.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(12.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income from
  discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>19.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR><TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income
  (loss) after discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(8.9</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(9.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>21.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>31</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Year Ended December 31, 2007 Compared With Year
Ended December 31, 2006</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues</I>. Total revenues increased by 11% to $58.4
million in 2007 from $52.6 million in 2006. License revenues decreased by 5% to
$15.0 million in 2007 from $15.8 million in 2006. Application revenues
decreased by 7% to $2.7 million in 2007 from $2.9 million in 2006 primarily due
to our efforts to decrease sales to third parties. Revenues from maintenance
and technical support increased by 10% to $12.6 million in 2007 from $11.5
million in 2006.as a result of the broad maintenance and support services that
we provide to our existing customers. Revenues from consulting and other
services increased by 27% to $28.1 million in 2007 from $22.2 million in 2006,
as a result of customers upgrading to eDeveloper V10 and due to the growth of
our information technology consulting firm.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost
of Revenues</I>. Cost of
revenues increased by 8% to $27.3 million in 2007 from $25.2 million in 2006.
Cost of revenues for licenses decreased by 6% to $3.3 million in 2007 from $3.5
million in 2006 in line with the decrease in licenses sales. These costs
includes the amortization of capitalized software development assets in the
amount of $2.5 million in 2007 and $3.6 million in 2006. Cost of revenues for
applications decreased by 32% to $1.3 million in 2007 from $1.9 million in
2006, primarily as a result of decrease in sales to third parties. Cost of
revenues for maintenance and technical support decreased by 45% to $1.6 million
in 2007 from $2.9 million in 2006 primarily due to cost saving following the
implementation of our restructuring plan. Cost of revenues for consulting and
other services increased by 25% to $21.2 million in 2007 from $16.9 million in
2006, consistent with the increase in consulting and other services revenues.
We expect that our cost of revenues as a percentage of revenues will improve in
2008.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
Profit</I>. Gross Profit
in 2007 was 53.2% as compared with gross profit of 52.1% in 2006. The
improvement in our gross profit was a result of the cost saving resulting from
the implementation of our restructuring plan and from improved sales margins
from professional services.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
and Development Expenses, Net</I>. Total research and development expenses decreased by 3% to $5.7
million in 2007 from $5.9 million in 2006. Net research and development
expenses increased by 8% to $2.7 million in 2007 from $2.5 million in 2006. In
2007, we capitalized $3.0 million of software development costs, as compared to
$3.5 million in 2006. The decrease in total research and development expenses
in 2007 was due to a decrease in the number of employees in our research and
development department.&nbsp;Net research and development expenses as a
percentage of revenues remained at the same level of 5% in 2007 and 2006. We do
not expect a material change in our net research and development expenses as
percentage of our revenues in 2008.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling
and Marketing Expenses, Net</I>. Selling and marketing expenses decreased slightly to $15.6 million in
2007, representing 26.6% of revenues, from $15.7 million in 2006, representing
29.9% of revenues. We expect that our selling and marketing expenses will
increase in 2008.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
and Administrative Expenses</I>. General and administrative expenses decreased by 17% to $11.5 million
in 2007 from $13.8 million in 2006. This was mainly as a result of the
implementation of our restructuring plan.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restructuring</I>
<I>and impairment expenses</I>. In the third quarter of 2006, we announced
a restructuring and impairment
plan primarily to reduce our costs and improve profitability. Total
restructuring and impairment
costs in 2006 were $2.2 million, a significant portion of which was attributable
to severance payments.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-Based
Compensation.</I> In 2006, we adopted SFAS No. 123(R), which had
an effect on our results of operations, although it did not have an impact on
our overall financial position or cash flows. In 2007, we incurred $0.4 million
due to the grant of 1,750,000 additional options, and in 2006, we incurred
$27,000 of stock-based compensation expense as a result of the adoption of SFAS
No. 123(R).</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>32</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
Income</I>. We recorded
other income of approximately $0.3 million in 2007 and $1.2 million in 2006
relating to the sale of CarPro System Ltd&#146;s intellectual property, related
assets and eDeveloper licenses.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial
Income, Net</I>. We had
financial income of $0.2 million in 2007 and financial income of $0.3 million
in 2006 primarily due to the appreciation of certain currencies in which we
held assets or to which assets were tied, against the U.S. dollar.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income Taxes</I>. We
incurred income taxes of $0.4 million in 2007, compared to $0.3 million in 2006.
Those taxes are primarily attributable to taxes incurred in Europe and the
United States. Most of our subsidiaries have accumulated carryforward losses
for tax purposes.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity
in Earnings (Losses) of Affiliates</I>. In 2007, we recognized equity in losses of affiliates of $86,000,
while we recognized equity in earnings of affiliates of $15,000 in 2006.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minority
Interest in Profits (Losses) of Consolidated Subsidiaries</I>. Minority interest in the profits of our
consolidated subsidiaries represents the minority shareholders&#146; share of the
profits (losses) of some of certain majority owned subsidiaries. In 2007, we
recognized a loss of $22,000 compared to income of $71,000 in 2006.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discontinued
Operation.</I> Net income from discontinued operations was $11.5 million in 2007, including a $9.3
million one-time capital gain. The income consisted of a profit of $2.9 million
from AAOD&#146;s activity and a $0.7 million loss by our Italian subsidiary. In 2006
we recorded net income from discontinued operations of $1.3 million.</FONT></P>

<P><FONT SIZE=2><B>Year Ended December 31, 2006 Compared With Year
Ended December 31, 2005</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues</I>. Total revenues increased by 2% to $52.6
million in 2006 from $51.8 million in 2005. License revenues decreased by 5% to
$15.8 million in 2006 from $16.6 million in 2005 due to a decrease in sales,
primarily in Europe. Application revenues decreased by 40% to $2.9 million in
2006 from $4.8 million in 2005 primarily due to the decrease in sales of
applications by certain of our subsidiaries. Revenues from maintenance and
technical support increased by 3% to $11.5 million in 2006 from $11.2 million
in 2005, as a result of our entering into maintenance and support contracts
with more customers in 2006. Revenues from consulting and other services
increased by 16% to $22.2 million in 2006 from $19.1 million in 2005, as a
result of growth in demand for consulting and other services</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost
of Revenues</I>. Cost of
revenues increased by 8% to $25.2 million in 2006 from $23.3 million in 2005.
Cost of revenues for licenses decreased by 22% to $3.5 million in 2006 from
$4.5 million in 2005 primarily as a result of the decrease in third party sales
.. Cost of revenues for applications decreased by 21% to $1.9 million in 2006
from $2.4 million in 2005, consistent with the decrease in application license
sales. Cost of revenues for maintenance and technical support increased by 32%
to $2.9 million in 2006 from $2.2 million in 2005.Cost of revenues for
consulting and other services increased by 20% to $16.9 million in 2006 from
$14.1 million in 2005, primarily due to the increase in our revenues from
consulting and other services.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
Profit</I>. Gross Profit
in 2006 was 52.1% as compared with gross profit of 55.1% in 2005. The decrease
of the gross profit was a result of the forgoing.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
and Development Expenses, Net</I>. Total research and development expenses decreased by 6% to $5.9
million in 2006 from $6.3 million in 2005. Net research and development
expenses increased by 4% to $2.5 million in 2006 from $2.4 million in 2005. In
2006, we capitalized $3.5 million of software development costs, as compared to
$3.9 million capitalized in 2005. The increase in total research and
development expenses in 2006 was due to work performed in connection with the
expected release of eDeveloper Version 10 in 2006 as well as our new version of
iBOLT. Net research and development expenses as a percentage of revenues
remained in the same level of 5% in both 2006 and 2005.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>33</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling
and Marketing Expenses, Net</I>. Selling and marketing expenses decreased by 9% to $15.7 million in
2006 from $17.2 million in 2005 reflecting the reduction of our marketing
activities for both our eDeveloper and iBOLT products and the effect of the
sales force reduction. Selling and marketing expenses as a percentage of
revenues decreased to 30% in 2006 from 33% in 2005, due to decreased marketing
activities for both our eDeveloper and iBolt products and the effect of the
sales force reduction.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
and Administrative Expenses</I>. General and administrative expenses decreased by 5% to $13.8 million
in 2006 from $14.5 million in 2005.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restructuring</I>
<I>and impairment expenses</I>. In the third quarter of 2006, we announced
a restructuring and impairment
plan primarily to reduce our costs and improve profitability. Total
restructuring and impairment
costs in 2006 were $2.2 million, a significant portion of which was
attributable to severance payments.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
Income</I>. We recorded
other income of approximately $0.3 million in 2006 relating to the sale of
CarPro System Ltd.&#146;s IP, related assets and eDeveloper licenses.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial
Income (Expenses) Net</I>.
We had financial income of $0.3 million in 2006 primarily due to the
appreciation of certain currencies in which we had assets that were denominated
or to which assets were tied, against the U.S. dollar. We had financial expense
of $0.8 million in 2005 primarily due to the devaluation of certain currencies
in which we had assets that were denominated or to which assets were tied,
against the U.S. dollar.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
Taxes</I>. We incurred
income taxes of $0.3 million in 2006, compared to $0.5 million in 2005. Those
taxes are primarily attributable to taxes accrued in Europe and the United
States. Most of our subsidiaries have accumulated carryforward losses for tax
purposes.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Equity in Earnings (Losses) of Affiliates</I>.
In 2006 and 2005, we recognized equity in earnings of affiliates of $15,000 and
of $19,000, respectively.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minority
Interest in Profits (Losses) of Consolidated Subsidiaries</I>. Minority interest in the profits of our
consolidated subsidiaries represents the minority shareholders&#146; share of the
profits (losses) of some of certain majority owned subsidiaries. In 2006, we
recognized an income of $71,000 compared to a loss of $8,000 in 2005.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discontinued
operation</I> Net
income from discontinued operations was $1.3 million in 2006. The profit was
composed of a profit of $1.7 million from AAOD&#146;s activity and from a loss of
$0.4 million of our Italian&#146;s subsidiary. In 2005 we recorded a net income from
discontinued operations of $2.2 million.</FONT></P>

<P><FONT SIZE=2><B>Conditions
in Israel</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are incorporated under the laws of, and our principal executive offices and
manufacturing and research and development facilities are located in the State
of Israel. Accordingly, we are influenced to a limited extent by the
political, economic and military conditions affecting Israel. Specifically, we
could be adversely affected by any major hostilities involving Israel, the
interruption or curtailment of trade between Israel and its present trading
partners, or a significant downturn in the economic or
financial condition of Israel.</FONT></P>

<P><FONT SIZE=2><B>Impact
of Currency Fluctuations and of Inflation</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
financial statements are stated in U.S. dollars, our functional currency.
Nevertheless, a substantial portion of our sales and expenses are incurred in
other currencies, particularly Euros, Japanese yen, NIS and the British pound.
We maintain substantial non-U.S. dollar balances of assets, including cash and
accounts receivable, and liabilities, including accounts payable. Fluctuations
in the value of the currencies in which we do business relative to the U.S.
dollar may have a material adverse effect on our business, results of
operations and financial condition, by decreasing the U.S. dollar value of
assets held in other currencies and increasing the U.S. dollar amount of
liabilities payable in other currencies. In addition, the effect can be by
decreasing the U.S. dollar value of revenues in other currencies and increasing
the U.S. dollar amount of expenses in other currencies.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>34</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
U.S. dollar cost of our operations in Israel is influenced by the extent to
which any increase in the rate of inflation in Israel is (or is not) offset, or
is offset on a lagging basis, by a devaluation of the NIS in relation to the
U.S. dollar. When the rate of inflation in Israel exceeds the rate of
devaluation of the NIS against the dollar, companies experience increases in
the dollar cost of their operations in Israel. Unless offset by a devaluation
of the NIS, inflation in Israel will have a negative effect on our
profitability, as we receive payments in dollars or dollar linked NIS for most
of our sales, while we incur a portion of our expenses in NIS.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth, for the periods indicated, (i) devaluation or
appreciation of the NIS against the most important currencies for our business,
the U.S. dollar and the Euro, and (ii) inflation as reflected in changes in the
Israeli consumer price index.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="33%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="14" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year Ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>Three Months Ended <BR>
  March 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="14" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2003</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2004</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>2008</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>U.S. dollar</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(7.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(1.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>6.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(8.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(9.0</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(7.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Euro</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>6.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(7.3</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>

</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Israeli consumer price index</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(1.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.4</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3.4</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>

</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
devaluation of the NIS in relation to the U.S. dollar has the effect of
reducing the U.S. dollar amount of any of our expenses or liabilities which are
payable in NIS (unless such expenses or payables are linked to the U.S.
dollar). Such devaluation also has the effect of decreasing the U.S. dollar
value of any asset, which consists of NIS or receivables payable in NIS (unless
such receivables are linked to the U.S. dollar). Conversely, any increase in
the value of the NIS in relation to the U.S. dollar has the effect of
increasing the U.S. dollar value of any unlinked NIS assets and the U.S. dollar
amounts of any unlinked NIS liabilities and expenses.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
exchange rates between the NIS and the U.S. dollar fluctuate continuously,
exchange rate fluctuations and especially larger periodic devaluations will
have an impact on our profitability and period-to-period comparisons of our
results. We cannot assure you that in the future our results of operations may
not be materially adversely affected by currency fluctuations.</FONT></P>

<P><FONT SIZE=2><B>Corporate
Tax Rate</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2007, Israeli companies were subject to income tax at the rate of 29% of
taxable income. However, eight investment programs at our facility in Or Yehuda
have been granted &#147;approved enterprise&#148; status under the Law for Encouragement
of Capital Investments, 1959 commonly referred to as the Investment Law, and we
are, therefore, eligible for some tax benefits. Subject to compliance with
applicable requirements, the portion of our income derived from the approved
enterprise programs will be tax-exempt for a period of two to four years
commencing in the first year in which an approved enterprise generates taxable
income and will be subject, for a period of five to eight years, to a reduced
corporate tax of 25%. However, these benefits will not be available to us with
respect to any income derived by our non-Israeli subsidiaries.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
April 1, 2005, an amendment to the Investment Law came into effect that has
significantly changed the provisions of the Investment Law. The amendment
limits the scope of enterprises which may be approved by the Investment Center
Investment Center of the Ministry of Industry and Trade of the State of Israel,
or the Investment Center, by setting criteria for the approval of a facility as
an approved enterprise, such as provisions generally requiring that at least
25% of the approved enterprise&#146;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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However,
the April 2005 amendment to the Investment Law provides that terms and benefits
included in any certificate of approval granted prior to the amendment will
remain subject to the provisions of the law as they were on the date of such
approval. Therefore, our existing approved enterprise programs will generally
not be subject to the provisions of the April 2005 amendment. As a result of
the amendment, tax-exempt income will subject us to taxes upon distribution or
liquidation and we may be required to record deferred tax liability with
respect to such tax-exempt income. As of December 31, 2007, we did not generate
income under the provision of the amended Investment Law.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>35</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 31, 2007, our net operating loss carry-forwards for Israeli tax
purposes was approximately $32.6 million and the net operating loss
carry-forwards of our U.S. subsidiaries for U.S. tax purposes amounted to
approximately $1.4 million. Our U.S. net operating loss carry-forwards can be
carried forward and offset against taxable income for 15 to 20 years and will
expire in the years 2022 through 2027. Under current Israeli tax laws,
operating loss carry forwards do not expire, and are linked to the Israeli
inflation rate and may be offset against future taxable income. As of December
31, 2007, our subsidiaries in Europe and Japan have estimated total available
tax loss carry-forwards of $14.7 million and $2.2 million, respectively, to
offset against future taxable income for 15 to 20 years and five years,
respectively.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
companies are subject to &#147;company tax&#148; on their taxable income. The applicable
rate was 29% in 2007 and will be reduced to 27% in 2008, 26% in 2009 and 25% in
2010 and thereafter. However, the effective tax rate payable by a company,
which derives income from an approved enterprise (as further discussed below),
may be considerably less.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
received final tax assessments for the years 1997 to 2002 from the Israeli tax
authorities and have submitted an appeal to the District Court of Tel
Aviv-Jaffa with respect to such tax assessments. As of April 2007, one open
issue remains to be settled by the court (see Item 8 -Financial Information),
while all other issues were resolved with no additional taxes to be paid by us.
Our management believes, based on the advice of its legal advisors, that the
probability of an unfavorable outcome to our company on this matter is remote,
therefore no provision was provided in the financial statements in respect of
this matter.</FONT></P>

<P><FONT SIZE=2><B>Recently Issued Accounting Standards</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 2007, the FASB issued SFAS 141(R), Business Combinations. This
Statement replaces SFAS 141, Business Combinations, and requires an acquirer to
recognize the assets acquired, the liabilities assumed, including those arising
from contractual contingencies, any contingent consideration, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with limited exceptions specified in the
statement. SFAS 141(R) also requires the acquirer in a business combination
achieved in stages (sometimes referred to as a step acquisition) to recognize
the identifiable assets and liabilities, as well as the noncontrolling interest
in the acquiree, at the full amounts of their fair values (or other amounts
determined in accordance with SFAS 141(R)). In addition, SFAS 141(R)&#146;s
requirement to measure the noncontrolling interest in the acquiree at fair
value will result in recognizing the goodwill attributable to the
noncontrolling interest in addition to that attributable to the acquirer. SFAS
141(R) amends SFAS No. 109, Accounting for Income Taxes, to require the
acquirer to recognize changes in the amount of its deferred tax benefits that
are recognizable because of a business combination either in income from
continuing operations in the period of the combination or directly in
contributed capital, depending on the circumstances. It also amends SFAS 142,
Goodwill and Other Intangible Assets, to, among other things, provide guidance
on the impairment testing of acquired research and development intangible
assets and assets that the acquirer intends not to use. SFAS 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. We do not expect that the adoption of SFAS 141(R) will have
any impact on our consolidated financial statements.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements. SFAS 160 amends Accounting Research Bulletin
51, Consolidated Financial Statements, to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It also clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial statements.
SFAS 160 also changes the way the consolidated income statement is presented by
requiring consolidated net income to be reported at amounts that include the
amounts attributable to both the parent and the noncontrolling interest. It
also requires disclosure, on the face of the consolidated statement of income,
of the amounts of consolidated net income attributable to the parent and to the
noncontrolling interest. SFAS 160 requires that a parent recognize a gain or
loss in net income when a subsidiary is deconsolidated and requires expanded
disclosures in the consolidated financial statements that clearly identify and
distinguish between the interests of the parent owners and the interests of the
noncontrolling owners of a subsidiary. SFAS 160 is effective for fiscal
periods, and interim periods within those fiscal years, beginning on or after
December 15, 2008. We do not expect that the adoption of SFAS 160 will have
significant impact on our consolidated financial statements.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>36</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2006, the FASB issued SFAS No. 157, &#147;<I>Fair
Value Measurements</I>,&#148; or SFAS No. 157. SFAS No. 157 provides a single
definition of fair value, a framework for measuring fair value, and expanded
disclosures concerning fair value. Previously, different definitions of fair
value were contained in various accounting pronouncements creating
inconsistencies in measurement and disclosures. SFAS No. 157 applies under
those previously issued pronouncements that prescribe fair value as the
relevant measure of value, except SFAS No. 123(R) and related interpretations.
SFAS No. 157 does not apply to accounting standards that require or permit
measurement similar to fair value but are not intended to measure fair value.
SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.
We are currently evaluating the impact of adopting the provisions of SFAS 157
for non-financial assets and liabilities that are recognized or disclosed on a
non-recurring basis.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February 2007, the FASB issued SFAS No. 159, &#147;<I>The
Fair Value Option for Financial Assets and Financial Liabilities</I>,&#148;
or SFAS No. 159. SFAS No. 159 provides companies with an option to report
selected financial assets and liabilities at fair value. Generally accepted
accounting principles have required different measurement attributes for
different assets and liabilities that can create artificial volatility in
earnings. The Standard&#146;s objective is to reduce both complexity in accounting
for financial instruments and the volatility in earnings caused by measuring
related assets and liabilities differently. SFAS No. 159 is effective as of the
beginning of an entity&#146;s first fiscal year beginning after November 15, 2007.
We do not expect that the adoption of SFAS No. 159 will have a material effect
on our consolidated financial statements.</FONT></P>

<P><FONT SIZE=2><B>B.<A NAME=A117></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;L<small>IQUIDITY AND</small> C<small>APITAL</small> R<small>ESOURCES</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically,
we have financed our operations through cash generated by operations, funds
generated by our public offerings in 1991 (approximately $8.5 million), 1996
(approximately $5.0 million) and 2000 (approximately $79.6 million), private
equity investments in 1998 (approximately $12.2 million), as well as from
research and development and marketing grants primarily from the Government of
Israel. In addition, we have also financed our operations through short-term
loans and borrowings under available credit facilities.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 30, 2007, we entered into an agreement, to sell our wholly-owned
subsidiary, AAOD, a Florida corporation that develops and markets application
software targeted at the long-term care industry to Fortissimo Capital for $17
million. We received $1 million of the sale proceeds in December 2007 and $16
million in the beginning of 2008.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
capital expenditures totaled $2.8 million, in the year ended December 31, 2007
compared to $5.2&nbsp;million, in the year ended December 31, 2006. Of the $2.8
million of capital expenditures in 2007, $2.1 million, was invested in network
equipment and computers, $0.5 million was invested in furniture and office
equipment and&nbsp;$0.2 million was invested in leasehold improvements. We
currently do not have significant capital spending or purchase commitments.
However, we anticipate a moderate increase in capital expenditures and lease
commitments consistent with our anticipated growth in operations,
infrastructure and personnel.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 31, 2007, we had approximately $12.2 million in cash and cash
equivalents and working capital of approximately $28.7 million as compared to
$6.9 million in cash and cash equivalents and working capital of approximately
$15.6 million at December 31, 2006.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that our accumulated cash, in conjunction with cash generated from
operations and available funds, will be sufficient to meet our cash
requirements for working capital and capital expenditures for at least the next
twelve months. There are no transactions, arrangements and other relationships
with unconsolidated entities or other persons that are reasonably likely to
materially affect our liquidity or the availability of funds to satisfy our
capital requirements. However, if our operations do not generate cash to the
extent currently anticipated by us, or if we grow more rapidly than currently anticipated,
it is possible that we will require more funds than anticipated. We expect that
these sources will continue to finance our operations in the long term, and
will be complemented, if required, by private or public financing.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>37</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 31, 2007, we used $1.25 million of our credit facility at the First
International Bank of Israel Ltd. and $2.2 million of our credit facility at
Bank HaPoalim B.M. We currently have an unutilized credit line of approximately$1.3 million at the First International
Bank of Israel Ltd. and $0.8 million at Bank HaPoalim B.M. For the purpose of
obtaining these credit lines and other services from these banks, we are
required to comply with the following financial covenants:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>our cash and
  cash equivalents and short term investment may not, at any time, be less than
  $6.5 million;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>our
  shareholders&#146;
  equity may not, at any time, be less than 45% of our total balance sheet and
  $36 million;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>our total
  financial obligations (such as short and long term loans from banking
  institutions or commitments due to debentures) may not exceed $7 million and
  10% of our total balance sheet;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>we are
  committed not to pledge under any general floating charge, for any purpose,
  all or part of our assets in favor of any third party without receiving the
  prior written consent of First International Bank of Israel Ltd.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we do not comply with all or part of these financial covenants, or upon the
occurrence of certain events specified in the agreements with such banks, both
of the banks will be entitled to request the immediate repayment of such credit
lines. As of December 31, 2007, we were in compliance with all of the financial
covenants according to Bank HaPoalim B.M. and received a waiver from the First
International Bank of Israel Ltd. with respect to the covenants with which we
did not comply. These loans were
classified in our Financial Statements as short term loans.</FONT></P>

<P><FONT SIZE=2><B>Cash
Flows</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes our cash flows for the periods presented:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="66%" VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>(U.S. dollars in thousands)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss) from continuing operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,811</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,326</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,143</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Adjustments to reconcile net income (loss)
  from continuing operations to net cash provided by operating activities from
  continuing operations:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>7,691</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,764</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>8,073</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided by operating activities
  from continuing operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>880</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,438</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,216</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided by operating activities
  from discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,716</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>393</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1,656</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided by operating activities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,597</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,831</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>7,560</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash used in investing activities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5,148</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5,185</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,391</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided (used) by financing
  activities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,282</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>678</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(756</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Effect of exchange rate changes on cash and
  cash equivalents</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>322</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(272</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(375</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Increase (decrease) in cash and cash
  equivalents from continuing operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(2,585</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>693</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,243</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash provided by operating activities was approximately $7.6 million for the
year ended December 31, 2007, compared to approximately $3.8 million for the
year ended December 31, 2006 and approximately $5.6 million for the year ended
December 31, 2005. Net cash from operations for 2007 consisted primarily of net
income adjusted for non cash activity including stock-based compensation
expenses, depreciation and amortization of our capitalized research and
development assets and an increase in accrued expenses and other accounts
payable and a decrease in other accounts receivable and prepaid expenses. Net
cash from operations for 2006 consisted primarily of net income adjusted for
non cash activity, depreciation and amortization of our capitalized research
and development assets and an increase in accrued expenses and other accounts
payable and a decrease in other accounts receivable and prepaid expenses and a
decrease in trade receivables. Net cash from operations for 2005 consisted
primarily of net income adjusted for non-cash activity, depreciation and
amortization of our capitalized research and development assets and a decrease
in trade receivables. This was offset by accrued expenses and other accounts
payable.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>38</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash used in investing activities was approximately $2.4 million for the year
ended December 31, 2007 compared to approximately $5.2 million for the year
ended December 31, 2006 and $5.1 million for the year ended December 31, 2005.
These amounts were primarily attributable to depreciation and amortization of
our capitalized research and development assets and purchases of property and equipment
an increase in accrued expenses and other accounts payable and a decrease in
other accounts receivable and prepaid expenses. In 2006, such amounts were
offset by proceeds from the sale of the operations of a subsidiary.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash used in financing activities was approximately $0.8million for the year
ended December 31, 2007, primarily attributable to reimbursement of short term
loans, compared to a net cash provided by financing activities of approximately
$0.7 million for the year ended December 31, 2006, and primarily attributable
to increase in short term loans and Proceeds from exercise of stock options and
warrants, compared to net cash provided by financing activities of
approximately $1.3 million for the year ended December 31, 2005, primarily
attributable to an increase in short term loans, which was offset by the
purchase of treasury shares.</FONT></P>

<P><FONT SIZE=2><B>C.<A   NAME=A118></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R<small>ESEARCH
  AND</small> D<small>EVELOPMENT</small>, P<small>ATENTS AND</small> L<small>ICENSES</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
research and development and support personnel work closely with our customers
and prospective customers to determine their requirements and to design
enhancements and new releases to meet their needs. We periodically release
enhancements and upgrades to our core products. In the years ended December 31,
2005, 2006 and 2007, we invested $6.3 million $5.9 million and $5.7 million,
respectively, in research and development. Research and development activities
take place in our facilities in Israel, India, Japan, the United States and
Europe.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 31, 2007, we employed 120 employees in research and development
activities, of which 41 persons were located in Israel, 63 persons in India,
five persons in Japan and 11 in Europe. Our product development team includes
technical writers who prepare user documentation for our products. In addition,
we have also entered into arrangements with subcontractors for the preparation
of product user documentation and certain product development work.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For additional information regarding product development see Item 4.
&#147;Information on the Company - Business Overview - Product Development&#148;.</FONT></P>

<P><FONT SIZE=2><B>D.<A   NAME=A119></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T<small>REND</small>
  I<small>NFORMATION</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2008, we intend to continue our tight cost control efforts in order to achieve
improved profitability.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
more information on trends in our industry, please see Item 4. &#147;Information on
the Company&#150;Business Overview&#150;Industry Background and Trends.&#148; and Item 5.
&#147;Operating and Financial Review and Prospects - Results of Operation&#148;.</FONT></P>

<P><FONT SIZE=2><B>E.<A   NAME=A120></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;O<small>FF</small>-B<small>ALANCE</small>
  S<small>HEET</small> A<small>RRANGEMENTS</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are not a party to any off-balance sheet arrangements. In addition, we have no
unconsolidated special purpose financing or partnership entities that are
likely to create material contingent obligations.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>39</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>F.<A   NAME=A121></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T<small>ABULAR</small>
  D<small>ISCLOSURE OF</small> C<small>ONTRACTUAL</small> O<small>BLIGATIONS</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes our minimum contractual obligations as of December
31, 2007 and the effect we expect them to have on our liquidity and cash flow
in future periods.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="55%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1><B>Contractual
  Obligations</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="11" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Payments due by period</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="11" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Total</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>less than 1 year</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>1-3 years</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>3-5 years</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="11" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>(U.S. dollars in thousands)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Operating
  lease obligations</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,759</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,568</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,189</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Severance
  payments*</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,316</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Uncertainties in income
  taxes (FIN 48)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>580</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Long term
  loan</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>132</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>132</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Operating
  lease obligations</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>8,787</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,568</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,321</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>*Severance
payments relate to accrued severance obligations mainly to our Israeli
employees as required under Israeli labor law. These obligations are payable
only upon termination, retirement or death of the respective employee.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 6.<A   NAME=A122></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>DIRECTORS,
  SENIOR MANAGEMENT AND EMPLOYEES</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>A<A   NAME=A123></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D<small>IRECTORS
  AND</small> S<small>ENIOR</small> M<small>ANAGEMENT</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below are the name, age, principal position and a biographical
description of each of our directors and executive officers:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=95% style="margin-left:5%">
<TR style="font-size:1px">
<TD WIDTH="21%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="69%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1><B>Name</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1><B>Age</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1><B>Position</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="80%" NOSHADE COLOR=BLACK ALIGN=LEFT>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Guy
  Bernstein</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>40</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Chairman of the Board of Directors, Acting Chief
  Executive Officer</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>David Zigdon</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>52</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Chief
  Financial Officer</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Hadas Gazit
  Kaiser (1)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>32</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Gad
  Goldstein</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>49</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Itiel Efrat (2)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>44</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Outside
  director</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Eitan Naor (1)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>45</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Elan Penn
  (1) (2)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>57</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Outside
  director</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Eli Reifman</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>39</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Naamit
  Salomon</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>43</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Yehezkel
  Zeira (2)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>64</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Director</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%"> </TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD> </TD>
<TD VALIGN=TOP COLSPAN=2>
<P><HR NOSHADE WIDTH=120 COLOR=GRAY ALIGN=LEFT SIZE=1>
</TD>
</TR>
<TR>
<TD> </TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(1)</FONT></P>
</TD>

<TD VALIGN=TOP>
<P><FONT SIZE=2>Member
  of our Option Committee</FONT></P>
</TD>
</TR>
<TR>
<TD> </TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(2)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Member
  of our Audit Committee</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Messrs.
Guy Bernstein, Eitan
Naor, Gad Goldstein, Yehezkel Zeira and Eli Reifman, Ms. Naamit Salomon
and Ms. Hadas Gazit Kaiser were elected at our 2007 annual general meeting of
shareholders for a one year period, to serve as director until our 2008 annual
general meeting of shareholders. Messrs. Itiel Efrat and Elan Penn will serve as
our outside directors pursuant to the provisions of the Israeli Companies Law
for three-year terms until December 28, 2009 and December 29, 2008, respectively, following which their service may
be renewed for one additional three-year term.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Guy Bernstein</B></I>
has served as the chairman of our board of directors since November 2007, and
as our director since December 2006. Mr. Bernstein was appointed as acting our
chief executive officer since May 2008 Mr. Bernstein has served as the chief
executive officer of Emblaze Ltd. since December 2006 and a member of the board
of directors of Emblaze since April 2004. From April 2004 to December 2006, Mr.
Bernstein served as the chief financial officer of Emblaze. From 1999 to 2004,
Mr. Bernstein served as chief financial and operations officer of our company.
Mr. Bernstein also acted as the interim chief executive officer of two of our
subsidiaries, Magic Software Enterprises (Israel) Ltd. and Coretech Consulting
Group. From 1994 to 1997, Mr. Bernstein was senior manager for Kost, Forer,
Gabbay &amp; Kasierer, a member of Ernst &amp; Young Global. Mr. Bernstein is a
certified public accountant (CPA) in Israel and holds a B.A. degree in
accounting and economics from Tel-Aviv University.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>40</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eitan
Naor</I></B> has served as a director of our company since
August 2007. Mr. Naor served as our president and chief executive officer from
July 2007 to April 2008. On April 30, 2008,
Mr. Eitan Naor ceased to serve as our president and chief executive officer.
Prior thereto and since February 2004, Mr. Naor served as chief executive
officer and president of ECtel Ltd. From 1999 to 2004, Mr. Naor served in
various managerial positions with Amdocs Limited. Mr. Naor holds a B.A. degree
in economics from the Tel-Aviv University and an M.B.A. in Strategic Management
from the Hebrew University in Jerusalem.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;David
Zigdon</I></B> has served as chief financial officer since
October 2007. Prior to joining us, and from May 2006 to October 2007 Mr. Zigdon
served as executive vice president and chief financial officer of Power Paper
Ltd. Prior to that and from February 2000 to May 2006 he served as the chief
financial officer of Radcom Ltd (Nasdaq RDCM). Mr. Zigdon is a certified public
accountant (CPA) in Israel and holds a B.A. degree in Economics and Accounting
and an LLM degree in business law from Bar Ilan University.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hadas
Gazit Kaiser</I></B> <I>has</I> served as a director of our company
since August 2007. Ms. Gazit Kaiser has served as chief financial officer of
Emblaze Ltd. since December 2006. From August 2005 to December 2006, Ms. Gazit
Kaiser served as a vice president of finance of Emblaze Ltd. and as chief
financial officer of Emblaze Mobile. Prior thereto and since August 2003, Ms.
Gazit Kaiser served as the budget control manager of TTI Team Telecom
International. From August 2000 to August 2003, Ms. Gazit Kaiser was a manager
for Kost Forer Gabbay &amp; Kasierer, a member of Ernst &amp; Young Global. Ms.
Gazit Kaiser is a director of Matrix IT Ltd., Formula Systems, Sapiens
International Corporation and RadView Software Ltd. Ms. Gazit Kaiser is a
Certified Licensed Public Accountant and holds a B.A. in Economics and
Accounting and an M.B.A. in Finance from Tel Aviv University.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gad
Goldstein</I></B> has served as a director of our company
since December 1998. Mr. Goldstein has been president of Formula Systems since
April 1995 and has served as a director of Formula Systems (1985) Ltd.since
January 1985. From 1985 to 1995, Mr. Goldstein served as vice president-finance
of Formula Systems (1985) Ltd. Mr. Goldstein is also the chairman of the board
of directors of BluePhoenix Solutions Ltd. and a director of other companies
within the Formula Systems group, including Matrix IT Ltd., Formula Vision
Technologies Ltd. and Sapiens International Corporation N.V. Mr. Goldstein
holds a B.A. degree in economics and M.B.A. degree, both from Tel Aviv
University.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Itiel
Efrat</I></B> has served as an outside director of our company
since December 2006. Mr. Efrat is the founder and has served as co-managing director
of ERB Ltd., a leading financial consulting firm, since 1995. Mr. Efrat is the
founder and a member of the Board of Directors of ESOP-Excellence Trust Company
since 2004. Mr. Efrat is a certified public accountant (CPA) in Israel
and holds a B.A. degree in accounting and economics from Tel-Aviv College of
Management.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Elan
Penn</I></B> has served as an outside director of our company
since December 2005. Mr. Penn has served as chief executive officer and chairman
of Penn Publishing Ltd., a private company based in Tel Aviv, Israel since
2001. From 2000 to 2001, Mr. Penn served as vice president of finance and
administration of A.I. Research and Development Ltd. Mr. Penn was chief
executive officer of Sivan Computer Training Company Ltd. during the years 1998
and 2000. From 1992 to 2000, Mr. Penn served as vice president of finance and
administration of Mashov Computers Ltd. From 1987 to 1991 and again from 1992
to 1997, Mr. Penn served as our company&#146;s vice president of finance and
administration. Mr. Penn also serves as a director of Healthcare Technologies
Ltd. Mr. Penn holds a B.A. degree in economics from the Hebrew University of
Jerusalem a Ph.D. in management science from the University of London.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eli
Reifman</I></B> was
appointed by our board of directors to serve as a director of our company in
January 2007. In 1994, Mr. Reifman co-founded Emblaze Ltd., an Israeli
company publicly traded on the Aim Stock Exchange, and has served as its
vice-chairman since December 2006. Mr. Reifman served as the chief executive
officer of Emblaze Ltd. from September 2000 until December 2006.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Naamit
Salomon</I></B> has served as a director of our company since
March 2003. Ms. Salomon has served as vice president finance of Formula Systems
(1985) Ltd. since August 1997. Ms. Salomon also serves as a director of
BluePhoenix Solutions Ltd., Sapiens International Corporation N.V. and Ki-bi
Mobile Technologies Ltd. From 1990 through August 1997, Ms. Salomon was
controller of two large privately held companies in the Formula Systems group.
Ms. Salomon holds a B.A. degree in economics and business administration from
Ben Gurion University and L.L.M. degree from Bar-Ilan University.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>41</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yehezkel
Zeira</I></B> has served as an independent director of our
company since December 2005. Mr. Zeira has been an independent information
technologies consultant since 2001. From 2000 to 2001, Mr. Zeira served as
executive vice president international of Ness Technologies Inc., and from 1970
to 2000, Mr. Zeira served in various positions at Advanced Technology Ltd.,
including as chief executive officer which position he assumed in 1982. Mr.
Zeira also serves as a director of Tim Computers and Systems Ltd., Kalanit
Carmon Software Services Ltd. and Dafron Ltd. Mr. Zeira is also a lecturer at
Ben Gurion University Faculty of Engineering. Mr. Zeira holds a B. Sc. degree
in industrial engineering and M. Sc. degree in operations research, both from
the Technion - Israel Institute of Technology and has participated in the
Harvard Business School program for management development.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table lists our other key employees:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=95% style="margin-left:5%">
<TR style="font-size:1px">
<TD WIDTH="26%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN="TOP" ALIGN="CENTER">
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="63%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1><B>Name</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN="TOP" ALIGN="CENTER">
<P><FONT SIZE=1><B>Age</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1><B>Position</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN="TOP" ALIGN="CENTER">
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amit Ben-Zvi</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN="TOP" ALIGN="CENTER">
<P><FONT SIZE=2>41</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Vice
  President, Chief Executive Officer of Hermes Logistics Technologies Limited</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amit Birk</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN="TOP" ALIGN="CENTER">
<P><FONT SIZE=2>37</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Vice
  President, Mergers and Acquisitions, General Counsel and Corporate Secretary</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Arita Mattsoff</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN="TOP" ALIGN="CENTER">
<P><FONT SIZE=2>44</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Vice
  President, Marketing</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Avikam Perry</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN="TOP" ALIGN="CENTER">
<P><FONT SIZE=2>51</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Chief
  Technology Officer and Vice President of Products</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amir Rosentuler</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN="TOP" ALIGN="CENTER">
<P><FONT SIZE=2>42</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Vice
  President, International
  Sales</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Regev Yativ</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN="TOP" ALIGN="CENTER">
<P><FONT SIZE=2>39</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Vice President, President and Chief
  Executive Officer Magic Software Enterprises Inc.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amit
Ben-Zvi</I></B> has served as our vice president and chief
executive officer of our subsidiary, Hermes Logistics Technologies Limited since
October 2007. Prior to that and since September 2005 he served as our vice
president marketing and manager of our iBOLT division. From July 2002 to July 2005, Mr. Ben-Zvi served as chief executive officer of
WizCom
Technologies, a publicly traded company specializing in scanning pens and
mobile data capture products. Prior thereto and from January 2000, Mr. Ben-Zvi served as the chief executive officer of
ISYS Operational Management Systems Ltd., a software applications company based
in Israel. From December 1997 to
January 2000, Mr. Ben-Zvi served
as chief operating officer Top Imaging Systems Ltd., a publicly traded company.
Mr. Ben-Zvi holds a B.A. degree in accounting and LLB degree, both from
Tel-Aviv University.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amit
Birk</I></B> has served as our vice president, mergers and
acquisitions, general counsel and corporate secretary since May 1999. From 1997
to 1998, Mr. Birk was an associate at Avital Dromi &amp; Co., a leading law
firm in Tel Aviv, Israel. Since November 2007 Mr. Birk serves as an outside
director of BGI Investment (1961) Ltd. a opublic company. Mr. Birk holds an
L.L.B. degree from the University of Sheffield, M.B.A. degree from Bar Ilan
University and a Practical Engineer degree from ORT College. Mr. Birk is also a
certified mediator.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Arita
Mattsoff</I></B> has served as our vice president, global
marketing since September 2007. Prior to that, and from June 2004 to September
2007, Ms. Mattosff served as vice president marketing at Finjan Software Ltd., and
at Paradigm Geophysical Ltd., from July 2001 until June 2004.Ms.
Mattsoff serves as a board member of LATET, Israeli Humantarian Organization.
Ms. Mattsoff holds a BA in Social Sciences and an MBA from Tel Aviv University
in Israel.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Avikam
Perry</I></B> has served as our chief technology officer
and vice president of products since January 2008. Prior to that, since July
1997, Mr. Perrry served as our vice president, research and development. Mr.
Perry joined our company in July 1992 and has held various positions, including
group and product manager, development department manager and vice president,
product development. Mr. Perry holds a B.Sc. degree in mathematics and computer
science from Tel Aviv University.</FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amir
Rosentuler</I></B> has served as our vice president
international sales since October 2007. Prior to that, and from December 2006
to October 2007, Mr. Rosentuler served as a vice president at Amdocs, a market
leader in software and services for billing, CRM and OSS systems. From 2004 to
2006, Mr. Rosentuler has served as vice president Euerope, Middle East and
Africa at OpTier, a leading provider of transaction workload management. From 2000 to
2004 Mr. Rosentuler held several senior positions in IBM.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>42</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regev
Yativ</I></B> has served as our vice president and the
president and chief executive officer Magic Software Enterprises Inc. since
January 2008 Prior to that Mr. Yativ served as our vice president international
sales since October 2006, responsible for our business activities and branches
in Europe and Japan, as well as the Israel-based team that oversees the
distribution network in the Asia Pacific region, Latin America and South
Africa. From September 2002 until June 2006, Mr. Yativ served as our vice
president and managing director of Europe, Middle East and Africa, based at our
Netherlands office. From 2001 to 2002, Mr. Yativ served as chief operating
officer of Agro Marches Int. Paris, a company specializing in software and
eBusiness platforms and managed its branches across Europe. From 1999 to 2001,
Mr. Yativ was the chief executive officer of G.E.D B.V. in Amsterdam, an
investments and business development group dealing in software and eBusiness
solutions throughout Europe. Mr. Yativ holds a B.A. degree from Tel Aviv
University.</FONT></P>

<P><FONT SIZE=2><B>B.<A   NAME=A124></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C<small>OMPENSATION</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth all compensation we paid with respect to all of our
directors and executive officers as a group for the year ended December 31,
2007.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=95% style="margin-left:5%">
<TR style="font-size:1px">
<TD WIDTH="62%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="15%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="14%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Salaries, fees, commissions and bonuses</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Pension, retirement and similar benefits</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>


<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>All
  directors and executive officers as a group (eleven persons)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,260,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>92,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December 31, 2007, we paid to each of our outside and
independent directors an annual fee of approximately $13,000 and a per meeting
attendance fee of approximately $400. Those fees are paid based on the fees
detailed in a schedule published semi-annually by the Committee for Public
Directors under the Israeli Securities Law. We provide automobiles to our
executive officers at our expense.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 31, 2007, our directors and executive officers as a group, then
consisting of ten persons, held options to purchase an aggregate of 911,000
ordinary shares, at exercise prices ranging from $1.50 to $2.40 per share
(after the dividend adjustment), vesting immediately. Of such options, options
to purchase 36,000 options expire in 2015 and options to purchase 875,000
ordinary shares expire in 2017. All such options were granted under our 2000
Stock Option Plan and 2007 Incentive Compensation Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June 15, 2007 we entered into an employment agreement with Mr. Eitan Naor, a
director and our former chief executive officer and President. Under its
employment agreement Mr. Naor is entitled to monthly salary of NIS 106,250
(approximately $29,513), linked to the Israeli consumer price index and updated once a
year. Every two years Mr. Naor&#146;s monthly salary will be increased by 6%. Mr.
Naor is also entitled to an annual bonus in the amount of 6% of our company&#146;s
net profit, as presented in our audited financial statements or, in the event
that our company have a capital gain in the year, a bonus in the amount of 5%
of our company&#146;s net profit and 1% of the capital gain as presented in our
audited financial statements. In addition, Mr. Naor was granted fully vested
stock options exercisable into 350,000 of our ordinary shares, under our 2007
Incentive Compensation Plan. The exercise price of such stock options will be
nil. Mr. Naor will be also entitled to stock options exercisable into 350,000
ordinary shares, with an exercise price of $2.40, subject to certain mil stones
and other terms and conditions, as described in the employment agreement. Mr.
Naor will be entitled to social benefits as customary in Israel for an
executive officer in his position, including managers insurance policy,
education fund, annual vacation and recreation pay, as well as the use of a
motor vehicle and reimbursement of expenses relating to operating the motor
vehicle. The agreement will continue until terminated in accordance with its
terms. After the first year of employment of Mr. Naor the agreement may be
terminated by our company without cause upon six months prior written notice.
The employment agreement includes customary confidentiality, non-competition
and non-solicitation provisions.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>43</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>C.<A   NAME=A125></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B<small>OARD</small>
  P<small>RACTICES</small></B></FONT></P>

<P><FONT SIZE=2><B>Introduction</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to the Israeli Companies Law and our Articles of Association, the management of
our business is vested in our board of directors. The board of directors may
exercise all powers and may take all actions that are not specifically granted
to our shareholders. Our executive officers are responsible for our day-to-day
management. The executive officers have individual responsibilities established
by our chief executive officer and board of directors. Executive officers are
appointed by and serve at the discretion of the board of directors, subject to
any applicable agreements.</FONT></P>

<P><FONT SIZE=2><B>Election of Directors</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
articles of association provide for a board of directors consisting of no less
than three and no more than eleven members or such other number as may be
determined from time to time at a general meeting of shareholders. Our board of
directors is currently composed of eight directors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to our articles of association, all of our directors are elected at our annual
general meeting of shareholders, which are required to be held at least once
during every calendar year and not more than 15 months after the last preceding
meeting. Except for our outside directors (as described below), our directors
are elected by a vote of the holders of a majority of the voting power
represented and voting at such meeting and hold office until the next annual
meeting of shareholders following the annual meeting at which they were
appointed. Directors (other than outside directors) may be removed earlier from
office by resolution passed at a general meeting of our shareholders. Our board
of directors may temporarily fill vacancies in the board until the next annual
meeting of shareholders, provided that
the total number of directors will not exceed the maximum number
permitted under our articles of association.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Companies Law, our board of directors is required to determine the
minimum number of directors who must have &#147;accounting and financial expertise&#148;
(as such term is defined in regulations promulgated under the Israeli Companies
Law). In determining such number, the board of directors must consider, among
other things, the type and size of the company and the scope of and complexity
of its operations. A director with &#147;accounting and financial expertise&#148; is a
person that, due to education, experience and qualifications, is highly skilled
and has an understanding of business-accounting issues and financial statements
in a manner that enables him/her to understand in depth the company&#146;s financial
statements and stimulate discussion regarding the manner of presentation of the
financial data. Our board of directors includes at least one director who has
&#147;accounting and financial expertise,&#148; within the meaning of the regulations
promulgated under the Israeli Companies Law.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are exempt from the requirements of the NASDAQ Marketplace Rules with regard to
the nomination process of directors, since we are a controlled company within
the meaning of NASDAQ Marketplace Rule 4350(c)(5). See below in this Item 6C.
&#147;Directors, Senior Management and Employees - Board Practices - NASDAQ
Exemptions for a Controlled Company.&#148;</FONT></P>

<P><FONT SIZE=2><B>Outside and Independent Directors</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside
Directors</I>. The Israeli Companies Law requires
companies incorporated under the laws of the State of Israel with shares that
have been offered to the public in or outside of Israel to appoint at least two
outside directors. No person may be appointed as an outside director if the
person or the person&#146;s relative, partner, employer or any entity under the
person&#146;s control has or had, on or within the two years preceding the date of
the person&#146;s appointment to serve as outside director, any affiliation with the
company or any entity controlling, controlled by or under common control with
the company. The term &#147;affiliation&#148; includes an employment relationship, a
business or professional relationship maintained on a regular basis, control
and service as an &#147;office holder&#148; as defined in the Israeli Companies Law,
however, &#147;affiliation&#148; does not include service as a director of a private
company prior to its first public offering if the director was appointed to
such office for the purpose of serving as an outside director following the
company&#146;s first public offering.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>44</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, no person may serve as an outside director if the person&#146;s position
or other activities create, or may create, a conflict of interest with the
person&#146;s responsibilities as an outside director or may otherwise interfere
with the person&#146;s ability to serve as an outside director. If, at the time
outside directors are to be appointed, all current members of the board of directors
are of the same gender, then at least one outside director must be of the other
gender.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of January 2006, at least one of the outside directors must have &#147;accounting
and financial expertise&#148; and the other outside directors must have &#147;professional
expertise,&#148; as such terms are defined by regulations promulgated under the
Israeli Companies Law. A director with &#147;financial expertise&#148; is a director that
due to his education, experience and skills has a high expertise and
understanding in financial and accounting matters and financial statements, in
such a manner which allows him to deeply understand the financial statements of
the company and initiate a discussion about the presentation of financial data.
A director is deemed to have &#147;professional expertise&#148; if he or she either
(i)&nbsp;has an academic degree in economics, business management, accounting,
law or public service, (ii)&nbsp;has an academic or other degree or completed
another higher education, all in the field of business of the company or relevant
for his/her position, or (iii)&nbsp;has at least 5 years experience as either a
senior managing officer in the company&#146;s line of business with a significant
volume of business, a public office, or a senior position in the company&#146;s main
line of business. Our outside directors meet these new conditions.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
outside directors are elected by a majority vote at a shareholders meeting. The
shareholders voting in favor of their election must include at least one-third
of the shares of the non-controlling shareholders of the company who voted on
the matter (not including abstentions). This minority approval requirement need
not be met if the total shareholdings of those non-controlling shareholders who
vote against their election represent 1% or less of all of the voting rights in
the company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
general, outside directors serve for a three-year term and may be reelected to
one additional three-year term. However, Israeli companies listed on certain
stock exchanges outside Israel, including The NASDAQ Global Market, may appoint
an outside director for additional terms of not more than three years subject
to certain conditions. Such conditions include the determination by the audit
committee and board of directors, that in view of the director&#146;s professional
expertise and special contribution to the company&#146;s board of directors and its
committees, the appointment of the outside director for an additional term is
in the best interest of the company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside
directors may be removed from office only by the same percentage of
shareholders as is required for their election, or by a court, and then only if
the outside directors cease to meet the statutory qualifications for their
appointment, violate their duty of loyalty to the company or are found by a
court to be unable to perform his or hers duties on a full time basis. Outside
directors may also be removed by the court if they are found guilty of bribery,
fraud, administrative offenses or use of inside information.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
committee of the board of directors that is authorized to exercise powers
vested in the board of directors must include at least one outside director and
the audit committee must be comprised of at least three directors and include
all the outside directors. An outside director is entitled to compensation as
provided in regulations adopted under the Israeli Companies Law and is
otherwise prohibited from receiving any other compensation, directly or
indirectly, in connection with such service.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until
the lapse of two year from termination of office, we may not engage an outside
director to service as an office holder and cannot employ or receive services
from that person, either directly or indirectly, including through a
corporation controlled by that person.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Independent
</I>Directors. NASDAQ Marketplace Rules require us to
establish an audit committee comprised of at least three members and only of
independent directors each of whom satisfies the respective &#147;independence&#148;
requirements of the Securities and Exchange Commission and NASDAQ.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a controlled company, within the meaning of NASDAQ Marketplace Rule 4350(c)(5),
we are exempted from the NASDAQ Marketplace Rule which requires that a majority
of our board of directors must qualify as independent directors, within the
meaning of the NASDAQ Marketplace Rules. See Item 6.C. &#147;Directors, Senior
Management and Employees - Board Practices - NASDAQ Exemptions for a Controlled
Company.&#148;</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>45</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Board of Directors has determined that Messrs. Itiel Efrat and Mr. Elann Penn both
qualify as independent directors under the Securities and Exchange Commission
and NASDAQ requirements and as outside directors under the Israeli Companies
Law requirements. Our Board of Directors has further determined that Mr.
Yehezkel Zeira qualifies as an independent director under the Securities and
Exchange Commission and NASDAQ requirements</FONT></P>

<P><FONT SIZE=2><B>Committees of the Board of
Directors</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit
Committee</I>. Our audit committee, established in
accordance with Section 114 of the Israeli Companies Law and Section
3(a)(58)(A) of the Securities Exchange Act of 1934, assists our board of
directors in overseeing the accounting and financial reporting processes of our
company and audits of our financial statements, including the integrity of our
financial statements, compliance with legal and regulatory requirements, our
independent public accountants&#146; qualifications and independence, the
performance of our internal audit function and independent public accountants,
finding any defects in the business management of our company for which purpose
the audit committee may consult with our independent auditors and internal
auditor, proposing to the board of directors ways to correct such defects and
such other duties as may be directed by our board of directors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
audit committee also has the responsibility of approving related-party
transactions as required by law. Under Israeli law, an audit committee may not
approve an action or a transaction with a controlling shareholder, or with an
office holder, unless at the time of approval two outside directors are serving
as members of the audit committee and at least one of the outside directors was
present at the meeting in which an approval was granted.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
audit committee is currently composed of Messrs. Efrat, Penn and Zeira, each of
whom satisfies the respective &#147;independence&#148; requirements of the Securities and
Exchange Commission and NASDAQ.We also comply with Israeli law
requirements for audit committee members. Mr. Elan Penn has been elected as the chairperson of the
audit committee. Our Board of Directors has determined that Mr. Penn qualifies
as a financial expert. The audit committee meets at least once each quarter.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Option
Committee.</I> Our board of directors has established an
option committee, which administers our option plans (see Item 6E. Directors,
Senior Management and Employees &#173;&#173;- Share Ownership - Stock Option Plans&#148;). Messrs. Penn, Naor and Ms. Hadas Gazit
are the current members of our option committee. Our option
committee meets approximately once each quarter.</FONT></P>

<P><FONT SIZE=2><B>Internal Audit</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law also requires the board of directors of a public company
to appoint an internal auditor proposed by the audit committee. A person who
does not satisfy the Israeli Companies Law&#146;s independence requirements may not
be appointed as an internal auditor. The role of the internal auditor is to
examine, among other things, the compliance of the company&#146;s conduct with
applicable law and orderly business practice. Our internal auditor complies
with the requirements of the Israeli Companies Law.</FONT></P>

<P><FONT SIZE=2><B>Directors&#146; Service Contracts</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth above and in Item 6B. &#147;Directors, Senior Management and Employees
&#150; Compensation,&#148; there are no arrangements or understandings between us and any
of our subsidiaries, on the one hand, and any of our directors, on the other
hand, providing for benefits upon termination of their employment or service as
directors of our company or any of our subsidiaries.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>46</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Approval of Related Party Transactions Under Israeli Law</B></FONT></P>

<P><FONT SIZE=2><I>Fiduciary Duties of Office Holders</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law codifies the fiduciary duties that &#147;office holders,&#148;
including directors and executive officers, owe to a company. An &#147;office
holder&#148; is defined in the Israeli Companies Law as a director, general manager,
chief business manager, deputy general manager, vice general manager, any other
person assuming the responsibilities of any of the foregoing positions without
regard to such person&#146;s title or any other manager directly subordinate to the
general manager. An office holder&#146;s fiduciary duties consist of a duty of care
and a duty of loyalty. The duty of care requires an office holder to act at a
level of care that a reasonable office holder in the same position would employ
under the same circumstances. This includes the duty to utilize reasonable
means to obtain (i) information regarding the appropriateness of a given action
brought for his approval or performed by him by virtue of his position and (ii)
all other information of importance pertaining to the foregoing actions. The
duty of loyalty includes (i) avoiding any conflict of interest between the
office holder&#146;s position in the company and any other position he holds or his
personal affairs, (ii) avoiding any competition with the company&#146;s business,
(iii) avoiding exploiting any business opportunity of the company in order to
receive personal gain for the office holder or others, and (iv) disclosing to the
company any information or documents relating to the company&#146;s affairs that the
office holder has received due to his position as an office holder.</FONT></P>

<P><FONT SIZE=2><I>Disclosure of Personal Interests of an Office
Holder</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law requires that an office holder promptly, and no later
than the first board meeting at which such transaction is considered, disclose
any personal interest that he or she may have and all related material
information known to him or her and any documents in their position, in
connection with any existing or proposed transaction by us. In addition, if the
transaction is an extraordinary transaction, that is, a transaction other than
in the ordinary course of business, other than on market terms, or likely to
have a material impact on the company&#146;s profitability, assets or liabilities,
the office holder must also disclose any personal interest held by the office
holder&#146;s spouse, siblings, parents, grandparents, descendants, spouse&#146;s
descendants and the spouses of any of the foregoing, or by any corporation in
which the office holder or a relative is a 5% or greater shareholder, director
or general manager or in which he or she has the right to appoint at least one
director or the general manager.</FONT></P>

<P><FONT SIZE=2><I>Approval of
Transactions with Office Holders</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Companies Law, all arrangements as to compensation of office
holders who are not directors require approval by the board of directors, and
exculpation, insurance and indemnification of, or an undertaking to, indemnify
an office holder who is not a director requires both board of directors and
audit committee approval. The compensation of office holders who are directors
must be approved by our audit committee, board of directors and shareholders.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
transactions, actions and arrangements involving an office holder (or a third
party in which an office holder has an interest) must be approved by the board
of directors or as otherwise provided for in a company&#146;s articles of
association, however, a transaction that is adverse to the company&#146;s interest
may not be approved. In some cases, such a transaction must be approved by the
audit committee and by the board of directors itself, and under certain
circumstances shareholder approval may be required. A director who has a
personal interest in a transaction that is considered at a meeting of the board
of directors or the audit committee may not be present during the board of
directors or audit committee discussions and may not vote on the transaction,
unless the transaction is not an extraordinary transaction or the majority of
the members of the board or the audit committee have a personal interest, as
the case may be. In the event the majority of the members of the board of
directors or the audit committee have a personal interest, then the approval of
the general meeting of shareholders is also required.</FONT></P>

<P><FONT SIZE=2><I>Disclosure of Personal Interests of a
Controlling Shareholder;</I> <I>Approval of
Transactions with Controlling Shareholders</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
disclosure requirements which apply to an office holder also apply to such
transaction with respect to his or her personal interest in the transaction.
The Israeli Companies Law provides that an extraordinary transaction with a
controlling shareholder or an extraordinary transaction with another person in
whom the controlling shareholder has a personal interest or a transaction with
a controlling shareholder or his relative regarding terms of service and
employment, must be approved by the audit committee, the board of directors and
shareholders. The shareholder approval for such a transaction must include at
least one-third of the shareholders who have no personal interest in the
transaction who voted on the matter (not including abstentions). The
transaction can be approved by shareholders without this one-third approval if
the total shareholdings of those shareholders who have no personal interest and
voted against the transaction do not represent more than one percent of the
voting rights in the company.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>47</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Companies Regulations (Relief from Related Party Transactions), 5760-2000,
promulgated under the Israeli Companies Law, as amended, certain extraordinary
transactions between a public company and its controlling shareholder(s) do not
require shareholder approval. In addition, under such regulations, directors&#146;
compensation and employment arrangements in a public company do not require the
approval of the shareholders if both the audit committee and the board of
directors agree that such arrangements are solely for the benefit of the
company. Also, employment and compensation arrangements for an office holder
that is a controlling shareholder of a public company do not require
shareholder approval if certain criteria are met. The foregoing exemptions from shareholder approval
will not apply if one or more shareholders holding at least 1% of the issued
and outstanding share capital of the company or of the company&#146;s voting rights,
objects to the use of these exemptions
provided that such objection is submitted to the company in writing not later
than fourteen days from the date of the filing of a report regarding the
adoption of such resolution by the company pursuant to the requirements of the
Israeli Securities Law. If such objection is duly and timely submitted, then
the transaction or compensation arrangement of the directors will require
shareholders&#146; approval as detailed above.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, a private placement of securities that will (i) cause a person to
become a controlling shareholder or (ii) increase the relative holdings of a
shareholder that holds 5% or more of the company&#146;s outstanding share capital,
or (iii) will cause any person to become, as a result of the issuance, a holder
of more than 5% of the company&#146;s outstanding share capital in a private
placement in which 20% or more of the company&#146;s outstanding share capital prior
to the placement are offered, the payment for which (in whole or in part) is
not in cash or not under market terms, requires approval by the board of
directors and the shareholders of the company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law provides that an acquisition of shares in a public
company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 25% or greater shareholder of the
company. This rule does not apply if there is already another 25% or greater
shareholder of the company. Similarly, the Israeli Companies Law provides that
an acquisition of shares in a public company must be made by means of a tender
offer if as a result of the acquisition the purchaser would hold greater than a
45% interest in the company, unless there is another shareholder holding more
than a 45% interest in the company. These requirements do not apply if, in
general, the acquisition was made in a private placement that received
shareholder approval, (i) was from a 25% or greater shareholder of the company
which resulted in the acquirer becoming a 25% or greater shareholder of the
company, if there is not already a 25% or greater shareholder of the company,
or (ii) was from a shareholder holding a 45% interest in the company which
resulted in the acquirer becoming a holder of a 45% interest in the company if
there is not already a 45% or greater shareholder of the company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If,
as a result of an acquisition of shares, the acquirer will hold more than 90%
of a public company&#146;s outstanding shares or a class of shares, the acquisition
must be made by means of a tender offer for all of the outstanding shares or a
class of shares. If less than 5% of the outstanding shares are not tendered in
the tender offer, all the shares that the acquirer offered to purchase will be
transferred to the acquirer. The Israeli Companies Law provides for appraisal
rights if any shareholder files a request in court within three months
following the consummation of a full tender offer. If more than 5% of the
outstanding shares are not tendered in the tender offer, then the acquirer may
not acquire shares in the tender offer that will cause his shareholding to exceed
90% of the outstanding shares.</FONT></P>

<P><FONT SIZE=2><B>Provisions Restricting Change in Control of Our Company</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tender
Offer. A person wishing to acquire shares or any class of shares of a publicly
traded Israeli company and who would as a result hold over 90% of the company&#146;s
issued and outstanding share capital or of a class of shares which are listed,
is required by the Israeli Companies Law to make a tender offer to all of the
company&#146;s shareholders for the purchase of all of the issued and outstanding
shares of the company. If the shareholders who do not respond to the offer hold
less than 5% of the issued share capital of the company, all of the shares that
the acquirer offered to purchase will be transferred to the acquirer by
operation of law. The Israeli Companies Law provides for an exception regarding
the threshold requirement for a shareholder that prior to and following
February 2000 holds over 90% of a company&#146;s issued and outstanding share
capital. However, the shareholders may petition the court to alter the
consideration for the acquisition. If the dissenting shareholders hold more
than 5% of the issued and outstanding share capital of the company, the
acquirer may not acquire additional shares of the company from shareholders who
accepted the tender offer if following such acquisition the acquirer would then
own over 90% of the company&#146;s issued and outstanding share capital.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>48</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law provides that an acquisition of shares of a public
company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 25% or greater shareholder of the
company. This rule does not apply if there is already another 25% shareholder
of the company. Similarly, the Israeli Companies Law provides that an acquisition
of shares in a public company must be made by means of a tender offer if as a
result of the acquisition the purchaser would become a 45% or greater
shareholder of the company, if there is no 45% or greater shareholder of the
company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
requirements regarding tender offers do not apply to companies that are traded
outside of Israel if, local law or the rules of the foreign stock exchange
impose a limit on the percentage of control which may be acquired or require
that acquisitions will be made by a way of a tender offer to the public.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merger.
The Israeli Companies Law permits merger transactions if approved by each
party&#146;s board of directors and the majority of each party&#146;s shares voted on the
proposed merger at a shareholders&#146; meeting called on at least 21 days&#146; prior
notice. Under the Israeli Companies Law, merger transactions may be approved by
holders of a simple majority of our shares present, in person or by proxy, at a
general meeting and voting on the transaction. In determining whether the
required majority has approved the merger, if shares of a company are held by
the other party to the merger, or by any person holding at least 25% of the
outstanding voting shares or 25% of the means of appointing directors of the other
party to the merger, then a vote against the merger by holders of the majority
of the shares present and voting, excluding shares held by the other party or
by such person, or anyone acting on behalf of either of them, is sufficient to
reject the merger transaction. If the transaction would have been approved but
for the exclusion of the votes of certain shareholders as provided above, a
court may still approve the merger upon the request of holders of at least 25%
of the voting rights of a company, if the court holds that the merger is fair
and reasonable, taking into account the value of the parties to the merger and
the consideration offered to the shareholders. Upon the request of a creditor
of either party to the proposed merger, the court may delay or prevent the
merger if it concludes that there exists a reasonable concern that, as a result
of the merger, the surviving company will be unable to satisfy the obligations
of any of the parties to the merger. In addition, a merger may not be executed unless
at least 30 days have passed from the receipt of the shareholders&#146; approval and
50 days have passed from the time that a proposal for approval of the merger
has been filed with the Israeli Registrar of Companies.</FONT></P>

<P><FONT SIZE=2><B>Exculpation, Indemnification and Insurance of Directors and
Officers</B></FONT></P>

<P><FONT SIZE=2><B><I>Exculpation
of Office Holders</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law provides that an Israeli company cannot exculpate an
office holder from liability with respect to a breach of his duty of loyalty,
but may, if permitted by its articles of association, exculpate in advance an
office holder from his liability to the company, in whole or in part, with
respect to a breach of his or her duty of care. However, a company may not
exculpate in advance a director from his or her liability to the company with
respect to a breach of his duty of care in the event of distributions.</FONT></P>

<P><FONT SIZE=2><B><I>Insurance
for Office Holders</I></B></FONT></P>

<DIV><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law provides that a company may, if permitted by its articles
of association, insure an office holder for acts or omissions performed by the
office holder in such capacity for:</FONT></div>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>A breach of his or her duty of care to the company or to another
  person;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>A breach of his or her duty of loyalty to the company, provided that
  the office holder acted in good faith and had reasonable cause to assume that
  his act would not prejudice the company&#146;s interests; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>A financial liability imposed upon the office holder in favor of
  another person as a result of an action which was performed by that office
  holder.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>49</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B><I>Indemnification of Office Holders</I></B></FONT></P>

<DIV><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law provides that a company may, if permitted by its articles
of association, indemnify an office holder for acts or omissions performed by
the office holder in such capacity for:</FONT></div>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR style="font-size:1px">
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>A financial liability imposed on the office holder in favor of
  another person by any judgment, including a settlement or an arbitrator&#146;s
  award approved by a court;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Reasonable litigation expenses, including attorney&#146;s fees, actually incurred
  by the office holder as a result of an investigation or proceeding instituted
  against him or her by a competent authority, provided that such investigation
  or proceeding concluded without the filing of an indictment against the
  office holder or the imposition of any financial liability in lieu of
  criminal proceedings, or concluded without the filing of an indictment
  against the office holder and a financial liability was imposed on the
  officer holder in lieu of criminal proceedings with respect to a criminal
  offense that does not require proof of criminal intent; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Reasonable litigation expenses, including attorneys&#146; fees, incurred
  by such office holder or which were imposed on him by a court, in proceedings
  the company instituted against the office holder or that were instituted on
  the company&#146;s behalf or by another person, or in a criminal charge from which
  the office holder was acquitted, or in a criminal proceeding in which the
  office holder was convicted of a crime which does not require proof of
  criminal intent.</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<DIV><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with the Israeli Companies Law, a company&#146;s articles of association
may permit the company to:</FONT></div>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P></TD>
</TR>


<TR style="font-size:1px">
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Undertake in advance to indemnify an office holder, except that with
  respect to a financial liability imposed on the office holder by any
  judgment, settlement or court-approved arbitration award, the undertaking
  must be limited to types of occurrences, which, in the opinion of the
  company&#146;s board of directors, are, at the time of the undertaking, foreseeable
  due to the company&#146;s activities and to an amount or standard that the board
  of directors has determined is reasonable under the circumstances; and</FONT></P>
</TD>
</TR>


<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Retroactively indemnify an office holder of the company.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B><I>Limitations
on Exculpation, Insurance and Indemnification</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law provides that neither a provision of the articles of
association permitting the company to enter into a contract to insure the
liability of an office holder, nor a provision in the articles of association
or a resolution of the board of directors permitting the indemnification of an
office holder, nor a provision in the articles of association exempting an
office holder from duty to the company shall be valid, where such insurance,
indemnification or exemption relates to any of the following:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a breach by the office holder of his duty of loyalty, except with
  respect to insurance coverage or indemnification if the office holder acted
  in good faith and had reasonable grounds to assume that the act would not
  prejudice the company;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a breach by the office holder of his duty of care if such breach was
  committed intentionally or recklessly, unless the breach was committed only
  negligently;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>any act or omission committed with intent to derive an unlawful
  personal gain; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>any fine or forfeiture imposed on the office holder.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, pursuant to the Israeli Companies Law, exemption of, procurement of
insurance coverage for, an undertaking to indemnify or indemnification of an
office holder must be approved by the audit committee and the board of
directors and, if such office holder is a director or a controlling shareholder or a relative of the controlling shareholder,
also by the shareholders general meeting. A special majority at the general
meeting is required if a controlling
shareholder is interested in such transaction as an office holder or as
a relative of an office holder,
as described above.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>50</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
articles of association allow us to insure, indemnify and exempt our office
holders to the fullest extent permitted by law, subject to the provisions of
the Israeli Companies Law. We currently maintain a directors&#146; and officers&#146;
liability insurance policy with a per claim and aggregate coverage limit of $15
million, including legal costs incurred world-wide. However, pursuant to the
approval of our audit committee, board of directors and shareholders, we are
authorized to procure a directors and officers liability insurance policy with
a per claim and aggregate coverage limit of up to $20 million. We have entered
into indemnification agreements with four of our directors. Under such
indemnification agreements, indemnification will not exceed 25% of our capital
in any one case and in the aggregate for all persons, and will be limited to
events covered by our directors&#146; and officer&#146;s insurance policy and to amounts
exceeding the amounts covered by such insurance policy.</FONT></P>

<P><FONT SIZE=2><B>NASDAQ Exemptions for a Controlled
Company</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are a controlled company within the meaning of NASDAQ Marketplace Rule 4350(c)(5), or Rule 4350(c)(5), since Formula Systems (1985)
Ltd. holds more than
50% of our voting power.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Rule 4350(c)(5), a controlled company is exempt from the requirements of NASDAQ
Marketplace Rule 4350(c) that would otherwise require that</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the majority
  of the company&#146;s board of directors must qualify as independent directors, as
  defined under NASDAQ Marketplace Rules.
</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the
  compensation of the chief financial officer and all other executive officers
  must be determined, or recommended to the board of directors for
  determination, either by (i) a majority of the independent directors or (ii)
  a compensation committee comprised solely of independent directors.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>director
  nominees must either be selected or recommended for the board of directors&#146;
  selection, either by (a) a majority of independent directors or (b) a
  nominations committee comprised solely of independent directors.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>NASDAQ Marketplace Rules and Home
Country Practices</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
NASDAQ Marketplace Rule 4350, or Rule 4350, foreign private issuers, such as
our company, are permitted to follow certain home country corporate governance
practices instead of certain provisions of Rule 4350, without the need to seek
individual exemptions from NASDAQ. A foreign private issuer that elects to
follow a home country practice instead of any of such provisions of Rule 4350,
must submit to NASDAQ, in advance, a written statement from an independent
counsel in such issuer&#146;s home country certifying that the issuer&#146;s practices
are not prohibited by the home country&#146;s laws.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June and November 2005, we provided NASDAQ with a notice of non-compliance with
Rule 4350. We informed NASDAQ that we do not comply with the following requirements
of Rule 4350, and instead follow Israeli law and practice in respect of such
requirements:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%"> </TD>
<TD WIDTH="5%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD> </TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The requirement that our
  independent directors will have regularly scheduled meetings at which only
  independent directors are present. Under Israeli law independent directors
  are not required to hold executive sessions.</FONT></P>
</TD>
</TR>
<TR>
<TD> </TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD> </TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The requirement that we
  distribute to shareholders, and file with NASDAQ, copies of an annual report
  containing audited financial statements of our company and its subsidiaries
  within a reasonable period of time prior to our annual meeting of
  shareholders. Under Israeli law, as a company that is publicly traded both in
  Israel and outside of Israel, we are not required to distribute such annual
  reports to our shareholders. Our annual report on Form 20-F and audited
  financial statements are available on our website (www.magicsoftware.com).</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>51</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>D.<A   NAME=A126></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E<small>MPLOYEES</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December 31, 2007, we and our 17 wholly-owned subsidiaries and one controlled
subsidiary had 414 employees worldwide, of which 122 employees were based in
Israel, 124 employees were based in Asia, 73 employees were based in Europe and
95 employees were based in North America. Of such employees, 118 employees were
employed in research and development, 150 employees were employed in technical
support and consulting, 74 employees were employed in marketing and sales and
72 employees were employed in operations and administration.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December 31, 2006, we and our 18wholly-owned subsidiaries and one
controlled subsidiary had 503 employees worldwide, of which 159 employees were
based in Israel, 123 employees were based in Asia, 73 employees were based in
Europe and 148 employees were based in North America. Of such employees, 145
employees were employed in research and development, 179 employees were
employed in technical support and consulting, 90 employees were employed in
marketing and sales and 89 employees were employed in operations and
administration.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December 31, 2005, we and our 18 wholly-owned subsidiaries and one controlled
subsidiary had 567 employees worldwide, of which 180 employees were based in
Israel, 127 employees were based in Asia, 108 employees were based in Europe
and 152 employees were based in North America. Of such employees, 149 employees
were employed in research and development, 204 employees were employed in
technical support and consulting, 106 employees were employed in marketing and
sales and 108 employees were employed in operations and administration.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
relationships with our employees in Israel are governed by Israeli labor
legislation and regulations, extension orders of the Israeli Ministry of Labor
and personal employment agreements. Israeli labor laws and regulations are
applicable to all of our employees in Israel. The laws concern various matters,
including severance pay rights at termination, notice period for termination,
retirement or death, length of workday and workweek, minimum wage, overtime
payments and insurance for work-related accidents. We currently fund our
ongoing legal severance pay obligations by paying monthly premiums for our
employees&#146; insurance policies and or pension funds.At the time of commencement
of employment, our employees generally sign written employment agreements
specifying basic terms and conditions of employment as well as non-disclosure,
confidentiality and non-compete provisions.</FONT></P>

<P><FONT SIZE=2><B>E.<A   NAME=A127></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S<small>HARE</small>
  O<small>WNERSHIP</small></B></FONT></P>

<P><FONT SIZE=2><B>Beneficial Ownership of Executive Officers and Directors</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth certain information as of May 9, 2008 regarding the beneficial ownership by each of our
directors and executive officers:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="57%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1><B>Name</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Number of Ordinary Shares<BR>
  Beneficially Owned (1)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Percentage of<BR>Ownership (2)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="40%" NOSHADE COLOR=BLACK ALIGN=LEFT>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Guy
  Bernstein</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>David Zigdon</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Hadash Gazit
  Kaiser</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Gad
  Goldstein (3)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Itiel Efrat</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Eitan Naor
  (4)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>437,500</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.37</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Elan Penn
  (5)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>18,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>*</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Eli Reifman</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Naamit
  Salomon(3)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Yehezkel
  Zeira (5)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>18,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>*</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>All
  directors and executive officers as a group (10 persons)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>473,500</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.48</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="100%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><HR NOSHADE WIDTH=120 COLOR=GRAY ALIGN=LEFT SIZE=1>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>* Less than
  1%</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>52</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(1)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Beneficial
  ownership is determined in accordance with the rules of the Securities and
  Exchange Commission and generally includes voting or investment power with
  respect to securities. Ordinary shares relating to options currently
  exercisable or exercisable within 60 days of the date of this table are
  deemed outstanding for computing the percentage of the person holding such
  securities but are not deemed outstanding for computing the percentage of any
  other person. Except as indicated by footnote, and subject to community
  property laws where applicable, the persons named in the table above have
  sole voting and investment power with respect to all shares shown as beneficially
  owned by them.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(2)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The
  percentages shown are based on 31,988,440
  ordinary shares issued and outstanding as of May 9,
  2008.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(3)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Guy
  Bernstein and Gad Goldstein, directors of Formula Systems and directors of
  our company, and Naamit Salomon, an officer of Formula Systems and a director
  of our company, disclaim beneficial ownership of the 17,036,018 ordinary
  shares held by Formula Systems.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(4)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Includes 87,500 ordinary shares subject to currently exercisable options granted under our
  2007 Stock Option Plan, having an average exercise price of $2.4 per share. Such options expire in 2017
</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(5)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Subject to currently exercisable options granted under our 2000 and
  2007 Stock Option Plan, having an exercise price of $1.5 per share which
  expire in 2015.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(6)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Includes 123,500 ordinary shares underlying currently exercisable
  stock options.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Stock Option Plans</B></FONT></P>

<P><FONT SIZE=2><B><I>1991 Stock Option Plan</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
1991 Employee Stock Option Plan, or the 1991 Plan, as amended, authorized the
grant of options to purchase an aggregate of 6,750,000 ordinary shares.
Employees and directors of our company and its subsidiaries were eligible to
participate in the 1991 Plan. The 1991 Plan had a ten-year term and no options
were granted under the 1991 Plan after July 31, 2001.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2007, options to purchase 67,055 ordinary shares were exercised
under the 1991 Plan at an average exercise price of $1.31 per share. As of December 31, 2007, options to purchase 191,072
ordinary shares
were outstanding under the 1991 Plan having an average exercise price of $3.77
per share. As of December 31, 2007, our executive officers and directors
as a group, then consisting of nine persons, did not hold any options under the 1991 Plan.</FONT></P>

<P><FONT SIZE="2"><B><I>2000 Stock Option Plan</I></B> </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2000, we adopted our 2000 Employee Stock Option Plan, or the 2000 Plan, under
which we may grant options to employees, officers, directors and consultants of
our company and its subsidiaries. The 2000 Plan initially authorized the grant
of options to purchase up to 3,000,000 ordinary shares. In January 2004, our
shareholders approved an increase in the number of shares available for grant
under the 2000 Plan by 1,000,000 ordinary shares and in December 2005 our
shareholders approved an additional increase in the number of shares available
for grant under the 2000 Plan by 600,000 ordinary shares. As such, up to an
aggregate of 4,600,000 ordinary shares may be issued under the 2000 Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Awards
under the 2000 Plan may be granted in the forms of incentive stock options as
provided in Section 422 of the U.S. Internal Revenue Code of 1986, as amended,
non-qualified stock options, options granted pursuant to Section 102 of the
Israeli Tax Ordinance and options granted pursuant to Section 3.9 of the
Israeli Tax Ordinance. The 2000 Plan has a term of ten years and will terminate
in November 2010. No award of options may be made after such date.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>53</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Board of Directors and Option Committee, which was appointed by the board of
directors, administer the 2000 Plan. Subject to the provisions of the 2000 Plan
and applicable law, the Option Committee has the authority, in its sole
discretion, to:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Propose to grant awards
  under the 2000 Plan and recommend to the board of directors the persons to
  whom such awards be granted;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Determine the form, terms
  and conditions of the written stock option agreement evidencing the option,
  including (but not limited to) the type of option and the number of shares to
  which it pertains, the option price, the option period and its vesting
  schedule, and exercisability of the option in special cases (such as death,
  retirement, disability and change of control);</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Prescribe the form and
  provisions of the notice of exercise and payment of the option;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Nominate a trustee for
  options issued under Section 102 of the Israeli Tax Ordinance, in accordance
  with the provisions of such Section 102;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Adjust any or all of the
  number and type of shares that thereafter may be made the subject of options,
  the number and type of shares subject to outstanding options, and the grant
  or exercise price with respect to any option, or, if deemed appropriate, make
  provision for a cash payment to the holder of any outstanding option in order
  to prevent dilution or enlargement of the benefits or potential benefits
  intended to be made available under the 2000 Plan in the event of any
  dividend or other distribution, recapitalization, stock split, reverse stock
  split, reorganization, merger, consolidation, split-up, spin-off, combination,
  repurchase, or exchange of shares or other securities;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Interpret the provisions
  of the 2000 Plan; and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT size=2 FACE="symbol">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Prescribe, amend, and
  rescind rules and regulations relating to the 2000 Plan or any award
  thereunder as it may deem necessary or advisable.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the board of directors nor the Option Committee may, without the consent of the
optionee, alter or in any way impair the rights of such optionee under any
award previously granted. Neither the termination of the 2000 Plan nor the
change of control of our company (except to the extent provided in the 2000
Plan) will affect any option previously granted.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the 2000 Plan, the option price per share may not be less than 65% of the fair
market value (as such term is defined in the 2000 Plan) of such share on the
date of the award; except that, that in the case of an award of an incentive
stock option made to a 10% owner (as such term is defined in the 2000 Plan),
the option price per share may not be less than 110% of the fair market value
of such share on the date of the award.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
option may not be exercisable after the expiration of ten years from the date
of its award, except that in case of an incentive stock option made to a 10%
owner (as such term is defined in the 2000 Plan), such option may not be
exercisable after the expiration of five years from its date of award. No
option may be exercised after the expiration of its term.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options
are not assignable or transferable by the optionee, other than by will or the
laws of descent and distribution, and may be exercised during the lifetime of
the optionee only by the optionee or his guardian or legal representative;
provided, however, that during the optionee&#146;s lifetime, the optionee may, with
the consent of the Option Committee transfer without consideration all or any
portion of his options to members of the optionee&#146;s immediate family, a trust
established for the exclusive benefit of members of the optionee&#146;s immediate
family, or a limited liability company in which all members are members of the
optionee&#146;s immediate family.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2007, options to purchase 573,332
ordinary shares were granted under the Plan having an average exercise
price of $2.32 per share,
and options to purchase 175,083 ordinary shares were exercised at an average
exercise price of $1.12 per share. As of December 31, 2007, options to purchase
2,257,923 ordinary shares were outstanding under the 2000 Plan having an
average exercise price of $2.45 per share. As of December 31, 2007,
our executive officers and directors as a group, then consisting of 11persons., held options to purchase 36,000
ordinary shares under the 2000 Plan having an average exercise price of
$1.5 per share.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>54</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 29, 2005, our Board of Directors resolved to accelerate the vesting
period of all of the outstanding unvested options as of such date, for the
purchase of an aggregate 611,517 ordinary shares, with vesting periods from
January 1, 2006 through March 2009, so that these options became fully vested.
These options had an average exercise price of $3.46 per share. All of the
accelerated options had an exercise price exceeding our market price on such
date. The ordinary shares that may be purchased upon exercise of the accelerated
options shall be subject to a holding period, according to which the optionees
will be entitled to sell the purchased shares over a three year period, 1/36 of
the purchased shares per month. Our foregoing decision to accelerate the
vesting of such options and to grant fully vested options in the future was
primarily due to the issuance of SFAS No. 123 (revised 2004), &#147;Share-Based
Payment,&#148; which requires all unvested stock options to be treated as a
compensation expense as of January 1, 2006.</FONT></P>

<P><FONT SIZE=2><B><I>2007 Incentive Compensation Plan.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2007, we adopted our 2007 Incentive Compensation Plan, or the 2007 Plan, under
which we may grant options to employees, officers, directors and consultants of
our company and its subsidiaries. The 2007 Plan provides for the award of stock
options, restricted shares, restricted share units and performance awards. The
shares subject to the 2007 Plan may be either authorized and unissued shares or
previously issued shares acquired by our company or any of its subsidiaries.
The total number of shares that may be delivered pursuant to awards under the
2007 Plan shall not exceed 1,500,000 shares in the aggregate. Out of such
shares, 487,269 ordinary shares maybe allocated between the 2007 Plan and our 2000
Plan. If any awards shall
expire, terminate, cancel or be forfeited, as the case may be, without having
been fully exercised or satisfied by the issuance of shares &#150; then the shares
subject to such award shall be available again for delivery in connection with
future awards under the 2007 Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
2007 Plan shall commenced on August 8, 2007 and will terminate upon the
earliest of (i) the expiration of its ten (10) year period, or (ii) the
termination of all outstanding awards in connection with a corporate transaction,
or (iii) in connection with, and as a result of, any other relevant event,
including the 2007 Plan&#146;s termination by the Board of Directors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the 2007 Plan, the option committee shall have full discretionary authority to
grant or, when so restricted by applicable law, recommend the Board of
Directors to grant, pursuant to the terms of the 2007 Plan, options and
restricted shares and restricted share units to those individuals who are
eligible to receive awards under the 2007 Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
2007 Plan provides that each option will expire on the date stated in the award
agreement, which will not be more than ten years from its date of grant. The
exercise price of an option shall be determined by the option committee of the
Board of Directors and set forth in the award agreement. Unless determined
otherwise by the Board of Directors, the exercise price shall be equal to, or
higher than, the fair market value of our company&#146;s shares on the date of
grant.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the 2007 Plan, restricted shares and restricted share units shall not be
purchased for less than the ordinary share&#146;s par value, unless determined
otherwise by the Board of Directors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Board of Directors may, from time to time, alter, amend, suspend or terminate
the 2007 Plan, with respect to awards that have not been granted, subject to
shareholder approval, if and to the extent required by applicable law. In
addition, no such amendment, alteration, suspension or termination of the 2007
Plan or any award theretofore granted, shall be made which would materially
impair the previously accrued rights of a participant under any outstanding
award without the written consent of such participant, provided, however, that
the Board of Directors may amend or alter the 2007 Plan and the option
committee may amend or alter any award, including any agreement, either
retroactively or prospectively, without the consent of the applicable
participant, (1) so as to preserve or come within any exemptions from liability
under any law or the rules and releases promulgated by the SEC, or (2) if the
Board of Directors or the option committee determines in its discretion that
such amendment or alteration either (I) is required or advisable for us, the
2007 Plan or the award to satisfy, comply with or meet the requirements of any
law, regulation, rule or accounting standard or (II) is not reasonably likely
to significantly diminish the benefits provided under such award, or that such
diminishment has been or will be adequately compensated.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>55</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2007, options to purchase 1,200,000
ordinary shares were granted under the 2007 Plan having an average
exercise price of $1.52 per
share. As of December 31, 2007, none
of these options were exercised. As of December 31, 2007, options to
purchase 1,200,000 ordinary shares were outstanding under the 2007 Plan having
an average exercise price of $1.52 per share. As of December 31, 2007,
our executive officers and directors as a group, then consisting of 11 persons,
held options to purchase 875,000 ordinary shares under the 2007 Plan
having an average exercise price of $1.35 per share.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 7.<A   NAME=A128></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>MAJOR
  SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>A.<A   NAME=A129></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M<small>AJOR</small>
  S<small>HAREHOLDERS</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are controlled by Formula Systems (1985) Ltd., which holds 53.3% of our
ordinary shares.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth certain information as of May 9, 2008 regarding the
beneficial ownership by all shareholders known to us to own beneficially 5.0%
or more of our ordinary shares:</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="47%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="4%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="26%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="4%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="19%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1><B>Name</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><b>Number of Ordinary Shares<br>
Beneficially Owned(1)</b></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><b>Percentage of<BR>Ownership (2)</b></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="40%" NOSHADE COLOR=BLACK ALIGN=LEFT>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="80%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="80%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Formula
  Systems (1985) Ltd. (3)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>17,036,018</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>53.3%</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P><HR NOSHADE WIDTH=120 COLOR=GRAY ALIGN=LEFT size=1>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(1)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Beneficial
  ownership is determined in accordance with the rules of the Securities and
  Exchange Commission and generally includes voting or investment power with
  respect to securities. Ordinary shares relating to options currently
  exercisable or exercisable within 60 days of the date of this table are
  deemed outstanding for computing the percentage of the person holding such
  securities but are not deemed outstanding for computing the percentage of any
  other person. Except as indicated by footnote, and subject to community
  property laws where applicable, the persons named in the table above have
  sole voting and investment power with respect to all shares shown as
  beneficially owned by them.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(2)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The
  percentages shown are based on 31,988,440 ordinary shares issued and
  outstanding as of May 9, 2008.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(3)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The address
  of Formula Systems (1985) Ltd. is 3 Aba Even St., Herzliya Pituach, Israel.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Major Shareholders Voting Rights</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
major shareholders do not have different voting rights.</FONT></P>

<P><FONT SIZE=2><B>Record Holders</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
on a review of the information provided to us by our U.S. transfer agent, as of
May 7, 2008, there were 109 record holders, of which 81 record holders holding
approximately 82% of our ordinary shares had registered addresses in the United
States, including banks, brokers and nominees. These numbers are not
representative of the number of beneficial holders of our shares nor are they
representative of where such beneficial holders reside, since many of these
ordinary shares were held of record by banks, brokers or other nominees.</FONT></P>

<P><FONT SIZE=2><B>B.<A   NAME=A130></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R<small>ELATED</small>
  P<small>ARTY</small> T<small>RANSACTIONS</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2005, we entered into an ERP (enterprise resource planning) project with a
number of companies that are engaged in the software and hardware businesses
and the implementation of ERP projects. See Item 5B. &#147;Operating and Financial
Review and Prospects - Liquidity and Capital Resources.&#148; In connection with
this ERP project, in July 2005 we entered into a memorandum of understanding
with Matrix-One1 Ltd., valued at approximately $670,000. Until the end of 2006,
we performed only part of the project, in the amount of $497,000. Matrix-One1
Ltd. is a subsidiary of Matrix IT Ltd., a company held by our major
shareholder, Formula Systems (1985) Ltd.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>56</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>C.<A   NAME=A131></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I<small>NTERESTS
  OF</small> E<small>XPERTS AND</small> C<small>OUNSEL</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 width=100%>
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 8.<A   NAME=A132></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>FINANCIAL
  INFORMATION</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>A.<A   NAME=A133></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C<small>ONSOLIDATED</small>
  S<small>TATEMENTS AND</small> O<small>THER</small> F<small>INANCIAL</small> I<small>NFORMATION</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See
the consolidated financial statements, including the notes thereto, included in
Item 18.</FONT></P>

<P><FONT SIZE=2><B>Export Sales</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
export sales constitute a
significant portion of our total sales volume. See Note 13 to our consolidated
financial statements.</FONT></P>

<P><FONT SIZE=2><B>Legal Proceedings</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We received
final tax assessments for the years 1997 to 2002 from the Israeli tax
authorities and have appealed to the District Court of Tel Aviv - Jaffa with
respect to such tax assessments. As of May 2006, one open issue remains to be
settled by the court (which management believes will result in a maximum tax
payment of no more than $0.7 million), while all other issues were resolved
with no additional taxes to be paid by us. Since our management, based on the advice of its legal advisors, believes that the
probability of an unfavorable outcome to our company on this matter is remote,
no provision was provided in the financial statements in respect of this
matter.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June
2004, an Israeli company filed a lawsuit against us in the District Court of
Tel Aviv - Jaffa seeking NIS 8.0 million (approximately $2.08
million), with an option to increase this amount to NIS 16,989,356
(approximately $4.4 million), for recovery of damages allegedly caused by our
failure to integrate a software application. During the last three years, the
parties tried to settle the case with an external mediator. This attempt failed
recently and the parties returned to the court to proceed with the court
proceedings. Preliminary court proceedings have commenced, such as disclosure
of documents and questionnaires. Since our management, based on the
advice of its legal advisors, believes that it cannot predict the outcome of
this lawsuit nor can it estimate the amount of damages, no provision was
provided in the financial statements in respect of this matter.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
May 2005, a client of our subsidiary Magic Software Enterprises (Israel) Ltd.
filed a lawsuit against the subsidiary claiming an alleged breach of the
agreement between the parties. The plaintiff is seeking damages in the amount
of $335,641. The claim was moved to
arbitration. Due to the preliminary
stage of this litigation, our management is unable to assess the outcome of
this lawsuit nor can it make an estimate of the amount of damages; therefore,
no provision has been made for the lawsuit.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March 2006, a client of our Magic solution partner in France filed a lawsuit
against the Magic solution partner and our subsidiary Magic Software
Enterprises (France) S.A.R.L. in the commercial court in Paris claiming an alleged breach of the agreement
between the parties. The plaintiff is seeking damages in the amount of
548,000 Euros (approximately $805,000). Due
to the preliminary stage of this litigation and based on the advice of our
legal advisors, our management is unable to assess the outcome of the lawsuit
nor can it estimate the amount of damages; therefore, no provision has been
made for the lawsuit.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2006, a subcontractor of our Italian subsidiary, filed a lawsuit against our
subsidiary in Milan, claiming an alleged
breach of the agreement between the parties. The plaintiff is seeking
damages in the amount of 524,000 Euros (approximately $770,000). Due to the preliminary stage of this litigation
and based on the advice of our legal advisors, we made a partial provision for
the lawsuit. However, at this stage, we cannot predict our chances of success
in this matter.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>57</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
April 30, 2008, Mr. Eitan Naor ceased to serve as our president and chief
executive officer. On May 6, 2008, Mr. Naor filed a claim and request for
relief against us and the chairman of our board of directors, Mr. Guy
Bernstein, in the Tel Aviv Labor Court. This request for relief follows an ex
parte request for relief filed by Mr. Naor on April 17, 2008 that was denied.
The Labor Court has scheduled a hearing on the matter in October 2008, subject
to the filing of a monetary claim in the near future by Mr. Naor. In the claim
field on May 6, Mr. Naor is seeking permanent relief that among other things
would prevent us from terminating his employment and suspending him, initiating
any process that would lead to the termination of his employment, or taking any
action that would affect his position as President, chief executive officer and
Director. Mr. Naor is also seeking a permanent order that would reinstate him
to all positions previously held by him with us.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, claims arising in the ordinary course of our business are brought
against us. In the opinion of our management,
these claims will not have a material adverse effect on our financial position,
liquidity or results of operations.</FONT></P>

<P><FONT SIZE=2><B>Dividend
Distributions Policy</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February 2003, following receipt of the approval of the District Court of Tel
Aviv, we paid a cash dividend to our shareholders of $0.40 per ordinary share.
The total dividend amounted to approximately $11.8 million dollars</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
2003 we have not paid any cash dividends on our ordinary shares. Any
future dividend policy will be determined by the board of directors and will be
based upon conditions then existing, including our results of operations,
financial condition, current and anticipated cash needs, contractual
restrictions and other conditions as the board of directors may deem relevant.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to the Israeli Companies Law, a company may distribute dividends out of its
profits provided that there is no reasonable concern that such dividend
distribution will prevent the company from paying all its current and
foreseeable obligations, as they become due. Notwithstanding the foregoing,
dividends may be paid with the approval of a court, provided that there is no
reasonable concern that such dividend distribution will prevent the company
from satisfying its current and foreseeable obligations, as they become due.
Profits, for purposes of the Israeli Companies Law, means the greater of
retained earnings or earnings accumulated during the preceding two years, after
deducting previous distributions that were not deducted from the surpluses. In
the event cash dividends are declared, such dividends will be paid in NIS.</FONT></P>

<P><FONT SIZE=2><B>B.<A NAME=A134></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S<small>IGNIFICANT</small> C<small>HANGES</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
the date of the annual consolidated financial statements included in this
annual report, no significant change has occurred other than the previously
reported appointment of Guy Bernstein as our acting chief executive officer
after Mr. Naor ceased to serve in that position on April 30, 2008.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 9.<A NAME=A135></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>THE OFFER AND LISTING</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>A.<A NAME=A136></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;O<small>FFER AND</small> L<small>ISTING</small> D<small>ETAILS</small></B></FONT></P>

<P><FONT SIZE=2><B>Annual Stock Information</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth, for each of the years indicated, the range of high
ask and low bid prices of our ordinary shares on the NASDAQ Global Market and
the Tel Aviv Stock Exchange:</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="51%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>NASDAQ Global Market</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Tel Aviv Stock Exchange*</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><B>Year</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>High</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Low</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>High</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Low</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="40%" NOSHADE COLOR=BLACK ALIGN=LEFT>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>2003</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4.85</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.79</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4.69</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.83</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>2004</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>8.70</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.11</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>8.65</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.60</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>2005</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3.56</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.45</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3.49</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.41</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>2006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.74</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.20</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.41</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.97</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.72</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.87</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.74</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<DIV><HR NOSHADE WIDTH=120 COLOR=GRAY ALIGN=LEFT size=1></DIV>
<DIV ALIGN=LEFT><FONT SIZE=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. dollar price of
  shares on the Tel Aviv Stock Exchange is determined by dividing the price of
  an ordinary share in New Israeli Shekels by the representative exchange rate
  of the New Israeli Shekel against the U.S. dollar on the same date.</FONT></DIV>

<P ALIGN=CENTER><FONT SIZE=2>58</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Quarterly
Stock Information</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth, for each of the financial quarters in the two most
recent financial years and subsequent period, the range of high ask and low bid
prices of our ordinary shares on the NASDAQ Global Market and the Tel Aviv
Stock Exchange:</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="51%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM nowrap>
<P ALIGN=CENTER><FONT SIZE=1><B>NASDAQ Global Market</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM nowrap>
<P ALIGN=CENTER><FONT SIZE=1><B>Tel Aviv Stock Exchange*</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>High</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Low</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>High</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Low</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2><B><U>2006</U></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>First Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.91</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.55</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.82</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.48</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Second
  Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.34</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.20</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.17</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.55</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Third Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.74</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.50</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.14</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.41</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Fourth
  Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.50</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.71</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.64</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2><B><U>2007</U></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>First Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3.00</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.87</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.35</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Second
  Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.47</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.21</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.45</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.29</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Third Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.88</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.75</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.38</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.88</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Fourth
  Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.36</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.85</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.09</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.74</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2><B><U>2008</U></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>First Quarter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.53</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.05</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.96</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.57</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<HR SIZE=1 WIDTH=120 NOSHADE ALIGN=LEFT COLOR=GRAY>
<DIV ALIGN=LEFT><FONT SIZE=2>* The U.S. dollar price of
  shares on the Tel Aviv Stock Exchange is determined by dividing the price of
  an ordinary share in New Israeli Shekels by the representative exchange rate
  of the New Israeli Shekel against the U.S. dollar on the same date.</FONT></DIV>

<P><FONT SIZE=2><B>Monthly
Stock Information</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth, for the most recent six months, the range of high
ask and low bid prices of our ordinary shares on the NASDAQ Global Market and
the Tel Aviv Stock Exchange:</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="51%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM nowrap>
<P ALIGN=CENTER><FONT SIZE=1><B>NASDAQ Global Market</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM nowrap>
<P ALIGN=CENTER><FONT SIZE=1><B>Tel Aviv Stock Exchange*</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>High</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Low</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>High</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Low</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>November 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.26</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.86</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.00</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.96</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>December 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.07</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.85</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.01</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.74</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>January 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.05</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.53</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.95</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.57</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>February 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.97</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.68</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.97</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.68</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>March 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.00</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.66</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.82</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.75</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>April 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.94</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.53</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.58</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.53</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<HR SIZE=1 WIDTH=120 NOSHADE ALIGN=LEFT COLOR=GRAY>
<DIV ALIGN=LEFT><FONT SIZE=2>* The U.S. dollar price of
  shares on the Tel Aviv Stock Exchange is determined by dividing the price of
  an ordinary share in New Israeli Shekels by the representative exchange rate
  of the New Israeli Shekel against the U.S. dollar on the same date.</FONT></DIV>

<P><FONT SIZE=2><B>B.<A NAME=A137></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;P<small>LAN OF</small> D<small>ISTRIBUTION</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>59</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>C.<A NAME=A138></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M<small>ARKETS</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ordinary shares have traded on the NASDAQ Global Market (under the symbol
&#147;MGIC&#148;) since our initial public offering on August 16, 1991. Since November
16, 2000, our ordinary shares have also traded on the Tel Aviv Stock Exchange.</FONT></P>

<P><FONT SIZE=2><B>D.<A NAME=A139></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S<small>ELLING</small> S<small>HAREHOLDERS</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>
<P><FONT SIZE=2><B>E.<A NAME=A140></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D<small>ILUTION</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>
<P><FONT SIZE=2><B>F.<A NAME=A141></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E<small>XPENSE</small> O<small>F</small> T<small>HE</small> I<small>SSUE</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 10.<A NAME=A142></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>ADDITIONAL INFORMATION</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>A.<A NAME=A143></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S<small>HARE</small> C<small>APITAL</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>
<P><FONT SIZE=2><B>B.<A NAME=A144></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M<small>EMORANDUM</small> A<small>ND</small> A<small>RTICLES OF</small> A<small>SSOCIATION</small></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
out below is a description of certain provisions of our Articles of Association
and of the Israeli Companies Law related to such provisions. This description
is only a summary and does not purport to be complete and is qualified by
reference to the full text of the Articles of Association, which are
incorporated by reference as exhibits to this Annual Report, and to Israeli
law.</I></FONT></P>

<P><FONT SIZE=2><B>Purposes and Objects of the Company</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are a public company registered with the Israeli Companies Registry as Magic
Software Enterprises Ltd., registration number 52-003674-0. Section 2 of our
memorandum of association provides that we were established for the purpose of
engaging in all fields of the computer business and in any other lawful
activity permissible under Israeli law.</FONT></P>

<P><FONT SIZE=2><B>The Powers
of the Directors</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the provisions of the Israel Companies Law and our articles of association,
subject to specified exceptions, a director cannot participate in a meeting nor
vote on a proposal, arrangement or contract in which he or she is materially
interested. In addition, our directors cannot vote compensation to themselves
or any members of their body without the approval of our audit committee and
our shareholders at a general meeting. See &#147;Item 6C. Directors, Senior
Management and Employees &#150; Board
Practices &#150; Approval of Related
Party Transactions Under Israeli Law.&#148;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
authority of our directors to enter into borrowing arrangements on our behalf
is not limited, except in the same manner as any other transaction by us.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
our articles of association, retirement of directors from office is not subject
to any age limitation and our directors are not required to own shares in our
company in order to qualify to serve as directors.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>60</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Rights
Attached to Shares</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
authorized share capital consists of 50,000,000 ordinary shares of a nominal
value of NIS 0.1 each. All outstanding ordinary shares are validly issued,
fully paid and non-assessable. The rights attached to the ordinary shares are
as follows:</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividend
rights.</I> Holders of our ordinary shares
are entitled to the full amount of any cash or share dividend subsequently
declared. The board of directors may declare interim dividends and propose the
final dividend with respect to any fiscal year only out of the retained
earnings, in accordance with the provisions of the Israeli Companies Law. See
&#147;Item 8A. Financial Information &#150; Consolidated and Other Financial Information
&#150; Dividend Distributions Policy.&#148; All unclaimed dividends or other monies
payable in respect of a share may be invested or otherwise made use of by the
Board of Directors for our benefit until claimed. Any dividend unclaimed after
a period of three years from the date of declaration of such dividend will be
forfeited and will revert to us; provided, however, that the Board of Directors
may, at its discretion, cause us to pay any such dividend to a person who would
have been entitled thereto had the same not reverted to us. We are not
obligated to pay interest or linkage differentials on an unclaimed dividend.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting
rights.</I>
Holders of ordinary shares have one vote for each ordinary share held on all
matters submitted to a vote of shareholders. Such voting rights may be affected
by the grant of any special voting rights to the holders of a class of shares
with preferential rights that may be authorized in the future.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
quorum required at any meeting of shareholders consists of at least two
shareholders present in person or represented by proxy who hold or represent,
in the aggregate, at least one-third (33%) of the voting rights in the company.
A meeting adjourned for lack of a quorum is generally adjourned to the same day
in the following week at the same time and place or any time and place as the
directors designate in a notice to the shareholders. At the reconvened meeting,
the required quorum consists of any two members present in person or by proxy.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
our articles of association, all resolutions require approval of no less than a
majority of the voting rights represented at the meeting in person or by proxy
and voting thereon.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to our articles of association, our directors (except outside directors) are
elected at our annual general meeting of shareholders by a vote of the holders
of a majority of the voting power represented and voting at such meeting and hold office
until the next annual general meeting of shareholders and until their
successors have been elected. All the members of our Board of Directors (except the outside
directors) may be reelected upon completion of their term of office. Formula Systems (1985) Ltd.,
which beneficially owns approximately 53.3% of our ordinary shares, is likely to be able to elect all
of our directors other than our outside directors. See &#147;Item 7A. Major
Shareholders and Related Party Transactions &#150; Major Shareholders.&#148; For
information regarding the election of outside directors, see &#147;Item 6C.
Directors, Senior Management and Employees &#150; Board Practices &#150; Election of
Directors.&#148;</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rights
to share in the company&#146;s profits.</I> Our shareholders have the
right to share in our profits distributed as a dividend and any other permitted
distribution. See this Item 10B. &#147;Additional Information &#150; Memorandum and Articles of
Association &#150; Rights Attached to
Shares &#150; Dividend Rights.&#148;</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rights
to share in surplus in the event of liquidation.</I> In the event of our
liquidation, after satisfaction of liabilities to creditors, our assets will be
distributed to the holders of ordinary shares in proportion to the nominal
value of their holdings. This right may be affected by the grant of
preferential dividend or distribution rights to the holders of a class of
shares with preferential rights that may be authorized in the future.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liability
to capital calls by the company.</I> Under our memorandum of association and the Israeli
Companies Law, the liability of our shareholders to provide us with additional
funds is limited to the par value of the shares held by them.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Limitations
on any existing or prospective major shareholder.</I> See Item 6C. &#147;Directors and
Senior Management &#150;Board Practices&nbsp;&#150;
Approval of Related Party Transactions Under Israeli Law.&#148;</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>61</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Changing
Rights Attached to Shares</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to our articles of association, the rights attached to any class of shares may be modified or abrogated by
us, subject to the consent in writing of, or sanction of a resolution passed
by, the holders of a majority of the issued shares of such class at a separate
general meeting of the holders of the shares of such class.</FONT></P>

<P><FONT SIZE=2><B>Annual
and Extraordinary Meetings</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Israeli Companies Law a company must convene an annual meeting of
shareholders at least once every calendar year and within fifteen months of the
last annual meeting. Depending on the matter to be voted upon, notice of at
least 21 days or 35 days prior to the date of the meeting is required. Our
board of directors may, in its discretion, convene additional meetings as
&#147;special general meetings.&#148;With respect to &#147;special general meetings notice of at least 35 days
prior to the date of the meeting is required.
In addition, the board must convene a special general meeting upon the
demand of two of the directors, 25% of the nominated directors, one or more
shareholders having at least 5% of the outstanding share capital and at least
1% of the voting power in the company, or one or more shareholders having at
least 5% of the voting power in the company. See Item 10B. &#147;Additional
Information - Memorandum and Articles of Association - Rights Attached to
Shares - Voting Rights.&#148;</FONT></P>

<P><FONT SIZE=2><B>Limitations
on the Rights to Own Securities in Our Company</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
our memorandum of association or our articles of association nor the laws of
the State of Israel restrict in any way the ownership or voting of shares by
non-residents, except with respect to subjects of countries which are in a
state of war with Israel.</FONT></P>

<P><FONT SIZE=2><B>Provisions
Restricting Change in Control of Our Company</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Companies Law requires that mergers between Israeli companies be
approved by the board of directors and general meeting of shareholders of both
parties to the transaction. The approval of the board of directors of both
companies is subject to such boards&#146; confirmation that there is no reasonable
doubt that following the merger the surviving company will be able to fulfill
its obligations towards its creditors. Each company must notify its creditors
about the contemplated merger. Under the Israeli Companies Law, our articles of
association are deemed to include a requirement that such merger be approved by
an extraordinary resolution of the shareholders, as explained above. The
approval of the merger by the general meetings of shareholders of the companies
is also subject to additional approval requirements as specified in the Israeli
Companies Law and regulations promulgated thereunder. See also &#147;Item 6C.
Directors, Senior Management and Employees &#150; Board Practices&nbsp;&#150; &nbsp;&#150; Approval of Related Party Transactions
Under
Israeli Law.&#148;</FONT></P>

<P><FONT SIZE=2><B>Disclosure
of Shareholders Ownership</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Israeli Securities Law and the regulations promulgated thereunder require that
a company whose shares are traded on a stock exchange in Israel, as in the case
of our company, report the share ownership of its interested parties. An
interested party is defined under the Israeli Securities Law as any one of the
following: (i) a person holding 5% or more of the company&#146;s issued capital
stock or voting power, or who is entitled to appoint one or more of the
company&#146;s directors or its general manager; or (ii) any person acting as a
director or general manager of the company; or (iii) any company, in which any
of the above persons either holds 25% or more of its capital stock or voting
power or is entitled to appoint 25% or more of its directors.</FONT></P>

<P><FONT SIZE=2><B>Changes
in Our Capital</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes
in our capital are subject to the approval of the shareholders by a majority of
the votes of shareholders present at the meeting, in person or by proxy, and
voting on the matter.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>62</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>C.<A NAME=A145></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M<small>ATERIAL</small> C<small>ONTRACTS</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 30, 2007, we entered into a stock purchase agreement with Fortissimo
Capital Fund GP LP, to sell our wholly-owned subsidiary, AAOD, a Florida
corporation that develops and markets application software targeted at the
long-term care industry to Fortissimo Capital for $17 million. $1 million of the proceeds was paid in December 2007
and $16 million in the beginning of 2008. In addition, as part of the
transaction, we entered into a three years license agreement with AAOD
according to which AAOD will continue to resell our products in consideration
for $3 million paid in equal payments over three years starting in 2008.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
we have numerous contracts with customers, resellers and distributors we do not
deem any such individual contract to be material.</FONT></P>

<P><FONT SIZE=2><B>D.<A NAME=A146></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E<small>XCHANGE</small> C<small>ONTROLS</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
law and regulations do not impose any material foreign exchange restrictions on
non-Israeli holders of our ordinary shares. In May 1998, a new &#147;general permit&#148;
was issued under the Israeli Currency Control Law, 1978, which removed most of
the restrictions that previously existed under such law, and enabled Israeli
citizens to freely invest outside of Israel and freely convert Israeli currency
into non-Israeli currencies.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-residents
of Israel who purchase our ordinary shares will be able to convert dividends,
if any, thereon, and any amounts payable upon our dissolution, liquidation or
winding up, as well as the proceeds of any sale in Israel of our ordinary shares
to an Israeli resident, into freely repatriable dollars, at the exchange rate
prevailing at the time of conversion, provided that the Israeli income tax has
been withheld (or paid) with respect to such amounts or an exemption has been
obtained.</FONT></P>

<P><FONT SIZE=2><B>E.<A NAME=A147></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T<small>AXATION</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a discussion of Israeli and United States tax consequences
material to our shareholders. To the extent that the discussion is based on new
tax legislation which has not been subject to judicial or administrative interpretation,
we cannot assure you that the views expressed in the discussion will be
accepted by the appropriate tax authorities or the courts. 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</FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders
of our ordinary shares should consult their own tax advisors as to the United
States, Israeli or other tax consequences of the purchase, ownership and
disposition of ordinary shares, including, in particular, the effect of any
foreign, state or local taxes.</B></FONT></P>

<P><FONT SIZE=2><B>I<small>SRAELI</small> T<small>AX</small> C<small>ONSIDERATIONS</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a summary of some of the current tax law applicable to companies
in Israel, with special reference to its effect on us. The following also contains
a discussion of specified Israeli tax consequences to our shareholders and
government programs benefiting us. To the extent that the discussion is based
on tax legislation that has not been subject to judicial or administrative
interpretation, there can be no assurance that the views expressed in the
discussion will be accepted by the tax authorities in question. The discussion
is not intended, and should not be construed, as legal or professional tax
advice and is not exhaustive of all possible tax considerations.</FONT></P>

<P><FONT SIZE=2><B>General Corporate Tax Structure</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
companies were generally subject to corporate tax at the rate of 29% of their
taxable income in 2007. The corporate tax was reduced to a rate of 27% in 2008 and will be further reduced to 26%
in 2009 and 25% in 2010 and thereafter.
</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However,
the rate is effectively reduced for income derived from an approved enterprise
and beneficiary enterprise, as discussed below.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>63</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the
Income Tax Law (Adjustment for Inflation) 1985, income for tax purposes is
generally measured in terms of earnings in NIS adjusted for the increase in the
Israeli CPI.</FONT></P>

<P><FONT SIZE=2><B>Tax Benefits Under the Law for the
Encouragement of Capital Investments, 1959</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Law for
the Encouragement of Capital Investment, 1959, or the Investment Law, provides
that a proposed capital investment in production facilities or other eligible
facilities may be designated as an &#147;approved enterprise.&#148; To obtain &#147;approved
enterprise&#148; status, an application to the Investment Center of the Ministry of
Industry and Trade, or the Investment Center, needs to be submitted. Each
instrument of approval for an approved enterprise relates to a specific
investment program that is defined both by the financial scope of the investment,
including sources of funds, and by the physical characteristics of the facility
or other assets.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax
benefits available under any instrument of approval relate only to taxable
profits attributable to the specific program and are contingent upon meeting
the criteria set out in the instrument of approval. If a company has more than
one approval or only a portion of its capital investments are approved, its
effective tax rate is the weighted average of the applicable rates. As
explained below, following the amendment of the Investment Law which became
effective on April 1, 2005, companies may receive tax benefits under the law
without applying for an approved enterprise status.</FONT></P>

<P><FONT SIZE=2><I>Tax Benefits for
Income from Approved Enterprises Approved Before April 1, 2005</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before April
1, 2005 an approved enterprise was entitled to either receive a grant from the
Government of Israel or an alternative package of tax benefits, or the
Alternative Benefits. We have elected to forego the entitlement to grants and
have applied for the Alternative Benefits, under which undistributed income
that we generate from our approved enterprises will be completely tax exempt.
The period of such tax exemption for a company electing the Alternative
Benefits ranges between two and ten years, depending upon the location within
Israel and the type of the approved enterprise. Because we are located in Or
Yehuda, the period of tax exemption applicable is two to four years (as
described below).</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
expiration of the exemption period, the approved enterprise would be eligible
for beneficial tax rates otherwise available for approved enterprises under the
Investment Law (for our company, a rate of 25%) for the remainder of the
otherwise applicable benefits period.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alternative
Benefits are available until the earlier of (i) seven consecutive years,
commencing in the year in which the specific approved enterprise first
generates taxable income, (ii) 12 years from commencement of production and
(iii) 14 years from the date of approval of the approved enterprise status.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
paid out of income generated by an approved enterprise (or out of dividends
received from a company whose income is generated by an approved enterprise)
are generally subject to withholding tax at the rate of 15%. This withholding
tax is deductible at source by the approved enterprise. The 15% tax rate is
limited to dividends and distributions out of income derived during the
benefits period and actually paid at any time up to 12 years thereafter. Since
we elected the Alternative Benefits track, we will be subject to payment of
corporate tax at the rate of 25% in respect of the gross amount of the dividend
that we may distribute out of profits which were exempt from corporate tax in
accordance with the provisions of the Alternative Benefits track. If we are
also deemed to be a &#147;Foreign Investors&#146; Company,&#148; or &#147;FIC,&#148; and if the FIC (the
definition of which appears below) is at least 49% owned by non-Israeli
residents, the corporate tax rate paid by us in respect of the dividend we may
distribute from income derived by our approved enterprises during the tax
exemption period may be taxed at a lower rate.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since we
have elected the Alternative Benefits package, we are not obliged to attribute
any part of dividends that we may distribute to exempt profits, and we may
decide from which year&#146;s profits to declare dividends. We currently intend to
reinvest any income that we may in the future derive from our approved
enterprise programs and not to distribute the income as a dividend.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>64</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we
qualify as a FIC, our approved enterprises will be entitled to additional tax
benefits. Subject to certain conditions, a FIC is a company with a level of
foreign investment of more than 25%. The level of foreign investment is
measured as the percentage of rights in the company (in terms of shares, rights
to profits, voting and appointment of directors), and of combined share and
loan capital, that are owned, directly or indirectly, by persons who are not
residents of Israel. Such a company will be eligible for an extension of the
period during which it is entitled to tax benefits under its approved
enterprise status (so that the benefit periods may be up to ten years) and for
further tax benefits if the level of foreign investment exceeds 49%.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Investment Center of the Ministry of Industry and Trade has granted approved
enterprise status under Israeli law to eight investment programs at our
manufacturing facility. We have elected the alternative package of benefits
with respect to each of these approved enterprise programs.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The benefits
available to an approved enterprise are subject to the fulfillment of
conditions stipulated in the Investment Law and its regulations and the
criteria in the specific certificate of approval, as described above. If a
company does not meet these conditions, it would be required to refund the
amount of tax benefits, together with consumer price index linkage adjustment
and interest.</FONT></P>

<P><FONT SIZE=2><I>Tax Benefits under
an Amendment that Became Effective on April&nbsp;1, 2005</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April 1,
2005, an amendment to the Investment Law became effective. The Investment Law
provides that terms and benefits included in any certificate of approval that
was granted before the April 2005 amendment came into effect will remain
subject to the provisions of the Investment Law as they were on the date of
such approval.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the
April 2005 amendment, &#147;approved enterprise&#148; status will continue to be granted
by the Investment Center to qualifying investments. However, 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 an approved enterprise,
such as provisions generally requiring that at least 25% of the approved
enterprise&#146;s income will be derived from export.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The April
2005 amendment provides that approved enterprise status will only be necessary
for receiving grants. As a result, it is no longer necessary for a company to
acquire approved enterprise status in order to receive the tax benefits
previously available under the Alternative Benefits provisions. Rather, a
company may claim the tax benefits offered by the Investment Law directly in
its tax returns, provided that its facilities meet the criteria for tax
benefits set out by the amendment. Companies are entitled to approach the
Israeli Tax Authority for a pre-ruling regarding their eligibility for benefits
under the amendment.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax benefits
are available under the April 2005 amendment to production facilities (or other
eligible facilities), which are generally required to derive more than 25% of
their business income from export. In order to receive the tax benefits, the
amendment states that the company must make an investment which meets all the
conditions set out in the amendment for tax benefits and exceeds a minimum
amount specified in the Investment Law. Such investment allows the company to
receive a &#147;benefited enterprise&#148; status, and may be made over a period of no
more than three years ending at the end of the year in which the company
requested to have the tax benefits apply to the benefited enterprise, referred
to as the Year of Election. Where the company requests to have the tax benefits
apply to an expansion of existing facilities, only the expansion will be
considered to be a benefited enterprise and the company&#146;s effective tax rate
will be the weighted average of the applicable rates. In this case, the minimum
investment required in order to qualify as a benefited enterprise is required
to exceed a certain amount or certain percentage of the value of the company&#146;s
production assets before the expansion.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The extent
of the tax benefits available under the April 2005 amendment to qualifying
income of a benefited enterprise are determined by the geographic location of
the benefited enterprise. The location will also determine the period for which
tax benefits are available.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>65</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
paid out of income derived by a benefited enterprise will be treated similarly
to payment of dividends by an approved enterprise under the Alternative
Benefits track. Therefore, dividends paid out of income derived by a benefited
enterprise (or out of dividends received from a company whose income is derived
from a benefited enterprise) are generally subject to withholding tax at the
rate of 15% (deductible at source). The reduced rate of 15% is limited to
dividends and distributions out of income derived from a benefited enterprise during
the benefits period and actually paid at any time up to 12 years thereafter. A
company qualifying for tax benefits under the amendment which pays a dividend
out of income derived by its benefited enterprise during the tax exemption
period will be subject to tax in respect of the gross amount of the dividend at
the otherwise applicable rate of 25%, (or lower in the case of a qualified
&#147;FIC&#148; which is at least 49% owned by non-Israeli residents). The dividend
recipient would be subject to tax at the rate of 15% on the amount received
which tax would be deducted at source.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result
of the April 2005 amendment, tax-exempt income generated under the provisions
of the new law will subject us to taxes upon distribution of the tax-exempt
income to shareholders or liquidation of the company, and we may be required to
record a deferred tax liability with respect to such tax-exempt income.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The April
2005 amendment sets a minimal amount of foreign investment required for a
company to be regarded a FIC.</FONT></P>

<P><FONT SIZE=2><B>Tax Benefits and Grants for Research
and Development</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
tax law allows, under certain conditions, a tax deduction in the year incurred
for expenditures (including capital expenditures) in scientific research and
development projects if the expenditures are approved by the relevant Israeli
government ministry (determined by the field of research) 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 so approved are
deductible over a three-year period. However, expenditures made out of proceeds
made available to us through government grants are not deductible according to
Israeli law.</FONT></P>

<P><FONT SIZE=2><B>Law for the Encouragement of Industry
(Taxes), 1969</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following preferred corporate tax benefits, among others, are available to
Industrial Corporations, which may be applicable to us:</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amortization of purchases of know-how and
  patents over eight years for tax purposes.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amortization of expenses incurred in
  connection with certain public security issuances over a three-year period.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Tax exemption for shareholders who held
  shares before a public offering on capital gains derived from the sale (as
  defined by law) of securities, if realized after more than five years from
  the public issuance of additional securities of the company. (As of November
  1994, this exemption was repealed, however, it applies to our shareholders
  pursuant to a grand-fathering clause.) This exemption applies only to gains
  that accrued before January 1, 2003.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Accelerated depreciation rates on equipment
  and buildings.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Special Provisions Relating to
Taxation Under Inflationary Conditions</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Income Tax Law (Inflationary Adjustments), 1985, generally referred to as the
Inflationary Adjustments Law, represents an attempt to overcome the problems
presented to a traditional tax system by an economy undergoing rapid inflation.
The Inflationary Adjustments Law is highly complex. The features that are
material to us can be described as follows:</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>When the value of a company&#146;s equity, as
  calculated under the Inflationary Adjustments Law, exceeds the depreciated
  cost of its fixed assets (as defined in the Inflationary Adjustments Law), a
  deduction from taxable income is permitted equal to the product of the excess
  multiplied by the applicable annual rate of inflation. The maximum deduction
  permitted in any single tax year is 70% of taxable income, with the unused
  portion permitted to be carried forward, linked to the increase in the
  consumer price index.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>66</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>If the depreciated cost of a company&#146;s fixed
  assets exceeds its equity, the product of the excess multiplied by the
  applicable annual rate of inflation is added to taxable income.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Subject to certain limitations, depreciation
  deductions on fixed assets and losses carried forward are adjusted for
  inflation based on the increase in the Israeli consumer price index.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
recent amendment repealing most of the provisions of the Inflationary
Adjustments Law became effective on January 1, 2008. As a result, the above
provisions will only be applicable to the determination of our taxable income
in fiscal year 2007.</FONT></P>

<P><FONT SIZE=2><B>Israeli Capital Gains Tax</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until
the end of the year 2002, and provided we maintained our status as an
industrial corporation, capital gains from the sale of our securities were
generally exempt from Israeli Capital Gains Tax. This exemption did not apply
to a shareholder whose taxable income was determined pursuant to the Israeli
Income Tax Law (Inflationary Adjustments) 1985, or to a person whose gains from
selling or otherwise disposing of our securities were deemed to be business
income.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
January 1, 2003, capital gains from the sale of our securities were generally
subject to tax. On January 1, 2006 an amendment to the Israeli tax regime
became effective, referred to as the 2006 Tax Reform. The 2006 Tax Reform
significantly changed the tax rates applicable to income derived from securities.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to the 2006 Tax Reform, an individual is subject to a 20% tax rate on real
capital gains derived from the sale of shares, as long as the individual is not
a &#147;substantial shareholder&#148; (generally a shareholder with 10% or more of the
right to profits, right to nominate a director and voting rights) in the
company issuing the shares.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
substantial shareholder will be subject to tax at a rate of 25% in respect of
real capital gains derived from the sale of shares issued by the company in
which he or she is a substantial shareholder. The determination of whether the
individual is a substantial shareholder will be made on the date that the
securities are sold. In addition, the individual will be deemed to be a
substantial shareholder if at any time during the 12 months preceding this date
he had been a substantial shareholder.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Israeli
residents are exempt from Israeli capital gains tax on any gains derived from
the sale of shares in an Israeli corporation publicly traded on the TASE and/or
on a foreign stock exchange, provided such gains do not derive from a permanent
establishment of such shareholders in Israel and that such shareholders did not
acquire their shares prior to the issuer&#146;s initial public offering. However,
non-Israeli corporations will not be entitled to such exemption if an Israeli
resident (i) has a controlling interest of 25% or more in such non-Israeli
corporation, or (ii) is the beneficiary of or is entitled to 25% or more of the
revenues or profits of such non-Israeli corporation, whether directly or
indirectly.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
some instances where our shareholders may be liable to Israeli tax on the sale
of their ordinary shares, the payment of the consideration may be subject to
the withholding of Israeli tax at the source.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the treaty between the governments of the United States and Israel with
respect to taxes on income, or the U.S.-Israel tax treaty, the sale, exchange
or disposition of our ordinary shares by a person who qualifies as a resident
of the United States under the treaty and who is entitled to claim the benefits
afforded to him by the treaty, will generally not be subject to Israeli capital
gains tax. This exemption shall not apply to a person who held, directly or
indirectly, shares representing 10% or more of the voting power in our company
during any part of the 12 month period preceding the sale, exchange or
disposition, subject to certain conditions. A sale, exchange or disposition of
our shares by a U.S. resident qualified under the treaty, who held, directly or
indirectly, shares representing 10% or more of the voting power in our company
at any time during the preceding 12 month period would be subject to Israeli
tax, to the extent applicable; however, under the treaty, this U.S. resident
would be permitted to claim a credit for these taxes against the U.S. income
tax with respect to the sale, exchange or disposition, subject to the
limitations in U.S. laws applicable to foreign tax credits.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>67</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Israeli Tax on Dividend Income</B></FONT></P>

<P><FONT SIZE=2><I>Taxation
of Israeli Residents</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Israeli
resident individuals are generally subject to Israeli income tax on the receipt
of dividends paid on our ordinary shares, other than bonus shares (share
dividends) or stock dividends, at the rate of 20%, or 25% for a shareholder
that is considered a material shareholder within the meaning of the Israeli Tax
Ordinance, at any time during the 12-month period preceding such distribution.
Dividends paid on our ordinary shares to Israeli resident companies are exempt
from such tax (except with respect to dividends that are distributed from the
income derived outside of Israel, which are subject to the 25% tax rate).</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trust
funds, pension funds and other institutions which are exempt from tax based on
Section 9(2) of the Israeli Tax Ordinance are exempt from the tax on dividend
distributions.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
withholding tax on dividends paid on our ordinary shares is 20% (including for
a shareholder considered a material shareholder within the meaning of the
Israeli Tax Ordinance).</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
paid from income derived from our approved enterprise or benefited enterprise
are subject to tax, which is withheld at the source at the rate of 15%,
although we cannot assure you that we will designate the profits that are being
distributed in a way that will reduce shareholders&#146; tax liability.</FONT></P>

<P><FONT SIZE=2><I>Taxation
of Non-Israeli Residents</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Israeli tax law, a distribution of dividends from income attributable to an
approved enterprise will be subject to tax in Israel at the rate of 15%, which
is withheld and paid by the company paying the dividend, if the dividend is
distributed during the benefits period or within the following 12 years (but
the 12-year limitation does not apply to a Foreign Investors&#146; Company). Any
distribution of dividends from income that is not attributable to an approved
enterprise will be subject to tax in Israel at the rate of 25%, except that
dividends distributed on or after January 1, 2006 to an individual who is deemed
&#147;a non-substantial shareholder&#148; will be subject to tax at the rate of 20%.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the US-Israel Tax Treaty, Israeli withholding tax on dividends paid to a U.S.
treaty resident may not in general exceed 25%, or 15% in the case of dividends
paid out of the profits of an approved enterprise. Where the recipient is a
U.S. corporation owning 10% or more of the voting stock of the paying
corporation and the dividend is not paid from the profits of an approved
enterprise, the Israeli tax withheld may not exceed 12.5%, subject to certain
conditions.</FONT></P>

<P><FONT SIZE=2><B>U<small>NITED</small> S<small>TATES</small> F<small>EDERAL</small> I<small>NCOME</small> T<small>AX</small> C<small>ONSEQUENCES</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a summary of certain material U.S. federal income tax consequences
that apply to U.S. Holders who hold ordinary shares as capital assets. This
summary is based on the United States Internal Revenue Code of 1986, as
amended, or the Code, Treasury regulations promulgated thereunder, judicial and
administrative interpretations thereof, and the U.S.-Israel Tax Treaty, all as
in effect on the date hereof and all of which are subject to change either
prospectively or retroactively. This summary does not address all tax
considerations that may be relevant with respect to an investment in ordinary
shares. This summary does not account for the specific circumstances of any
particular investor, such as:</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>broker-dealers,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>financial
  institutions,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>certain
  insurance companies,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>investors
  liable for alternative minimum tax,</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>68</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>tax-exempt
  organizations,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>non-resident
  aliens of the U.S. or taxpayers whose functional currency is not the U.S.
  dollar,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>persons who
  hold the ordinary shares through partnerships or other pass-through entities,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>persons who
  acquire their ordinary shares through the exercise or cancellation of
  employee stock options or otherwise as compensation for services,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>investors
  that actually or constructively own 10% or more of our voting shares, and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>investors
  holding ordinary shares as part of a straddle, or appreciated financial
  position or a hedging or conversion transaction.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a partnership or an entity treated as a partnership for U.S. federal income tax
purposes owns ordinary shares, the U.S. federal income tax treatment of a
partner in such a partnership will generally depend upon the status of the
partner and the activities of the partnership. A partnership that owns ordinary
shares and the partners in such partnership should consult their tax advisors
about the U.S. federal income tax consequences of holding and disposing of
ordinary shares.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
summary does not address the effect of any U.S. federal taxation other than
U.S. federal income and gift and estate taxation. In addition, this summary
does not include any discussion of state, local or foreign taxation.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
are urged to consult your tax advisors regarding the foreign and United States
federal, state and local tax considerations of an investment in ordinary
shares.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of this summary, a U.S. Holder is:</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>an individual
  who is a citizen or, for U.S. federal income tax purposes, a resident of the
  United States;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a corporation
  created or organized in or under the laws of the United States or any
  political subdivision thereof;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>an estate
  whose income is subject to U.S. federal income tax regardless of its source;
  or</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a trust that
  (a) is subject to the primary supervision of a court within the United States
  and the control of one or more U.S. persons or (b) has a valid election in effect
  under applicable U.S. Treasury regulations to be treated as a U.S. person.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Taxation
of Dividends</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
gross amount of any distributions received with respect to ordinary shares,
including the amount of any Israeli taxes withheld therefrom, will constitute
dividends for U.S. federal income tax purposes to the extent of our current and
accumulated earnings and profits, as determined for U.S. federal income tax
purposes. You will be required to include this amount of dividends in gross
income as ordinary income. Distributions in excess of our current and
accumulated earnings and profits will be treated as a non-taxable return of
capital to the extent of your tax basis in the ordinary shares and any amount
in excess of your tax basis will be treated as gain from the sale of ordinary
shares. See &#147;-Disposition of Ordinary Shares&#148; below for the discussion on the
taxation of capital gains. Dividends will not qualify for the
dividends-received deduction generally available to corporations under Section
243 of the Code.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
that we pay in NIS, including the amount of any Israeli taxes withheld
therefrom, will be included in your income in a U.S. dollar amount calculated
by reference to the exchange rate in effect on the day such dividends are
received. A U.S. Holder who receives payment in NIS and converts NIS into U.S.
dollars at an exchange rate other than the rate in effect on such day may have
a foreign currency exchange gain or loss that would be treated as ordinary
income or loss. U.S. Holders should consult their own tax advisors concerning
the U.S. tax consequences of acquiring, holding and disposing of NIS.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>69</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to complex limitations, any Israeli withholding tax imposed on such dividends
will be a foreign income tax eligible for credit against a U.S. Holder&#146;s U.S.
federal income tax liability (or, alternatively, for deduction against income
in determining such tax liability). The limitations set out in the Code include
computational rules under which foreign tax credits allowable with respect to
specific classes of income cannot exceed the U.S. federal income taxes
otherwise payable with respect to each such class of income. Dividends
generally will be treated as foreign-source passive category income or, in the case
of certain U.S. Holders, general category income for United States foreign tax
credit purposes. Further, there are special rules for computing the foreign tax
credit limitation of a taxpayer who receives dividends subject to a reduced
tax, see discussion below. A U.S. Holder will be denied a foreign tax credit
with respect to Israeli income tax withheld from dividends received on the
ordinary shares to the extent such U.S. Holder has not held the ordinary shares
for at least 16 days of the 31-day period beginning on the date which is 15
days before the ex-dividend date or to the extent such U.S. Holder is under an
obligation to make related payments with respect to substantially similar or
related property. Any days during which a U.S. Holder has substantially
diminished its risk of loss on the ordinary shares are not counted toward
meeting the 16-day holding period required by the statute. The rules relating
to the determination of the foreign tax credit are complex, and you should
consult with your personal tax advisors to determine whether and to what extent
you would be entitled to this credit.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to certain limitations, &#147;qualified dividend income&#148; received by a noncorporate
U.S. Holder in tax years beginning on or before December 31, 2010 will be
subject to tax at a reduced maximum tax rate of 15 percent. Distributions
taxable as dividends paid on the ordinary shares should qualify for the 15
percent rate provided that either: (i) we are entitled to benefits under the
income tax treaty between the Untied States and Israel, or the Treaty, or (ii)
the ordinary shares are readily tradable on an established securities market in
the United States and certain other requirements are met. We believe that we
are entitled to benefits under the Treaty and that the ordinary shares
currently are readily tradable on an established securities market in the
United States. However, no assurance can be given that the ordinary shares will
remain readily tradable. The rate reduction does not apply unless certain
holding period requirements are satisfied. With respect to the ordinary shares,
the U.S. Holder must have held such shares for at least 61 days during the
121-day period beginning 60 days before the ex-dividend date. The rate
reduction also does not apply to dividends received from passive foreign
investment companies, see discussion below, or in respect of certain hedged
positions or in certain other situations. U.S. Holders of ordinary shares
should consult their own tax advisors regarding the effect of these rules in
their particular circumstances.</FONT></P>

<P><FONT SIZE=2><B>Disposition
of Ordinary Shares</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you sell or otherwise dispose of ordinary shares, you will recognize gain or
loss for U.S. federal income tax purposes in an amount equal to the difference
between the amount realized on the sale or other disposition and the adjusted
tax basis in ordinary shares. Subject to the discussion below under the heading
&#147;Passive Foreign Investment Companies,&#148; such gain or loss will generally be
capital gain or loss and will be long-term capital gain or loss if you have
held the ordinary shares for more than one year at the time of the sale or
other disposition. In general, any gain that you recognize on the sale or other
disposition of ordinary shares will be U.S.-source for purposes of the foreign
tax credit limitation; losses will be generally allocated against U.S. source
income. Deduction of capital losses is subject to certain limitations under the
Code.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the case of a cash basis U.S. Holder who receives NIS in connection with the
sale or disposition of ordinary shares, the amount realized will be based on
the U.S. dollar value of the NIS received with respect to the ordinary shares
as determined on the settlement date of such exchange. A U.S. Holder who receives
payment in NIS and converts NIS into United States dollars at a conversion rate
other than the rate in effect on the settlement date may have a foreign
currency exchange gain or loss that would be treated as ordinary income or
loss.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
accrual basis U.S. Holder may elect the same treatment required of cash basis
taxpayers with respect to a sale or disposition of ordinary shares, provided
that the election is applied consistently from year to year. Such election may
not be changed without the consent of the Internal Revenue Service, or the IRS.
In the event that an accrual basis U.S. Holder does not elect to be treated as
a cash basis taxpayer (pursuant to the Treasury regulations applicable to
foreign currency transactions), such U.S. Holder may have a foreign currency
gain or loss for U.S. federal income tax purposes because of differences
between the U.S. dollar value of the currency received prevailing on the trade
date and the settlement date. Any such currency gain or loss would be treated
as ordinary income or loss and would be in addition to gain or loss, if any,
recognized by such U.S. Holder on the sale or disposition of such ordinary
shares.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>70</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Passive
Foreign Investment Companies</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
U.S. federal income tax purposes, we will be considered a passive foreign
investment company, or PFIC, for any taxable year in which either (i) 75% or
more of our gross income is passive income, or (ii) the average percentage of
our assets for the taxable year which are produced or held for the production
of passive income is at least 50%. For this purpose, passive income includes
generally dividends, interest, royalties, rents, annuities and the excess of
gains over losses from the disposition of assets which produce passive income.
If we were determined to be a PFIC for U.S. federal income tax purposes, highly
complex rules would apply to U.S. Holders owning ordinary shares. Accordingly,
you are urged to consult your tax advisors regarding the application of such
rules.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
on our current and projected income, assets and activities, we believe that we
are not currently a PFIC nor do we expect to become a PFIC in the foreseeable
future. However, because the determination of whether we are a PFIC is based
upon the composition of our income and assets from time to time, there can be
no assurances that we will not become a PFIC for any future taxable year.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we are treated as a PFIC for any taxable year, dividends would not qualify for
the reduced maximum tax rate, discussed above, and, unless you elect either to
treat your investment in ordinary shares as an investment in a &#147;qualified
electing fund&#148;, or a QEF election, or to &#147;mark-to-market&#148; your ordinary shares,
as described below,</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>you would be
  required to allocate income recognized upon receiving certain dividends or
  gain recognized upon the disposition of ordinary shares ratably over the
  holding period for such ordinary shares,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the amount
  allocated to each year during which we are considered a PFIC other than the
  year of the dividend payment or disposition would be subject to tax at the
  highest individual or corporate tax rate, as the case may be, and an interest
  charge would be imposed with respect to the resulting tax liability allocated
  to each such year,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>the amount
  allocated to the current taxable year and any taxable year before we became a
  PFIC would be taxable as ordinary income in the current year, and</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P style="margin-top:-2px"><FONT FACE="symbol" size="2">&#183;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>you would be
  required to make an annual return on IRS Form 8621 regarding distributions
  received with respect to ordinary shares and any gain realized on your
  ordinary shares.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you make either a timely QEF election or a timely mark-to-market election in
respect of your ordinary shares, you would not be subject to the rules described
above. If you make a timely QEF election, you would be required to include in
your income for each taxable year your pro rata share of our ordinary earnings
as ordinary income and your pro rata share of our net capital gain as long-term
capital gain, whether or not such amounts are actually distributed to you. You
would not be eligible to make a QEF election unless we comply with certain
applicable information reporting requirements. We will provide U.S. Holders
with the information needed to report income and gain under a QEF election if
we are classified as a PFIC.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alternatively,
assuming the ordinary shares qualify as &#147;marketable stock&#148; within the meaning
of section 1296(e) of the Code, if you elect to &#147;mark-to-market&#148; your ordinary
shares, you will generally include in income, in each year in which we are
considered a PFIC, any excess of the fair market value of the ordinary shares
at the close of each tax year over your adjusted basis in the ordinary shares.
If the fair market value of the ordinary shares had depreciated below your
adjusted basis at the close of the tax year, you may generally deduct the
excess of the adjusted basis of the ordinary shares over its fair market value
at that time. However, such deductions would generally be limited to the net
mark-to-market gains, if any, that you included in income with respect to such
ordinary shares in prior years. Income recognized and deductions allowed under
the mark-to-market provisions, as well as any gain or loss on the disposition
of ordinary shares with respect to which the mark-to-market election is made,
is treated as ordinary income or loss, except that in a year that we are not
considered a PFIC, a gain or loss will be treated as capital gain or loss.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>71</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Backup
Withholding and Information Reporting</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments
in respect of ordinary shares may be subject to information reporting to the
U.S. Internal Revenue Service and to U.S. backup withholding tax at a rate
equal to the fourth lowest income tax rate applicable to individuals, which,
under current law, is 28%. Backup withholding will not apply, however, if you
(i) are a corporation or fall within certain exempt categories, and demonstrate
the fact when so required, or (ii) furnish a correct taxpayer identification number
and make any other required certification.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Backup
withholding is not an additional tax. Amounts withheld under the backup
withholding rules may be credited against a U.S. Holder&#146;s U.S. tax liability,
and a U.S. Holder may obtain a refund of any excess amounts withheld under the
backup withholding rules by filing the appropriate claim for refund with the
IRS.</FONT></P>

<P><FONT SIZE=2><B>U.S.
Gift and Estate Tax</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
individual U.S. Holder of ordinary shares will generally be subject to U.S.
gift and estate taxes with respect to ordinary shares in the same manner and to
the same extent as with respect to other types of personal property.</FONT></P>

<P><FONT SIZE=2><B>F.<A NAME=A148></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D<small>IVIDEND</small> A<small>ND</small> P<small>AYING</small> A<small>GENTS</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>
<P><FONT SIZE=2><B>G.<A NAME=A149></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S<small>TATEMENT</small> B<small>Y</small> E<small>XPERTS</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>
<P><FONT SIZE=2><B>H.<A NAME=A150></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D<small>OCUMENTS ON</small> D<small>ISPLAY</small></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are subject to the reporting requirements of the United States Securities
Exchange Act of 1934, as amended, as applicable to &#147;foreign private issuers&#148; as
defined in Rule 3b-4 under the Exchange Act, and in accordance therewith, we
file annual and interim reports and other information with the Securities and
Exchange Commission.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a foreign private issuer, we are exempt from certain provisions of the Exchange
Act. Accordingly, our proxy solicitations are not subject to the disclosure and
procedural requirements of Regulation 14A under the Exchange Act, transactions
in our equity securities by our officers and directors are exempt from
reporting and the &#147;short-swing&#148; profit recovery provisions contained in Section
16 of the Exchange Act. However, we distribute annually to our shareholders an
annual report containing financial statements that have been examined and
reported on, with an opinion expressed by, an independent public accounting
firm, and we file reports with the Securities and Exchange Commission on Form
6-K containing unaudited financial information for the first three quarters of
each fiscal year.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
annual report and the exhibits thereto and any other document we file pursuant
to the
Exchange Act may be inspected without charge and copied at prescribed rates at
the following Securities and Exchange Commission public reference rooms: 100 F
Street, N.E., Room 1580, Washington, D.C. 20549; and on the Securities and
Exchange Commission Internet site (http://www.sec.gov) and on our website <U>www.magicsoftware.com</U>.
You may obtain information on the operation of the Securities and Exchange
Commission&#146;s public reference room in Washington, D.C. by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Exchange Act file
number for our Securities and Exchange Commission filings is 0-30198.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>72</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
documents concerning our company that are referred to in this annual report may
also be inspected at our offices located at 5 Haplada Street, Or Yehuda 60218,
Israel.</FONT></P>

<P><FONT SIZE=2><B>I.<A NAME=A151></A>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S<small>UBSIDIARY</small> I<small>NFORMATION</small></B></FONT></P>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 11.<A NAME=A152></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>QUANTITATIVE AND QUALITATIVE
  DISCLOSURE ABOUT MARKET RISKS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are exposed to a variety of market risks, primarily changes in interest rates
affecting our investments in marketable securities and foreign currency
fluctuations.</FONT></P>

<P><FONT SIZE=2><B>Interest
Rate Risk</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
for our exposure to market risk for changes in interest rates relating to our
investments in marketable securities, we do not have any substantial risk which
is derived from a change in interest rates.</FONT></P>

<P><FONT SIZE=2><B>Foreign
Currency Exchange Risk</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
financial results may be negatively impacted by foreign currency fluctuations.
Our foreign operations are transacted through a global network of subsidiaries.
As a result, these sales and related expenses are denominated in currencies
other than the U.S. dollar. Because our financial results are reported in U.S.
dollars, our results of operations may be adversely impacted by fluctuations in
the rates of exchange between the U.S. dollar and such other currencies as the
financial results of our foreign subsidiaries are converted into U.S. dollars
in consolidation. From time to time, we use derivative or hedge instruments to
cover part of our exposures.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 12.<A NAME=A153></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>DESCRIPTION OF SECURITIES OTHER
  THAN EQUITY SECURITIES</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>

<P ALIGN=CENTER><A NAME=A154></A><FONT SIZE=2><B>PART II</B></FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 13.<A NAME=A155></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>DEFAULTS, DIVIDEND ARREARAGES AND
  DELINQUENCIES</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 14.<A NAME=A156></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>MATERIAL MODIFICATIONS TO THE
  RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 15.<A NAME=A157></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>CONTROLS AND PROCEDURES</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM
  15T.<A NAME=A158></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>CONTROLS AND PROCEDURES</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Disclosure Controls and Procedures</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in its Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission&#146;s rules and forms, and that such information
is accumulated and communicated to our chief executive officer and chief
financial officer to allow timely decisions regarding required disclosure. Our
management, including our chief executive officer and chief financial officer,
conducted an evaluation of our disclosure controls and procedures, as defined
under Exchange Act Rule 13a-15(e), as of the end of the period covered by this
Annual Report on Form 20-F. Based upon that evaluation, our chief executive
officer and chief financial officer have concluded that, as of such date, our
disclosure controls and procedures were effective.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>73</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<P><FONT SIZE=2><B>Management&#146;s Annual Report on
Internal Control over Financial Reporting</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
management, including our chief executive officer and chief financial officer,
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined under Exchange Act Rules 13a-15(f) and
15d-15(f). Our internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States.
Internal control over financial reporting includes those policies and
procedures that: (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of our
assets, (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that the our receipts and
expenditures are being made only in accordance with appropriate authorizations;
and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of our assets that could have
a material effect on the financial statements.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
management assessed the effectiveness of our internal control over financial
reporting as of the end of the period covered by this annual report. Their
assessment included an evaluation of the design of our internal control over
financial reporting and testing of the operational effectiveness of our
internal control over financial reporting. Based on that assessment, our
management concluded that as of December 31, 2007 the company&#146;s internal
control over financial reporting was effective.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
report. Management&#146;s report was not subject to attestation by our independent
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management&#146;s report in
this annual report.</FONT></P>

<P><FONT SIZE=2><B>Changes in Internal Control over
Financial Reporting</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
was no change in our internal controls over financial reporting that occurred
during the period covered by this annual report that has materially affected,
or is reasonably likely to materially affect, our internal controls over
financial reporting.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 16.<A NAME=A159></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>RESERVED</U></B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 16A.<A NAME=A160></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>AUDIT COMMITTEE FINANCIAL EXPERT</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors has determined that Mr.
Elan Penn, an outside director, meets the definition of an audit
committee financial expert, as defined by rules of the Securities and Exchange
Commission. For a brief listing of Mr.
Penn&#146;s relevant experience, see Item 6.A. &#147;Directors, Senior Management
and Employees &#150; Directors and Senior Management.&#148;</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM
  16B.<A NAME=A161></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>CODE OF ETHICS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have adopted a code of ethics that applies to our chief executive officer and
all senior financial officers of our company, including the chief financial
officer, chief accounting officer or controller, or persons performing similar
functions. The code of ethics is publicly available on our website at <U>www.magicsoftware.com.</U>
Written copies are available upon request. If we make any substantive amendment
to the code of ethics or grant any waivers, including any implicit waiver, from
a provision of the codes of ethics, we will disclose the nature of such
amendment or waiver on our website.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>74</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM
  16C.<A NAME=A162></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>PRINCIPAL
  ACCOUNTING FEES AND SERVICES</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Fees
Paid to Independent Public Accountants</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth, for each of the years indicated, the fees paid to
our principal independent registered public accounting firm. All of such fees
were pre-approved by our Audit Committee.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="88%" style=margin-left:5%>
<TR style="font-size:1px">
<TD WIDTH="73%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year Ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Services Rendered</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="30%" NOSHADE COLOR=BLACK ALIGN=LEFT>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Audit (1)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>142,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>161,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Audit-related
  (2)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Tax (3)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>18,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>27,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Other (4)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>7,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>18,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Total</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>167,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>216,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><HR NOSHADE WIDTH=120 ALIGN=LEFT SIZE=1 COLOR=GRAY>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(1)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Audit fees
  relate to services that would normally be provided in connection with
  statutory and regulatory filings or engagements, including services that
  generally only the independent accountant can reasonably provide.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(2)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Audit related
  fees relate to the sale of AAOD.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(3)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Tax fees
  relate to services performed by the tax division for tax compliance,
  planning, and advice.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(4)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Other fees
  relate mainly to strategic consulting
  services.</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Pre-Approval
Policies and Procedures</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Audit Committee has adopted a policy and procedures for the pre-approval of
audit and non-audit services rendered by our independent registered public
accountants, Kost Forer Gabbay &amp;
Kasierer, a member of Ernst &amp; Young Global. Pre-approval of an audit
or non-audit service may be given as a general pre-approval, as part of the
audit committee&#146;s approval of the scope of the engagement of our independent
auditor, or on an individual basis. Any proposed services that exceed general
pre-approved levels also require specific pre-approval by our audit committee.
The policy prohibits retention of the independent public accountants to perform
the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley
Act of 2002 or the rules of the Securities and Exchange Commission, and also
requires the Audit Committee to consider whether proposed services are
compatible with the independence of the public accountants.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM
  16D.<A NAME=A163></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>EXEMPTIONS
  FROM THE LISTING REQUIREMENTS AND STANDARDS FOR AUDIT COMMITTEE</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM
  16E.<A NAME=A164></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>PURCHASE
  OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Issuer
Purchase of Equity Securities</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
we nor any affiliated purchaser has purchased any of our securities during
2007.</FONT></P>

<P ALIGN=CENTER><A NAME=A165></A><FONT SIZE=2><B>PART III</B></FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 17.<A NAME=A166></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>FINANCIAL STATEMENTS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>75</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 18.<A NAME=A167></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>FINANCIAL STATEMENTS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="70%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="15%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="15%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Index to
  Financial Statements</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F-1</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Reports of
  Independent Registered Public Accounting Firm</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F-2</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consolidated
  Balance Sheets</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F-3&#150;F- 4</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consolidated
  Statements of Operations</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F-5</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Statements of
  Changes in Shareholders&#146; Equity</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F-6</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consolidated
  Statements of Cash Flows</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F-7&#150;F-8</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Notes to
  Consolidated Financial Statements</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F-9&#150;F-44</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Appendix A &#150;
  Details of Subsidiaries and Affiliated Company</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F-45</FONT></P>
</TD>
</TR>


<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2> Reports of Independent Auditors with Respect to Subsidiaries</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2>F- 46-F-52</FONT></P>
</TD>
</TR>

</TABLE>

<BR>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>ITEM 19.<A NAME=A168></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B><U>EXHIBITS</U></B></FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2><B>Index to
Exhibits</B></FONT></P>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="99%">
<TR style="font-size:1px">
<TD WIDTH="8%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1><B>Exhibit</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1><B>Description</B></FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="80%" NOSHADE COLOR=BLACK ALIGN=LEFT>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=LEFT>
</TD>
</TR>


<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>3.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Memorandum of
  Association of the Registrant<SUP>1</SUP></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>3.2</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Articles of
  Association of the Registrant<SUP>2</SUP></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Specimen of
  Ordinary Share Certificate<SUP>3</SUP></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>4.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>1991 Employee
  Stock Option Plan, as amended<SUP>4</SUP></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>4.2</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2000 Employee
  Stock Option Plan<SUP>5</SUP></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>4.3</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2007
  Incentive Compensation Plan.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>4.4</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Form of Stock
  Purchase Agreement with Fortissimo Capital Fund GP LP</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>8</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>List of
  Subsidiaries of the Registrant</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>12.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Certification
  of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
  the Securities Exchange Act, as amended</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>12.2</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Certification
  of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
  the Securities Exchange Act, as amended</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>13.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Certification
  of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>13.2</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Certification
  of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>76</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="99%">
<TR style="font-size:1px">
<TD WIDTH="8%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="90%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>15.1</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consent of
  Kost Forer Gabbay &amp; Kasierer, a Member of Ernst &amp; Young Global</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>15.2</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consent of
  Levy Cohen &amp; Co., Chartered Accountants (relating to Magic Software
  Enterprises (UK) Limited)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>15.3</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consent of
  Levy Cohen &amp; Co., Chartered Accountants (relating to Hermes Logistics
  Technologies Limited)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>15.4</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consent of
  KDA Audit Corporation (relating to Magic Software Japan K.K.)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>15.5</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consent of
  Verstegen accountants en adviseurs (relating to Magic Benelux B.V.)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>15.6</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consent of
  M&#225;ria N&#233;gyessy, Registered Auditors (relating to Magic (Onyx) Magyarorsz&#225;g
  Szoftverh&#225;z Kft.)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>15.7</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Consent of
  Federico Pozzi, Registered Auditors (relating to Magic Italy Srl.)</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P><HR NOSHADE WIDTH=120 COLOR=GRAY ALIGN=LEFT SIZE=1>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2> (1)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed as
  Exhibit 3.2 to the registrant&#146;s registration statement on Form F-1,
  registration number 33-41486, and incorporated herein by reference.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(2)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed as
  Exhibit 3.1 to the registrant&#146;s registration statement on Form F-1,
  registration number 33-41486, and incorporated herein by reference.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(3)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed as
  Exhibit 4.1 to the registrant&#146;s registration statement on Form F-1,
  registration number 33-41486, and incorporated herein by reference.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(4)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed as
  Exhibit 10.1 to the registrant&#146;s annual report on Form 20-F for the year
  ended December 31, 2000, and incorporated herein by reference.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(5)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Filed as Exhibit 10.2 to the registrant&#146;s annual
  report on Form 20-F for the year ended December 31, 2000, and incorporated
  herein by reference.</FONT></P>
</TD>
</TR>
</TABLE>
<P ALIGN=CENTER><FONT SIZE=2>77</FONT></P>
<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<page>


<P ALIGN=CENTER ><FONT SIZE=2><B>MAGIC SOFTWARE
ENTERPRISES LTD. AND ITS SUBSIDIARIES</B></FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2><B>CONSOLIDATED
FINANCIAL STATEMENTS</B></FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2><B>AS OF DECEMBER 31,
2007</B></FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2><B>IN U.S. DOLLARS</B></FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2><B>INDEX</B></FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="84%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="13%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1><B>Page</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT   SIZE=2><B><A HREF="#A201">Report of Independent
  Registered Public Accounting Firm</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=2><B>F-2</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT   SIZE=2><B><A   HREF="#A202">Consolidated Balance
  Sheets</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=2><B>F-3 - F-4</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT   SIZE=2><B><A   HREF="#A203">Consolidated Statements
  of Operations</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=2><B>F-5</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT   SIZE=2><B><A   HREF="#A204">Statements of Changes in
  Shareholders&#146; Equity</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=2><B>F-6</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT   SIZE=2><B><A   HREF="#A205">Consolidated Statements
  of Cash Flows</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=2><B>F-7 - F-8</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT   SIZE=2><B><A   HREF="#A206">Notes to Consolidated
  Financial Statements</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=2><B>F-9 - F-44</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT   SIZE=2><B><A HREF="#A207">Details Of Subsidiaries
  And Affiliate</A></B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=2><B>F-45</B></FONT></P>
</TD>
</TR>
</TABLE>
<BR><BR>



<p align=center>
<font size=2>F - 1</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<P><FONT SIZE=2><IMG SRC="img009.jpg" ALT="(ERNST & YOUNG LOGO)"></FONT></P>

<P ALIGN=CENTER><A NAME=A201></A><FONT SIZE=2><B>REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2><B>To the Shareholders
and the Board of Directors of</B></FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2><B>MAGIC SOFTWARE
ENTERPRISES LTD.</B></FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have
audited the accompanying consolidated balance sheets of Magic Software
Enterprises Ltd. (the &#147;Company&#148;) and its subsidiaries as of December 31, 2006
and 2007, and the related consolidated statements of operations, changes in
shareholders&#146; equity and cash flows for each of
the three years in the period ended December&nbsp;31, 2007. These
financial statements are the responsibility of Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of certain subsidiaries,
which statements reflect total assets of 18% and 19% as of December&nbsp;31,
2006 and 2007, respectively, and total revenues of 18%, 33% and 29% for each of
the three years in the period ended December 31, 2007 of the related
consolidated totals. Those statements were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to
the amounts included for those subsidiaries, is based solely on the reports of
the other auditors. </FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Company&#146;s internal control over financial reporting.
Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company&#146;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, and evaluating the overall financial statement
presentation. We believe that our audits and the reports of other auditors
provide a reasonable basis for our opinion.</FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our
opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company and its
subsidiaries at       December 31, 2006
and 2007, and the related consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 2007,
in conformity with U.S. generally accepted accounting principles.</FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in Note 2 to the consolidated financial statements, in 2007 the
Company adopted FASB interpretation No. 48 &#147;Accounting for Uncertainty in
Income Taxes &#150; An Interpretation of FASB No. 109&#148;, effective January 1, 2007.
As discussed in Note 2 to the consolidated financial statements, the Company
adopted the provision of Statement of Financial Accounting Standard
No.&nbsp;123(R), &#147;Share-Based Payment&#148;.</FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in Note 2 to the consolidated financial statements, on December 31,
2007, the Company initially applied the provisions of Staff Accounting Bulletin
No. 108, &#147;Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements&#148;, and recorded a cumulative
effect adjustment to beginning accumulated deficit at January 1, 2006 and
adjustments to property and equipment as of December 31, 2005.</FONT></P>



<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH=65% VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH=35% VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Tel-Aviv, Israel</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><IMG SRC="kfg.jpg"><BR><FONT   SIZE=2>KOST FORER
  GABBAY &amp; KASIERER</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>May 15, 2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=2>A Member of Ernst &amp; Young Global</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER ><FONT SIZE=2>F - 2</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT ><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD. <BR>
  AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>CONSOLIDATED BAL<A NAME=A202></A>ANCE SHEETS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>U.S. dollars in thousands</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="67%" VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>ASSETS</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>CURRENT ASSETS:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cash and cash equivalents</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>6,935</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>12,178</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Short-term bank deposits</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>69</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>89</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Marketable securities (Note
3)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>4,649</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>4,090</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Trade receivables (net of allowance
for
  doubtful accounts of $1<FONT   SIZE=2>836 and
  $1,829 at December 31, 2006 and 2007, respectively)</FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>10,797</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>12,941</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Other accounts receivable and prepaid
  expenses (Note 4)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,437</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,010</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Receivables from a sale of subsidiary
(Note
  2b)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>16,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Current assets of discontinued
operations
  (Note 18)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>10,096</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>41</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Total</U> current
  assets</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>34,983</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>47,349</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>LONG-TERM INVESTMENTS:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Long-term lease deposits</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>522</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>472</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Investments in an affiliated
company</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>213</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>127</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Severance pay fund</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>2,176</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>1,925</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Total</U> long-term
  investments</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,911</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,524</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>PROPERTY AND EQUIPMENT, NET (Note 5)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>6,049</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>5,758</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>OTHER INTANGIBLE ASSETS, NET (Note 6)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>10,270</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>10,681</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>GOODWILL (Note 7)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>15,693</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>15,986</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>69,906</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>82,298</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>The accompanying notes are an integral part of the consolidated
financial statements.</FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2>F - 3</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT ><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD. <BR>
  AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>CONSOLIDATED BALANCE SHEETS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>U.S. dollars in thousands (except share and per share data)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="67%" VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>LIABILITIES AND SHAREHOLDERS&#146;
  EQUITY</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>CURRENT LIABILITIES:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Short-term credit and current
maturities of
  long-term loans (Note 8)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>4,514</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>3,621</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Trade payables</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>3,053</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>2,999</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Accrued expenses and other accounts
payable
  (Note 9)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>6,623</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>9,169</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Deferred Revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>1,693</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>2,314</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Current liabilities of discontinued
  operations (Note 18)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>3,516</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>503</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Total</U> current
  liabilities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>19,399</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>18,606</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>ACCRUED SEVERANCE PAY</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,499</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,316</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>LONG-TERM LOANS (Note 10)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>233</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>132</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>MINORITY INTEREST</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>131</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>COMMITMENTS AND CONTINGENTIES (Note 15)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>SHAREHOLDERS&#146; EQUITY (Note 12):</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Share capital:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Authorized: 50,000,000 Ordinary
shares of
  NIS 0.1 par value at December&nbsp;31, 2006 and 2007; Issued: 32,599,213 and
  32,794,939 shares at December 31, 2006 and 2007, respectively; Outstanding:
  31,323,845 and 31,542,050 shares at December 31, 2006 and 2007, respectively</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>834</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>838</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Additional paid-in capital</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>106,375</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>107,052</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Accumulated other comprehensive
loss</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(1,337</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(1,026</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Treasury shares, at cost: 1,275,368
  Ordinary shares at December 31, 2006 and 2007.</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(6,772</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(6,772</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Accumulated deficit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(51,456</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(38,848</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Total</U>
  shareholders&#146; equity</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>47,644</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>61,244</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>69,906</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>82,298</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>The accompanying notes are an integral part of the consolidated
financial statements.</FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2>F - 4</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT ><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD. <BR>
  AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>


<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>CONSOLIDATED STATEMENTS OF OPERATIONS<A   NAME=A203></A></B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>U.S.
  dollars in thousands (except per share data)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="51%" VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Revenues (Note 13):</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>21,503</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>18,788</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>17,707</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Maintenance and technical
support</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>11,238</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>11,531</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>12,605</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Consulting services</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>19,095</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>22,252</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>28,116</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Total</U> revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>51,836</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>52,571</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>58,428</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cost of revenues:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>6,965</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>5,433</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>4,557</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Maintenance and technical
support</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>2,179</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>2,873</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>1,602</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Consulting services</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>14,123</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>16,862</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>21,181</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Total</U> cost of
  revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>23,267</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>25,168</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>27,340</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Gross profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>28,569</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>27,403</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>31,088</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Operating costs and expenses:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Research and development, net (Note
14a)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,413</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,462</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,716</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Selling and marketing</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>17,197</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>15,712</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>15,558</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>General and administrative</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>14,510</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>13,784</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>11,532</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Restructuring and Impairment (Note
1e)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>2,157</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Total</U> operating
  expenses, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>34,120</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>34,115</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>29,806</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Operating income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(5,551</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(6,712</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>1,282</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Financial income (expenses), net (Note 14b)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(809</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>332</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>161</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Other income, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>278</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>170</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss) before taxes on income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(6,360</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(6,102</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>1,613</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Taxes on income (Note 11)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>462</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>310</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>362</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(6,822</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(6,412</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>1,251</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Equity in earnings (losses) of affiliates</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>19</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(86</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Minority interest in losses (earnings) of
  subsidiaries</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>71</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss) from continued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(6,811</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(6,326</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>1,143</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income from discontinued operation
  (Note 18)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,204</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>1,320</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>11,465</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(5,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>12,608</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss) per share (Note 16)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Basic:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss) from continuing operations</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(0.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(0.20</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>0.04</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income from discontinued operations</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>0.07</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>0.04</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>0.36</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>0.40</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Diluted:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss) from continuing operations</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(0.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(0.20</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>0.04</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income from discontinued operations</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>0.07</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>0.04</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>0.35</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>0.39</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P><FONT SIZE=2>The accompanying notes are an integral part of the consolidated
financial statements.</FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2>F - 5</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT ><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD. <BR>
  AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; <A NAME=A204></A>EQUITY</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>U.S. dollars in thousands</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="18%" VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="9%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT >&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT >&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Share<BR>
  capital<BR>
  (</B><FONT SIZE=1><B>Number)</B></FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Share<BR>
  capital<BR>
  </B><FONT SIZE=1><B>(Amount)</B></FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Additional<BR>
  paid-in<BR>
  capital</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Accumulated<BR>
  other<BR>
  comprehensive<BR>
  income (loss)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Treasury<BR>
  shares<BR>
  at cost</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Accumulated<BR>
  deficit</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Comprehensive<BR>
  income<BR>
  (loss)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Total<BR>
  shareholders&#146;<BR>
  equity</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Balance as of January 1, 2005</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1>31,180,275</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1>827</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1>105,992</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>306</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(5,875</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(41,703</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>59,547</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Other comprehensive loss:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Realized losses from available-for-sale
securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>36</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>36</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Foreign currency translation adjustments</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(1,578</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(1,578</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(1,578</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Unrealized losses from available-for-sale
securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(278</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(278</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(278</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Net loss</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Total comprehensive loss</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(6,463</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Exercise of stock options</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>80,604</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>80</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>82</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Purchase of Treasury shares</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(190,380</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(897</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(897</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Balance as of December 31, 2005</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>31,070,499</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>829</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>106,072</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(1,514</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(6,772</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(46,310</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>52,305</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Effect of SAB 108</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(140</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(140</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(46,450</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>52,165</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Stock based compensation expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>27</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>27</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Realized losses from available-for-sale
securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>5</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>5</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Other comprehensive loss:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Foreign currency translation adjustments</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Unrealized gain from available-for-sale
securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>150</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>150</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>150</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Net loss</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(5,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(5,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(5,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Total comprehensive loss</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(4,834</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Exercise of stock options</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>253,346</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>5</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>276</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>281</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Balance as of December 31, 2006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>31,323,845</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>834</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>106,375</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(1,337</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(6,772</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(51,456</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>47,644</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Stock based compensation expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>434</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>434</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Realized gain from available-for-sale
securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Other comprehensive loss:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Foreign currency translation adjustments</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>673</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>673</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>673</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Cumulative effect of changes in accounting for
uncertainties in income
  taxes (FIN 48)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(530</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(530</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(530</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Unrealized gain from available-for-sale
securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>166</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>166</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>166</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Net income</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>12,608</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>12,608</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>12,608</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Total comprehensive income</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>12,917</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR BGCOLOR="#CCEEFF">
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Exercise of stock options</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>218<FONT SIZE=1>,</FONT><FONT   SIZE=1>205</FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>4</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>243</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>247</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=1>Balance as of December 31, 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>31,542,050</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>838</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>107,052</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(1,026</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(6,772</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>(38,848</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>61,244</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ><FONT SIZE=2>The accompanying notes are an integral part of the consolidated
financial statements.</FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2>F - 6</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT ><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD. <BR>
  AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ><FONT SIZE=2><B>CONSOLIDATED STATEMENTS OF CASH FLOWS<A NAME=A205></A></B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ><FONT SIZE=2><B>U.S.
  dollars in thousands</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="57%" VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Cash flows from operating
  activities:</U></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(5,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>12,608</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Less: Net income from discontinued
  operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(2,204</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(1,320</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(11,465</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net income (loss) from continuing
operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(6,811</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(6,326</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>1,14<FONT SIZE=2>3</FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Adjustments to reconcile net income
(loss)
  from continuing operations to net cash provided by operating activities from
  continuing operations:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Depreciation and
amortization</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>4,542</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>5,182</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>3,798</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Equity in losses (earnings) of
affiliates</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(19</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>86</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Minority interest in earnings
(losses) of
  subsidiaries</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(71</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Accrued severance pay, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(30</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(69</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>68</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Loss (gain) on sale of property and
  equipment</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>16</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>56</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(7</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Stock-based compensation
expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>27</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>434</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Amortization of premiums and accrued
  interest on marketable securities, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>67</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>55</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>57</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Loss (gain) on sale of marketable
  securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>68</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>10</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Gain on sale of subsidiary&#146;s
operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(278</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(170</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Impairment of intangible
asset</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>309</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Decrease (increase) in trade
receivables</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>3,191</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>2,852</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(102</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Decrease (increase) in other accounts
  receivable and prepaid expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(174</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>1,537</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>1,253</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Increase (decrease) in trade
payables</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>614</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(77</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(599</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Increase (decrease) in accrued
expenses and
  other accounts payable</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(1,020</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>856</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>2,620</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Increase (decrease) in deferred
revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>428</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(610</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>621</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided by operating activities
  from continuing operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>880</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>3,438</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>9,216</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided (used)  by operating activities from
discontinued
  operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>4,716</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>393</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(1,656</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided by operating activities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>5,597</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>3,831</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>7,560</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Cash flows from investing activities:</U></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Capitalized software development
costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(3,909</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(3,482</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(3,027</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Purchase of property and
equipment</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(1,044</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(961</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(769</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Proceeds from sale of
subsidiary&#146;s
  operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>900</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>170</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Proceeds from sale of property and
  equipment</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>18</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>97</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>74</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Proceeds from sale of marketable
securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>664</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>226</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>680</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Purchase of marketable
securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(199</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(408</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Change in short-term and long-term
deposits</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(599</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>477</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>30</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash used in investing activities from
  continuing operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(5,069</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(3,151</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(2,842</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided (used) by investing
  activities from discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(79</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(2,034</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>451</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash used in investing activities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(5,148</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(5,185</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(2,391</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ><FONT SIZE=2>The accompanying notes are an integral part of the consolidated
financial statements.</FONT></P>

<P ALIGN=CENTER ><FONT SIZE=2>F - 7</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT ><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD. <BR>
  AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ><FONT SIZE=2><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ><FONT SIZE=2><B>U.S. dollars in thousands</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="57%" VALIGN=BOTTOM>
<P >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER >&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Cash flows from financing
  activities:</U></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Proceeds from exercise of stock
options and
  warrants</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>82</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>281</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>247</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Purchase of Treasury shares</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(897</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Short-term credit, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>1,979</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>334</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(906</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Repayment of long-term loan</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(46</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(122</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(111</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Proceeds from long-term
loans</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>164</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>185</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>14</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided by (used in) financing
  activities from continuing operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>1,282</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>678</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(756</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash used in financing activities from
  discontinued operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(517</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Net cash provided by (used in) financing
  activities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>765</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>672</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(756</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Effect of exchange rate changes on cash and
  cash equivalents from continuing operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>322</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(272</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>(375</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Increase (decrease) in cash and cash
  equivalents from continuing operation</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>(2,585</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>693</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>5,243</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cash and cash equivalents from continuing
  operation at the beginning of the year</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>5<FONT SIZE=2>,759</FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>5,424</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>6,935</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cash and cash equivalents from continuing
  operation at end of the year</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>5,424</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>6,935</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>12,178</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2><U>Non-cash activities related to</U> discontinued operation:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Receivables from a sale of subsidiary
(see
  Note 1b)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>16,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2><U>Supplemental
  disclosure of cash flow activities:</U></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2><U>Net cash paid during the year
for:</U></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income taxes</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>424</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>433</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=2>238</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P  STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:25.9PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Interest</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>102</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>265</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT ><FONT SIZE=2>503</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ><FONT SIZE=2>The accompanying notes are an integral part of the consolidated
financial statements.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>F - 8</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR STYLE="font-size:1px;">
<TD WIDTH="50%" VALIGN="TOP">
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN="TOP">
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS<A NAME=A206></A></B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 1:-</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>GENERAL</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>a.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Magic
  Software Enterprises Ltd. (the &#147;Company&#148;), an Israeli corporation, and its
  subsidiaries (&#147;the Group&#148;) develops, markets and supports software
  development and deployment technology (&#147;the Magic technology&#148;) and
  applications developed using this Magic technology. Magic technology enables
  enterprises to accelerate the process of building and deploying software
  applications that can be rapidly customized and integrated with existing
  systems. The principal markets of the Company and its subsidiaries are
  Europe, U.S., Japan and Israel, (see Note 13).</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>As for
  information about the Company&#146;s holdings in subsidiaries and affiliated
  company, see Page 45.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>b.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>During 2004,
  in consideration of $1,240, the Company purchased an additional 20.96% equity
  interest in Advanced Answer on Demand Holdings Corp. (&#147;AAOD&#148;), a private
  Florida based company that provides integrated software solutions for the
  long-term healthcare industry. As a result, the Company&#146;s interest in AAOD&#146;s
  share capital increased to 83.89%.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>In February
  2006, in consideration of $1,910, the Company purchased an additional 16.11%
  equity interest in AAOD. As a result, the Company&#146;s interest in AAOD&#146;s share
  capital increased to 100%. The purchase price was allocated, as follows:</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="66%">
<TR style="font-size:1px" >
<TD WIDTH="85%" VALIGN=BOTTOM>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=2>Customer
  relations *)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>314</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=2>Acquired
  technology*)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>216</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=2>Goodwill</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>990</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=2>Minority
  interest</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>390</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=2>Total net assets
  acquired</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,910</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>*)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The customer
  relations and acquired technology are amortized on a straight-line basis over
  a period of five years.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>On December
  30, 2007 the Company sold 100% of its holding in AAOD, in consideration of $17,000,
  out of which an amount of $1,000 was received in December 2007 and an
  additional amount of $16,000 was received in March 2008. As a result of
  the sale, the Company recorded a net gain of approximately $<FONT SIZE=2>9,300.
  </FONT></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>AAOD&#146;s
  results have been classified as discontinued operations for all presented
  periods (see also Note 18).</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 9</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 1:-</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>GENERAL</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>According to
  SFAS 144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets&#148;,
  when a component of an entity, as defined in SFAS 144, has been disposed of
  or is classified as held for sale, the results of its operations, including
  the gain or loss on its disposal should be classified as discontinued
  operations when the operations and cash flows of the component have been
  eliminated from the Company&#146;s consolidated operations and the Company will no
  longer have any significant continuing involvement in the operations of the
  component. The business sold by the Company met the criteria for reporting
  discontinued operations and therefore the 2007 results of operations of the
  business and the gain on the sale have been classified as discontinued
  operations in the statement of operations and prior periods results have been
  reclassified accordingly. In addition, the comparative data of the assets and
  liabilities have been reclassified as assets and liabilities attributed to
  discontinued operations in the balance sheets.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>c.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>In 2007, the
  Company has decided to liquidate its Italian subsidiary. Due to this, Magic
  Software Enterprises Italy S.r.l&#146;s (&#147;Magic Italy&#148;) results have been
  classified as discontinued operations for all presented periods according to
  FASB 144 and EITF 03-13</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>d.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>During 2004,
  the Company purchased an additional equity interest of 12.5% from the
  minority in CarPro Systems Ltd., (&#147;CarPro&#148;) bringing its holding to 87.5%, in
  consideration of $96. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>During 2005,
  the Company invested an additional amount of approximately $214 in CarPro
  equity, bringing its holding to 90.48%.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>On December
  7, 2006, the Company has recorded a net gain of $278 relating to the sale of
  CarPro&#146;s assets and liabilities, including the intellectual property (the
  RentPro and LeasePro software) and its customer base, to its distributor
  CarPro Systems International B.V. (the &#147;Buyer&#148;),. Additionally, Magic
  Software Enterprises sold to the buyer a substantial number of licenses for
  Magic Software&#146;s products for continued use in the ongoing maintenance and
  enhancement of the CarPro software products. The combined sales price is
  $1,750 to be paid over a period of five years. The Company recognizes the
  consideration from the sale of CarPro&#146;s operations on a cash basis and net of
  related expenses (including goodwill and other intangible assets write-offs).
  Due to immateriality, CarPro&#146;s results were not classified as discontinued
  operations.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>e.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>On August
  16, 2006, Magic&#146;s board of directors approved a comprehensive global
  Restructuring plan (the &#147;Plan&#148;). The Plan establishes the terms of the
  benefit arrangement, including the benefits that employees will receive upon
  termination. In accordance with Statement of Financial Accounting Standard
  No. 146, &#147;Accounting for Costs Associated with Exit or Disposal Activities&#148;
  (&#147;SFAS No. 146&#148;) the Company recorded $1,365 related to one-time termination
  benefits provided to terminated employees in 2006. As of December 31, 2006,
  all termination benefits were paid and substantially all terminated employees
  no longer provide services to the Company. In addition, during 2006, the
  Company wrote- off certain intangible assets related to the restructuring
  plan and incurred other exit costs in the amounts of $309 and $483,
  respectively. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 10</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The
  consolidated financial statements have been prepared in accordance with
  accounting principles generally accepted in the U.S. (&#147;U.S. GAAP&#148;), applied
  on a consistent basis, as follows:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Use of estimates</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The
  preparation of financial statements in conformity with generally accepted
  accounting principles requires management to make estimates and assumptions
  that affect the amounts reported in the financial statements and accompanying
  notes. Actual results could differ from those estimates.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Financial statements in United States dollars</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>A
  substantial portion of the revenues of the Company and certain of its subsidiaries
  is generated in U.S. dollars (&#147;dollar&#148;). In addition, a substantial portion
  of the Company&#146;s costs is incurred in dollars. The Company&#146;s management
  believes that the dollar is the currency of the primary economic environment
  in which the Company and its subsidiaries operate. Thus, the functional and
  reporting currency of the Company and certain of its subsidiaries is the
  dollar.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Accordingly,
  monetary accounts maintained in currencies other than the dollar are
  remeasured into dollars in accordance with SFAS No. 52, &#147;Foreign Currency
  Translation&#148; (&#147;SFAS No.&nbsp;52&#148;). All transaction gains and losses of the
  remeasurement of monetary balance sheet items are reflected in the statements
  of operations as financial income or expenses, as appropriate.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The
  financial statements of foreign subsidiaries and of certain entities that are
  reported using the equity method of accounting, whose functional currency is
  not the U.S. dollar, have been translated into dollars. All balance sheet
  amounts have been translated using the exchange rates in effect at each
  balance sheet dates. Statement of operation amounts have been translated
  using the average exchange rate prevailing during each year. Such translation
  adjustments are reported as a component of accumulated other comprehensive
  income (loss) in shareholders&#146; equity.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Principles of consolidation</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The
  consolidated financial statements include the accounts of the Company and its
  wholly and majority owned subsidiaries. Intercompany balances and transactions
  including profit from intercompany sales not yet realized outside the Group,
  have been eliminated upon consolidation.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Cash and cash equivalents:</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Cash and
  Cash equivalents include short-term highly liquid investments that are
  readily convertible to cash with original maturities of three months or less,
  at the date acquired.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Short-term deposits</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Short-term
  deposits include deposits with original maturities of more than three months
  and less than one year which presented at cost, including accrued interest.
  The deposits for the year ended December 31, 2006 are in U.S. dollars and in
  New Israeli Shekels and bear interest at an average annual rate of 4.94%. The
  deposits for the year ended December 31, 2007 are in Japanese YEN and bear
  interest at an average annual rate of 0.03%.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 11</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Marketable securities</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  accounts for investments in marketable securities in accordance with SFAS No.
  115, &#147;Accounting for Certain Investments in Debt and Equity Securities (&#147;SFAS
  No.&nbsp;115&#148;). Management determines the appropriate classification of its
  investments in marketable debt securities at the time of purchase and
  reevaluates such determinations at each balance sheet date. Debt securities
  are classified as available - for - sale and reported at fair value. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Debt
  securities that are designated as available-for-sale are stated at fair
  value, with unrealized gains and losses reported in accumulated other
  comprehensive income (loss), a separate component of shareholders&#146; equity.
  Realized gains and losses on sales of investments, as determined on a
  specific identification basis, are included in financial income, net. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>FASB Staff Position (&#147;FSP&#148;) No.
  115-1/124-1, &#147;The Meaning of Other-Than-Temporary Impairment and Its
  Application to Certain Investments&#148; (&#147;FSP 115-1/124-1&#148;) provides guidance for
  determining when an investment is considered impaired, whether impairment is
  other-than-temporary, and measurement of an impairment loss. An investment is
  considered impaired if the fair value of the investment is less than its
  cost. If, after consideration of all available evidence to evaluate the
  realizable value of its investment, impairment is determined to be
  other-than-temporary, then an impairment loss should be recognized equal to
  the difference between the investment&#146;s cost and its fair value. FSP
  115-1/124-1 nullifies certain provisions of Emerging Issues Task Force
  (&#147;EITF&#148;) Issue No. 03-1, &#147;The Meaning of Other-Than-Temporary Impairment and
  Its Application to Certain Investments&#148; (&#147;EITF 03-1&#148;) while retaining the
  disclosure requirements of EITF 03-1 which the Company adopted in 2003.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>According to
  the Staff Accounting Bulletin No. 59 (&#147;SAB 59&#148;), management is required to
  evaluate each period whether the impairment of value for securities is other
  than temporary. The Company&#146;s policy in evaluating the fair value of its
  investments in marketable securities is based on the following factors: (i)
  whether there is a significant impairment of value of the securities
  suspected to be other than temporary, (ii) the ability to hold the security
  until recovery and (iii) the intention to hold the security until recovery.
  If the Company determines that a decline in market value is other than
  temporary, then a charge to earnings is recorded in financial income
  (expense), net in the accompanying consolidated statements of operations for
  all or a portion of the unrealized loss, and a new cost basis in the
  investment is established.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Inventories</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Inventories
  consist of software packaging, discs, printed materials, hardware devices and
  third party licenses, and are stated at the lower of cost or market value.
  Cost is determined by the &#147;first-in, first-out&#148; method<FONT SIZE=2>.</FONT></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Inventory
  write-offs are provided to cover risks arising from slow-moving items,
  technological obsolescence, excess inventories, and for market prices lower
  than cost. In 2005, the Company wrote off approximately $100 of slow-moving
  inventory of license, recorded under the cost of revenue. In 2006, the
  Company wrote off approximately $237 of slow-moving inventory of license,
  which was not part of the core business of the Company, related to the
  reorganization plan which was approved by the Company&#146;s management and Board
  of Directors during the third quarter of 2006. No write offs were recorded in
  2007.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 12</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Investments in affiliated companies</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>In these
  financial statements, affiliated companies are companies held to the extent
  of 20% or more (which are not subsidiaries), where the Company can exercise
  significant influence over operating and financial policy of the affiliate.
  The investment in affiliated companies is accounted for by the equity method,
  in accordance with Accounting Principle Board Opinion No. 18, &#147;The Equity
  Method of Accounting for Investments in Common Stock&#148;. Profits on
  inter-company sales, not realized outside the Group, were eliminated.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Management
  periodically reviews the carrying value of the investments. If this review
  indicates that the cost is not recoverable, the carrying value is reduced to
  its estimated fair value. As of December 31, 2005, 2006 and 2007, no
  impairment indicators have been identified.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Property and equipment net</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Property and
  equipment are stated at cost, net of accumulated depreciation. Depreciation
  is calculated by the straight-line method over the estimated useful lives of
  the assets, at the following annual rates:</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="76%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=BOTTOM>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="45%" VALIGN=BOTTOM>
<P ALIGN=CENTER DIR=LTR>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER DIR=LTR><FONT   SIZE=1><B>Years</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER DIR=LTR><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=2>Buildings</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER DIR=LTR><FONT   SIZE=2>25</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=2>Computers
  and peripheral equipment</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER DIR=LTR><FONT   SIZE=2>3</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=2>Office
  furniture and equipment</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER DIR=LTR><FONT   SIZE=2>7 &#150; 15 (mainly 7)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=JUSTIFY><FONT SIZE=2>Motor
  vehicles</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER DIR=LTR><FONT   SIZE=2>7</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=2>Software for
  internal use</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER DIR=LTR><FONT   SIZE=2>3</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Leasehold
  improvements</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER DIR=LTR><FONT   SIZE=2>Over the shorter of the lease term or
  useful economic life</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Impairment of long-lived assets</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The
  Company&#146;s long-lived assets are reviewed for impairment in accordance with
  SFAS No.&nbsp;144, &#147;Accounting for the Impairment or Disposal of Long-Lived
  Assets&#148; (&#147;SFAS No.&nbsp;144&#148;) 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 the future undiscounted cash flows expected to be
  generated by the assets. 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. As of December 31,
  2007 and 2005, no impairment indicators have been identified. For the year
  2006 see Note 1e.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Other intangible assets</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Intangible assets
  are comprised of distribution rights, acquired technology and customer
  relations, and are amortized over their useful life using a method of
  amortization that reflects the pattern in which the economic benefits of the
  intangible assets are consumed or otherwise used up. Distribution rights,
  acquired technology and customer relations are amortized on a straight line
  basis over a period of five years.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 13</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  is required to test its other intangible assets for impairment whenever
  events or circumstances indicate that the value of the assets may be impaired
  in accordance with SFAS No. 144. Factors that the Company considers being
  important, which could trigger impairment include: significant
  underperformance relative to expected historical or projected future
  operating results; significant changes in the manner of the Company&#146;s use of
  the acquired assets or the strategy for the Company&#146;s overall business;
  significant negative industry or economic trends; significant decline in the
  Company&#146;s stock price for a sustained period; and significant decline in the
  Company&#146;s market capitalization relative to net book value.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Where events
  or circumstances are present which indicate that the carrying amount of an
  intangible asset may not be recoverable, the Company will recognize an
  impairment loss. Such impairment loss is measured by comparing the fair value
  of the assets with their carrying value. The determination of the value of
  such intangible assets requires the Company to make assumptions regarding
  future business conditions and operating results in order to estimate future
  cash flows and other factors to determine the fair value of the respective
  assets.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  assessed the carrying value of the remaining intangible assets based on the
  future expected cash flow from these assets at year ends. As of December 31
  2005 and 2007 there was no impairment. During the year 2006, as part of the
  Restructuring plan the Company wrote- off certain intangible assets related
  to the restructuring plan in the amount of $309.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Goodwill</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Goodwill is
  measured as the excess of the cost of an acquired company over the sum of the
  amounts assigned to tangible and identifiable intangible assets acquired less
  liabilities assumed. Goodwill is not amortized, but rather reviewed for
  impairment at least annually in accordance with the provisions of SFAS No.
  142. The goodwill impairment test under SFAS No. 142 involves a two-step
  approach. Under the first step, the Company determines the fair value of each
  reporting unit to which goodwill has been assigned. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  then compares the fair value of each reporting unit to its carrying value,
  including goodwill. The Company estimates the fair value of each reporting
  unit by estimating the present value of the reporting unit&#146;s future cash
  flows. If the fair value exceeds the carrying value, no impairment loss is
  recognized. If the carrying value exceeds the fair value, the goodwill of the
  reporting unit is considered potentially impaired and the second step is
  completed in order to measure the impairment loss. Under the second step
  goodwill is reduced to its implied fair value through an adjustment to the
  goodwill balance, resulting in an impairment charge. The Company has elected
  to perform its analysis of goodwill at December of each year. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>As of
  December 31, 2007 the Company has two reporting units. Since the fair value
  of the reporting units exceeded their carrying amount, no impairment losses
  were identified in 2007, 2006 or 2005.&#148;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 14</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Revenue recognition</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>To date, the
  Company has derived its revenues from licensing the rights to use its
  software, maintenance and technical support and providing professional
  services. The Company sells its products primarily through its direct sales
  force and indirectly through distributors.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  accounts for its software sales in accordance with Statement of Position No.
  97-2, &#147;Software Revenue Recognition,&#148; as amended (&#147;SOP No. 97-2&#148;) when
  persuasive evidence of an arrangement exists, delivery has occurred, the
  vendor&#146;s fee is fixed or determinable, no further obligation exists and
  collectibility is probable.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>With regard
  to software arrangements involving multiple elements such as software product
  and maintenance and support, the Company has adopted Statement of Position
  No. 98-9, &#147;Modification of SOP No. 97-2, Software Revenue Recognition with
  Respect to Certain Transactions&#148; (&#147;SOP No.&nbsp;98-9&#148;). According to SOP No.
  98-9, revenues should be allocated to the different elements in the
  arrangement under the &#147;residual method&#146;&#146; when Vendor Specific Objective
  Evidence (&#147;VSOE&#148;) of fair value exists for all undelivered elements and no
  VSOE exists for the delivered elements. Under the residual method, at the
  outset of the arrangement with the customer, the Company defers revenue for
  the fair value of its undelivered elements (maintenance and support) and
  recognizes revenue for the remainder of the arrangement fee attributable to
  the elements initially delivered in the arrangement (software product) when
  the basic criteria in SOP No. 97-2 have been met. Any discount in the
  arrangement is allocated to the delivered element. Maintenance and support
  revenue is deferred and recognized on a straight-line basis over the term of
  the maintenance and support agreement. The VSOE of fair value of the
  undelivered elements (maintenance and support) is determined based on the
  price charged for the undelivered element when sold separately. The Company
  uses the residual method in accordance with SOP 97-2.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  generally does not grant a right of return to its customers. When a right of
  return exists, the Company defers revenue until the right of return expires,
  at which time revenue is recognized provided that all other revenue
  recognition criteria are met.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Maintenance
  and technical support revenues are deferred and recognized on a straight-line
  basis over the term of the maintenance and support agreement. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Revenue from
  consulting services consists of billable hours for services provided,
  recognized as the services are rendered.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Arrangements
  that include consulting services are evaluated to determine whether those
  services are essential to the functionality of other elements of the arrangement.
  When services are considered essential, revenues under the arrangement are
  recognized using contract accounting based on Statement of Position No. 81-1,
  &#147;Accounting for Performance of Construction-Type and Certain Production-Type
  Contracts&#148; (&#147;SOP 81-1&#148;) on a percentage of completion method based on inputs
  measures. 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 for the entire contract. As of December&nbsp;31, 2005, 2006
  and 2007, no such estimated losses were identified.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 15</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>When consulting
  services are not considered essential, the revenues allocable to the
  consulting services are recognized as the services are performed. In most
  cases, the Company had determined that the services are not considered
  essential to the functionality of other elements of the arrangement. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Deferred
  revenue includes unearned amounts received under maintenance and support
  contracts, and amounts received from customers but not yet recognized as
  revenues.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Research and development costs</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Group
  accounts for costs of computer software developed or obtained for internal
  use in accordance with Statement of Position No. 98-1, Accounting for the
  Costs of Computer Software Developed or Obtained for Internal Use (&#147;SOP No.
  98-1&#148;). The SOP requires the capitalization of certain costs incurred in
  connection with developing or obtaining internal use software. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>SFAS No. 86
  &#147;Accounting for the Costs of Computer Software to be Sold, Leased or
  Otherwise Marketed&#148;, (&#147;SFAS No. 86&#148;) requires capitalization of certain
  software development costs subsequent to the establishment of technological
  feasibility. Based on the Company and its subsidiaries product development
  process, technological feasibility is established upon completion of a
  detailed program design and working model.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Research and
  development costs incurred in the process of developing product improvements
  are generally charged to expenses as incurred.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Significant
  costs incurred by the Company and its subsidiaries between completion of the
  detailed program design and a working model, and the point at which the
  product is ready for general release, have been capitalized.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Capitalized
  software costs are amortized by the greater of the amount computed using the:
  (i) ratio that current gross revenues from sales of the software to the total
  of current and anticipated future gross revenues from sales of that software,
  or (ii) the straight-line method over the estimated useful life of the
  product (three to five years). The Company assesses the recoverability of
  this intangible asset on a regular basis by determining whether the
  amortization of the asset over its remaining life can be recovered through
  undiscounted future operating cash flows from the specific software product
  sold. As of December 31, 2005, 2006 and 2007, no impairment losses have been
  identified.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Severance pay</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The
  Company&#146;s and some of its subsidiaries&#146; liability for severance pay, with
  respect to their Israeli employees, is calculated pursuant to Israeli
  severance pay law and employee agreements based on the most recent salary of
  the employees. The Company&#146;s liability for all of its Israeli employees is
  fully provided for by monthly deposits with insurance policies and by an
  accrual. The value of these policies is recorded as an asset in the Company&#146;s
  balance sheet.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 16</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Some
  subsidiaries agreements with employees, specifically state, in accordance
  with section 14 of the Severance Pay Law -1963, that the Company&#146;s
  contributions for severance pay shall be instead of severance compensation
  and that upon release of the policy to the employee, no additional calculations
  shall be conducted between the parties regarding the matter of severance pay
  and no additional payments shall be made by the Company to the employee.
  Further, for companies which have signed section 14, related obligation and
  amounts deposits on behalf of such obligation, are not stated on the balance
  sheet, as they are legally released from obligation to employees once the
  deposit amounts have been paid.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The
  deposited funds include profits accumulated up to the balance sheet date. The
  deposited funds may be withdrawn only upon the fulfillment of the obligations
  pursuant to Israeli severance pay law or labor agreements. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Severance
  expenses for the years ended December 31, 2005, 2006 and 2007 amounted to
  approximately $453, $463 and $617, respectively. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Advertising expenses</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Advertising
  expenses are charged to selling and marketing expenses, as incurred.
  Advertising expenses for the years ended December 31, 2005, 2006 and 2007
  were $119, $87 and $305, respectively.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Income taxes</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  and its subsidiaries account for income taxes in accordance with SFAS
  No.&nbsp;109, &#147;Accounting for Income Taxes&#148; (&#147;SFAS No. 109&#148;). This Statement
  prescribes the use of the liability method whereby deferred tax assets and
  liability account balances are determined based on differences between
  financial reporting and tax bases of assets and liabilities and are measured
  using the enacted tax rates and laws that will be in effect when the
  differences are expected to reverse. The Company and its subsidiaries provide
  a valuation allowance, if necessary, to reduce deferred tax assets to their
  estimated realizable value.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>In September
  2006, the FASB issued Interpretation No. 48, &#147;Accounting for Uncertainty in
  Income Taxes, an Interpretation of FASB Statement No. 109&#148; (FIN 48). FIN 48
  contains a two-step approach to recognizing and measuring uncertain tax
  positions accounted for in accordance with SFAS No. 109. The first step is to
  evaluate the tax position taken or expected to be taken in a tax return by determining
  if the weight of available evidence indicates that it is more likely than not
  that, on an evaluation of the technical merits, the tax position will be
  sustained on audit, including resolution of any related appeals or litigation
  processes. The second step is to measure the tax benefit as the largest
  amount that is more than 50% likely to be realized upon ultimate settlement.
  This interpretation is effective for fiscal years beginning after December
  15, 2006. The adoption of FIN 48, on January 1, 2007, resulted in a change to
  the Company&#146;s retained earning in the amount of $530. The total amount of
  gross unrecognized tax benefits as of December 31, 2007 was $50.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 17</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
</TR>
</TABLE>

<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Treasury shares</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  repurchases its Ordinary shares from time to time in the open market and
  holds such shares as Treasury shares. The Company applies the &#147;cost method&#148;
  and presents the cost to repurchase such shares as a reduction in
  shareholders&#146; equity. As of December 31, 2007, the Company did not sell any
  of the shares.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Basic and diluted net earnings (loss) per share</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Basic net
  earnings (net loss) per share is computed based on the weighted average
  number of Ordinary shares outstanding during each year. Diluted earnings per
  share are computed based on the weighted average number of Ordinary shares
  outstanding during each year, plus dilutive potential Ordinary shares
  considered outstanding during the year, in accordance with SFAS No. 128,
  &#147;Earnings Per Share&#148; (&#147;SFAS No. 128&#148;). </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Part of the
  outstanding stock options and warrants has been excluded from the calculation
  of the diluted earnings (net loss) per share because such securities are
  anti-dilutive for 2005, 2006 and 2007. The total weighted average number of
  shares related to the outstanding options and warrants excluded from the
  calculations of diluted earnings (net loss) per share was 1,298,186, 883,884
  and 1,635,685 for the years ended December 31, 2005, 2006 and 2007,
  respectively.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>Accounting for stock-based compensation</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>On January
  1, 2006, the Company adopted Statement of Financial Accounting Standards No.
  123 (revised 2004), &#147;Share-Based Payment&#148; (&#147;SFAS 123(R)&#148;) which requires the
  measurement and recognition of compensation expense based on estimated fair
  values for all share-based payment awards made to employees and directors.
  SFAS 123(R) supersedes Accounting Principles Board Opinion No. 25,
  &#147;Accounting for Stock Issued to Employees&#148; (&#147;APB 25&#148;), for periods beginning
  in fiscal 2006. In March 2005, the Securities and Exchange Commission issued
  Staff Accounting Bulletin No. 107 (&#147;SAB 107&#148;) relating to SFAS 123(R). The
  Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>SFAS 123(R)
  requires companies to estimate the fair value of equity-based payment awards
  on the date of grant using an option-pricing model. The value of the portion
  of the award that is ultimately expected to vest is recognized as an expense
  over the requisite service periods in the Company&#146;s consolidated income
  statement. Prior to the adoption of SFAS 123(R), the Company accounted for
  equity-based awards to employees and directors using the intrinsic value
  method in accordance with APB 25 as allowed under Statement of Financial
  Accounting Standards No. 123, &#147;Accounting for Stock-Based Compensation&#148;
  (&#147;SFAS 123&#148;).</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  adopted SFAS 123(R) using the modified prospective transition method, which
  requires the application of the accounting standard starting from January 1,
  2006, the first day of the Company&#146;s fiscal year 2006. Under that transition
  method, since all the unvested options had been accelerated prior to the
  adoption of statement 123(R), (see note 12), compensation cost recognized in
  the years ended December 31, 2006 and 2007, includes compensation cost for
  all share-based payments granted subsequent to January 1, 2006, based on the
  grant-date fair value estimated in accordance with the provisions of
  Statement 123(R). Results for prior periods have not been restated.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 18</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P ALIGN=JUSTIFY>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  recognizes compensation expenses for the value of its awards, which have
  graded vesting based on the straight line method over the requisite service
  period of each of the awards, net of estimated forfeitures. Estimated
  forfeitures are based on actual historical pre-vesting forfeitures.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>As a result
  of adopting SFAS 123(R) on January 1, 2006, the Company&#146;s income before
  income taxes and net income for the years ended December 31, 2006 is $27
  lower than if it had continued to account for stock-based compensation under
  APB 25. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  used the Black-Scholes option-pricing model through December 31, 2006 and the
  Cox, Ross and Rubinstein&#146;s Binomial model (&#147;the Binomial model&#148;) for options
  granted thereafter, excluding a grant to a consultant of the Company that was
  calculated in 2006 based on the Black-Scholes option-pricing model and was
  granted in 2007. The impact on the basic and diluted net income per share for
  the grant to the consultant had the Company changed to account for share-based
  compensation using the Binomial model option pricing model is not
  significant.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The
  Black-Scholes option-pricing model requires a number of assumptions, of which
  the most significant are, expected stock price volatility, and the expected
  option term. Expected volatility was calculated based upon actual historical
  stock price movements over the most recent periods ending on the grant date,
  equal to the expected option term. The expected option term represents the
  period that the Company&#146;s stock options are expected to be outstanding and
  was determined based on historical experience of similar options, giving
  consideration to the contractual terms of the stock options. The Company has
  not paid any cash dividend since 2003, and has no foreseeable plans to issue
  dividends. The risk-free interest rate is based on the yield from U.S.
  Treasury zero-coupon bonds with an equivalent term.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Binomial model for option pricing
  requires a number of assumptions, of which the most significant are, the suboptimal exercise
  factor, and expected stock price volatility. The suboptimal exercise factor
  is estimated using historical option exercise information. The suboptimal
  exercise factor is the ratio by which the stock price must increase over the
  exercise price before employees are expected to exercise their stock options.
  The expected life of employee stock options is a derived output of this
  assumption from the Binomial model. The weighted average expected life of
  employee stock options that was granted in 2007 is approximately 58 months.
  Expected volatility based upon actual historical stock price movements and was calculated as of the
  grant dates for different periods, since the Binomial model can be used for
  different expected volatilities for different periods. The expected
  volatilities for the employee stock options that were granted in 2007 are in
  a range of 51% - 73%. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>For these
  reasons, the Company believes that the Binomial model provides a fair value
  that is more representative of actual experience and future expected
  experience than that calculated using the Black-Scholes model.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The fair
  value for the Company&#146;s stock options granted to employees and directors was
  estimated using the following weighted-average assumptions:</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER DIR=LTR><FONT SIZE=2>F - 19</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN="TOP">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE border=0 CELLSPACING="0" CELLPADDING="0" WIDTH="88%" STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="72%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>In the
  Black-Scholes options pricing Model for the years:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Dividend yield</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;0%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>&nbsp;&nbsp;0%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Expected volatility</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>80%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>64%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Risk-free interest rate</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>3.9%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>4.7%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Expected forfeiture (employees)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>11%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Expected
  life (in years)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>5
  years</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>5
  years</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Contractual term of up to</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM NOWRAP>
<P ALIGN=CENTER><FONT SIZE=2>10
  years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM NOWRAP>
<P ALIGN=CENTER><FONT SIZE=2>10
  years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING="0" CELLPADDING="0" WIDTH="88%" STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="72%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>In the
  Binomial Model for the year:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Dividend yield</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>0%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Expected volatility</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>51%-73%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Risk-free interest rate </FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD nowrap VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>3.46%-5.05%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Expected forfeiture (employees)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>11%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Expected forfeiture (executives)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>8%</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Contractual term of up to</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>10
  years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Suboptimal exercise multiple (employees)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>2.48</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Suboptimal exercise multiple (executives)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>3</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>During the
years ended December 31, 2006 and 2007, the Company recognized stock-based
compensation expense related to employee stock options in the amount of
$27 and $434 respectively, as follows:</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="88%" STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="76%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="4%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Cost of revenue</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>35</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Research and development</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>47</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Selling and marketing</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>132</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>General and administrative</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>27</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>220</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Total Stock-based compensation expense</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>27</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>434</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>As of December
31, 2007, the total unrecognized estimated compensation costs related to
non-vested stock options granted prior to that date was $1,336, which is
expected to be recognized over a period of up to 5 years. The Company recorded
cash received from the exercise of stock options of $247.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The Company
accounts for stock option and warrant grants issued to non-employee using the
guidance of SFAS No. 123(R), &#147;Accounting for Stock-Based Compensation&#148; and EITF
No. 96-18: &#147;Accounting for Equity Instruments that are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services,&#148;
whereby the fair value of such option and warrant grants is determined using
the Black-Scholes model at the earlier of the date at which the non-employee&#146;s
performance is completed or a performance commitment is reached. </FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>F - 20</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN="TOP">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The Pro-forma
table below illustrates the effect of the Company&#146;s stock based compensation
expense on net income and basic and diluted earnings per share for 2005, had
the Company applied the fair value recognition provisions of SFAS 123:</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="88%" STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="84%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31, 2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Net loss - as reported</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=2>Add:
  stock-based compensation expense recognized under APB 25</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=2>Deduct: stock-based
  compensation expense determined under fair value method for all awards</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,599</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Pro forma net loss:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>7,206</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Net loss per share:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Basic and
  diluted loss per share, as reported</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Pro forma
  basic and diluted loss per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.23</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>For purpose of
pro-forma disclosures, stock based compensation is amortized over the vesting
period using the interest method. Pro-forma compensation expense under SFAS
123, among other computational differences, does not consider potential
pre-vesting forfeitures. Because of these differences, the pro-forma stock
based compensation expense presented above for the prior year ended December
31, 2005 under SFAS 123 and the stock based compensation expense recognized
during the years ended December&nbsp;31, 2006 and 2007 under SFAS 123(R) are not
directly comparable.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2><B>Concentrations of credit risk</B></FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>Financial
instruments which potentially subject the Company and its subsidiaries to
concentration of credit risk consist principally of cash and cash equivalents,
marketable securities and trade receivables. </FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The Company&#146;s
cash and cash equivalents are invested primarily in deposits with major banks
worldwide, however, such cash and cash equivalents in the United States may be
in excess of insured limits and are not insured in other jurisdictions.
Management believes that the financial institutions that hold the Company&#146;s
investments are financially sound, and accordingly, minimal credit risk exists
with respect to these investments. </FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The Company&#146;s
marketable securities include investments in debentures of corporations,
foreign banks, governments and commercial debentures. Management believes that
those corporations and governments are financially sound and that the portfolios
are well-diversified, and accordingly, minimal credit risk exists with respect
to these marketable securities.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>F - 21</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN="TOP">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>Trade
receivables of the Company and its subsidiaries are derived from sales to
customers located primarily in the U.S., Europe, Japan and Israel. The Company
performs ongoing credit evaluations of its customers and to date has not
experienced any material losses. An allowance for doubtful accounts is
determined with respect to those amounts that the Company has determined to be
doubtful of collection. Moreover, in some of the subsidiaries there is an
additional general allowance (based on a percentage of accounts receivables or
revenue) which depends on the nature of the local market and local law
requirements. The doubtful accounts expenses for the years ended December 31,
2005, 2006 and 2007 were $1,212, $607 and $255, respectively. </FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2><B>Derivative instruments</B></FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>Statement of
Financial Accounting Standard No. 133, &#147;Accounting for Derivative Instruments
and Hedging Activities&#148; (&#147;SFAS No. 133&#148;), requires companies to recognize all
of their derivative instruments as either assets or liabilities in the
statement of financial position at fair value.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>For those
derivative instruments that are designated and qualify as hedging instruments,
the Company must designate the hedging instrument, based upon the exposure
being hedged, as a fair value hedge, cash flow hedge or a hedge of a net
investment in a foreign operation.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>For derivative
instruments that are designated and qualify as a cash flow hedge (i.e., hedging
the exposure to variability in expected future cash flows that is attributable
to a particular risk), the effective portion of the gain or loss on the
derivative instrument is reported as a component of other comprehensive loss
and reclassified into earnings in the same period or periods during which the
hedged transaction affects earnings. The remaining gain or loss on the
derivative instrument in excess of the cumulative change in the present value
of future cash flows of the hedged item, if any, is recognized in current
earnings during the period of change.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>All other
derivatives which do not qualify for hedge accounting under FAS 133, are
recognized on the balance sheet at their fair value, with changes in the fair
value carried to the statements of income included in the financial expenses.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>During 2006
and 2007, respectively, the Company recorded a net income of $6 and a net loss
of $89 related to forward transactions. </FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>Besides the
aforementioned foreign exchange contract, the Company and its subsidiaries have
no off-balance-sheet concentration of credit risk such as option contracts or
other foreign hedging arrangements.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2><B>Fair value of financial instruments</B></FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The following
methods and assumptions were used by the Company and its subsidiaries in
estimating their fair value disclosures for financial instruments:</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The carrying
amounts of cash and cash equivalents, trade receivables and other accounts
receivable, short-term bank credit, trade payables and other accounts payable
approximate their fair value due to the short-term maturity of these
instruments.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>F - 22</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN="TOP">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The fair
values for marketable securities are presented based on quoted market prices
(see also Note 3).</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The carrying
amount of the Company&#146;s long-term borrowing approximates its fair value. The
fair value was estimated using discounted cash flow analyses, based on the
Company&#146;s incremental borrowing rates for similar type of borrowing
arrangements. </FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2><B>Impact of recently issued Accounting
Standards:</B></FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>In December
2007, the FASB issued SFAS 141(R), <I>Business
Combinations</I>. This Statement replaces SFAS 141, <I>Business Combinations,</I> and requires an
acquirer to recognize the assets acquired, the liabilities assumed, including
those arising from contractual contingencies, any contingent consideration, and
any noncontrolling interest in the acquiree at the acquisition date, measured
at their fair values as of that date, with limited exceptions specified in the
statement. SFAS 141(R) also requires the acquirer in a business combination
achieved in stages (sometimes referred to as a step acquisition) to recognize
the identifiable assets and liabilities, as well as the noncontrolling interest
in the acquiree, at the full amounts of their fair values (or other amounts determined
in accordance with SFAS 141(R)). In addition, SFAS 141(R)&#146;s requirement to measure
the noncontrolling interest in the acquiree at fair value will result in
recognizing the goodwill attributable to the noncontrolling interest in
addition to that attributable to the acquirer. SFAS 141(R) amends SFAS No. 109, <I>Accounting for Income Taxes</I>, to require
the acquirer to recognize changes in the amount of its deferred tax benefits
that are recognizable because of a business combination either in income from
continuing operations in the period of the combination or directly in
contributed capital, depending on the circumstances. It also amends SFAS 142, <I>Goodwill and Other Intangible Assets</I>, to,
among other things, provide guidance on the impairment testing of acquired research
and development intangible assets and assets that the acquirer intends not to
use. SFAS 141(R) applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. As such, the Company does not
expect the adoption of SFAS 141(R) will have any impact on its consolidated
financial statements.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>In December
2007, the FASB issued SFAS 160, <I>Noncontrolling
Interests in Consolidated Financial Statements</I>. SFAS 160 amends
Accounting Research Bulletin 51, <I>Consolidated
Financial Statements</I>, to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It also clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial statements.
SFAS 160 also changes the way the consolidated income statement is presented by
requiring consolidated net income to be reported at amounts that include the
amounts attributable to both the parent and the noncontrolling interest. It
also requires disclosure, on the face of the consolidated statement of income,
of the amounts of consolidated net income attributable to the parent and to the
noncontrolling interest. SFAS 160 requires that a parent recognize a
gain or loss in net income when a subsidiary is deconsolidated and requires
expanded disclosures in the consolidated financial statements that clearly
identify and distinguish between the interests of the parent owners and the
interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective
for fiscal periods, and interim periods within those fiscal years, beginning on
or after December 15, 2008. The Company does not expect the adoption of SFAS
160 will have significant impact on its consolidated financial statements.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>F - 23</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN="TOP">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 2:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>In September
2006, the FASB issued Statement of Financial Accounting Standards No. 157,
&#147;Fair Value Measurements&#148;, or SFAS 157, which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value
measurements. SFAS 157 applies to other accounting pronouncements that require
or permit fair value measurements and, accordingly, does not require any new
fair value measurements. SFAS 157 is effective for fiscal years beginning after
November 15, 2007 for financial assets and liabilities, as well as for any
other assets and liabilities that are carried at fair value on a recurring
basis, and should be applied prospectively. The adoption of the provisions of
SFAS 157 related to financial assets and liabilities and other assets and
liabilities that are carried at fair value on a recurring basis, is not
anticipated to materially impact the Company&#146;s consolidated financial position
and results of operations. In February 2008, the FASB issued FASB STAFF
POSITION FAS 157-2 (FSP FAS 157-2), which provided for a one-year deferral of
the provisions of SFAS 157 for non-financial assets and liabilities that are
recognized or disclosed at fair value in the consolidated financial statements
on a non-recurring basis. The Company is currently evaluating the impact of
adopting the provisions of SFAS 157 for non-financial assets and liabilities
that are recognized or disclosed on a non-recurring basis.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>In February
2007, the FASB issued SFAS No.&nbsp;159, &#147;The Fair Value Option for Financial
Assets and Financial Liabilities&#148; (&#147;SFAS No.&nbsp;159&#148;). SFAS No.&nbsp;159
permits companies to choose to measure certain financial instruments and
certain other items at fair value. SFAS No.&nbsp;159 requires that unrealized
gains and losses on items for which the fair value option has been elected be
reported in earnings. SFAS No.&nbsp;159 is effective for financial statements
issued for the fiscal year beginning after November&nbsp;15, 2007 and the
interim periods thereafter, although earlier adoption is permitted. The
Company does not expect the adoption will have a material effect on its
consolidated financial statements.</FONT></P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 3:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>MARKETABLE SECURITIES</B></FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The Company
invests in marketable debt securities, which are classified as available-for-sale.
The following is a summary of marketable debt securities:</FONT></P>

<TABLE BORDER=0 CELLSPACING="0" CELLPADDING="0" WIDTH="88%" STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="21%" VALIGN="BOTTOM">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="23" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="23" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="11" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="11" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="11" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="11" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Amortized cost</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Unrealized losses</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Unrealized<BR>gains</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Market<BR>value</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Amortized cost</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Unrealized<BR>losses</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Unrealized gains</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Market<BR>value</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE="2"><U>Available-for-sale:</U> </FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Governmental debentures</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,641</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(18</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,626</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,216</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>59</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,274</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Commercial debentures</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,842</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(56</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>7</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,793</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,540</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(16</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>90</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,614</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Equity funds</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>249</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(19</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>230</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>249</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(47</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>202</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE="2"><U>Total</U> available-for-sale marketable securities </FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,732</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(93</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>10</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,649</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,005</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(64</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>149</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,090</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>During 2006
and 2007, the Company recorded proceeds from sales of marketable securities in
the amount of $&nbsp;226 and $680, respectively and related losses of
$10 and $8, respectively, in financial income, net.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2>F - 24</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN="TOP">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 3:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>MARKETABLE SECURITIES (Cont.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The amortized
costs of available-for-sale debt securities at December&nbsp;31, 2007, by
contractual maturities, are shown below:</FONT></P>

<TABLE CELLSPACING="0" border=0 CELLPADDING="0" WIDTH="88%" STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="55%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Unrealized gains (losses)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Amortized cost</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Gains</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Losses</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Estimated fair value</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Due in one year or less</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>670</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(48</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>622</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Due between one year to five years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,731</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>111</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(16</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,826</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Due in more than five years</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>604</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>38</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>642 </FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,005</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>149</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(64</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,090</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>


</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The actual
maturity dates may differ from the contractual maturities because debtors may
have the right to call or prepay obligations without penalties.</FONT></P>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The unrealized
losses on the available-for-sale marketable securities are due to temporary
changes in interest rates and not in issuers&#146; liquidity. It is expected that the
securities would not be settled at a price less than the amortized cost of the
Company&#146;s investment. Based on the partial recovery in the securities&#146; market
value after the balance sheet date and the ability and intent of the Company to
hold these investments until recovery, the debentures were not considered to be
other than temporarily impaired at December&nbsp;31, 2007.</FONT></P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 4:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="88%" STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="77%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Short-term deposits
  and other accounts receivable</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>696</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>641 </FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Prepaid
  expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,050</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>798</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Government
  authorities</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>634</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>488</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Employee
  loans</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>57</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>53</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Related
  party receivables</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>30</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,437</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,010</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 25</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN="TOP">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 5:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>PROPERTY AND EQUIPMENT</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="88%" STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="77%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Cost:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Buildings and leasehold improvements</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>6,564</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>6,665</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Computers and peripheral equipment</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,618</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,861</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Office furniture and equipment</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,882</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,083</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Motor vehicles</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>250</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>196</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software for internal use</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,017</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,264</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>21,331</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>22,069</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Accumulated
  depreciation:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Buildings and leasehold improvements</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,447</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,943</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Computers and peripheral equipment</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,113</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Office furniture and equipment</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,269</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,508</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Motor vehicles</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>150</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>132</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Software for internal use</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,410</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,615</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,282</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>16,311</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Depreciated
  cost</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>6,049</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,758</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>Depreciation
expenses amounted to $1,340, $1,232 and $1,090 for the years ended
December 31, 2005, 2006 and 2007, respectively. As for charges, see Note 15c.</FONT></P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 6:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>OTHER INTANGIBLE ASSETS</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Intangible
  assets:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="83%" STYLE="MARGIN-LEFT:17%">
<TR style="font-size:1px" >
<TD WIDTH="77%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Original amounts:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Capitalized software costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>31,830</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>34,692</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Acquired technology and other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,488</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,593</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>33,318</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>36,285</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Accumulated
  amortization:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Capitalized software costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>21,816</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24,087</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Acquired technology and other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,232</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,517</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>23,048</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>25,604</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Amortized
  cost</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>10,270</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>10,681</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN="TOP">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>b.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Amortization
  expenses amounted to $3,187, $3,965 and $&nbsp;2,708 for the years ended
  December 31, 2005, 2006 and 2007, respectively.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>c.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Estimated
  acquired technology and other intangible assets amortization expenses for the
  year ended December 31, 2008, are $76.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 26</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" WIDTH="100%">
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN="TOP">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 7:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>GOODWILL</B></FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=JUSTIFY STYLE="MARGIN-LEFT:12%"><FONT SIZE=2>The changes in
the carrying amount of goodwill for the two years ended December 31, 2007 are
as follows:</FONT></P>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=88% STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="87%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Balance as
  of December 31, 2005</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>15,823</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Foreign currency translation adjustments</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>30</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Sale of Subsidiary&#146;s operations (see note
  1b)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(160</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Balance as
  of December 31, 2006</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,693</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Foreign currency translation adjustments</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>293</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Balance as
  of December 31, 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>15,986</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 8:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>SHORT-TERM CREDIT AND CURRENT MATURITIES OF LONG-TERM LOANS</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Classified
  by currency, linkage terms and interest rates, the credit and loans are as
  follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0  CELLSPACING="0" CELLPADDING="0" WIDTH="83%" STYLE="MARGIN-LEFT:17%">
<TR style="font-size:1px" >
<TD WIDTH="47%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN="BOTTOM">
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Interest rate</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>%</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Short-term
  bank loans:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>In, or linked to, U.S. dollars</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD colspan=2 VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD colspan=2 VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>6.48</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,250 </FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>In, or linked to, Euro</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD colspan=2 VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>5.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD colspan=2 VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>5.63</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,184</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,479</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>In other currencies</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD nowrap colspan=2 VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>2.13-6.75</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD nowrap colspan=2 VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>5.25</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>975</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>705</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>&nbsp;</FONT></P>
</TD>
</TR>



<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,159</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,434</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Short-term
  bank credit:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>In other currencies</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD colspan=2 VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD colspan=2 VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>111</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>111</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Short-term
  credit (1):</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>In, or linked to, U.S. dollar</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD colspan=2 VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>5.6-6.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD nowrap colspan=2 VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>6.11-6.64</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>185</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>117</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>185</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>117</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Current
  maturities of long-term loans</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>59</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>70</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,514</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,621</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="17%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(1)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Financing
  arrangement in regard to the ERP system.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 27</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 8:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>SHORT-TERM CREDIT AND CURRENT MATURITIES OF LONG-TERM LOANS</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>b.</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P align=justify><FONT SIZE=2>Contractual
  restrictions and financial covenants:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P align=justify><FONT SIZE=2>For the
  purpose of obtaining credit and/or other bank services from banking
  institutions, the Company is committed towards the banking institutions as
  follows:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>1.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company
  is committed that the amount of cash and cash equivalents and short term
  investment will not be at any time below the amount of $6.5 million.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company
  is committed that at any time the rate of shareholders&#146; equity of the Company
  will not drop below 45% of total balance sheet. In addition, shareholders
  equity will not drop at any time below the amount of $36 million.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>3.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company
  is committed that the total of its financial obligations (i.e., short and
  long terms from banking institutions or commitments due to debentures) will
  not exceed $7 million and 10% of total balance sheet.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>4.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company
  is committed not to pledge under any form of general floating charge and for
  any purpose any of the Companies&#146; assets and/or part of it in favor of any
  third party, without receiving the banking institutions&#146; advance and written
  consent.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P align=justify><FONT SIZE=2>If the
  Company does not comply with all or part of the financial ratios, or upon the
  occurrence of certain events as specified in the agreement, the bank will be
  allowed to request the immediate repayment of the aforementioned credit. All
  amounts that are related to those covenants are classified as short- term.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P align=justify><FONT SIZE=2>As of
  December 31, 2007, the Company complied with some of the financial covenants
  and received a waiver from the banks for those financial covenants the
  Company did not comply with. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>c.</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2>Credit line:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P align=justify><FONT SIZE=2>As of
  December 31, 2007, the Company used $1.25 million of its credit facility with
  the First International Bank of Israel Ltd. and $2.2 million with the Poalim
  Bank Ltd. As of December&nbsp;31, 2007, the Company has an unutilized credit
  line of $1.3 million and $0.8 million in the First International Bank of
  Israel Ltd. and the Poalim Bank Ltd., respectively.</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE="2"><B>NOTE 9:-</B> </FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE="2"><B>ACCRUED
EXPENSES AND OTHER ACCOUNTS PAYABLE</B> </FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=88% STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="76%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Employees
  and payroll accruals</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,011</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,468</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Accrued
  expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,386</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,267</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Government
  authorities and other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>226</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,434</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>6,623</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,169</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 28</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100% style="margin-top:-10px">
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 10:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>LONG-TERM LOANS</B></FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Long-term
loans are composed as follows:</FONT></P>
</TD>
</TR>


</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=88% STYLE="MARGIN-LEFT:12%">
<TR style="font-size:1px" >
<TD WIDTH="55%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Interest rate</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>%</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>In U.S.
  dollar</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>5.6-6.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>6.1-6.6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>95</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>56</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>In Yens</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>3.70</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=2>3.23</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>169</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>117</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>In other
  currencies</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>14</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=2>5.5</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>28</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>29</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Less -
  current maturities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(59</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(70</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>233</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>132</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 11:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>TAXES ON INCOME</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a.</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Tax benefits
  under the Law for the Encouragement of Capital Investments, 1959 (the &#147;Law&#148;):
  </FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Eight
  expansion programs of the Company have been granted &#147;Approved Enterprise&#148;
  status under the Law. For these expansion programs, the Company has elected
  the alternative benefits track, waiving grants in return for tax exemptions.
  Pursuant thereto, the income of the Company derived from the following
  &#147;Approved Enterprise&#148; expansion programs is tax-exempt for the periods stated
  below and will be eligible for reduced tax rates thereafter (such reduced tax
  rates are dependent on the level of foreign investments in the Company), as
  described below.</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>1.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The period
  of the benefits for the first program and its four extensions has already
  ended as of December 31, 2007.</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>2.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The fifth
  program entitles the Company to a tax exemption for a four-year period and is
  subject to a reduced tax rate of 25% for an additional period of six years.
  The period of benefits for this program has not yet commenced.</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>3.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>In January
  1998, November 1998 and November 2002, the Company received approvals for
  other expansions of its &#147;Approved Enterprise&#148; status, which entitles the
  Company to a two-year tax exemption period for each expansion and to a
  reduced tax rate of 25% for an additional period of five to eight years. The
  period of benefits for those expansions has not yet commenced.</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The tax
  benefit periods provided, except from the exempt years, by the fifth, sixth,
  seventh and eighth programs end at the earlier of 12 years from the
  commencement of production, or 14 years from receipt of the approval. As the
  Company currently has no taxable income, these benefits have not yet
  commenced. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 29</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 11:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>TAXES ON INCOME (Cont.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The benefits
  available to an enterprise are conditional upon the fulfillment of conditions
  stipulated in the Law and its regulations and the criteria set forth in the
  specific letters of approval. In the event that the Company does not meet
  these conditions, it would be required to refund the amount of tax benefits,
  with the addition of interest and linkage adjustment to the Israeli Consumer
  Price Index (&#147;CPI&#148;). In the opinion of the Company&#146;s management, the Company
  has been in full compliance with the conditions of the above programs through
  December&nbsp;31, 2007.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>If dividends
  were to be distributed out of tax-exempt profits deriving from an &#147;Approved
  Enterprise&#148;, the Company would be liable for corporate tax at a rate of 25%.
  The Company does not anticipate paying dividends in the foreseeable future.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Income from
  sources other than the &#147;Approved Enterprise&#148; during the benefit period will
  be subject to tax at the regular corporate tax rate (see Note 11e below).</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>On April 1,
  2005, an amendment to the Investment Law came into effect (&#147;the Amendment&#148;)
  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 an
  Approved Enterprise, such as provisions generally requiring that at least 25%
  of the Approved Enterprise&#146;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.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>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 Company&#146;s existing
  Approved Enterprise 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 and the Company may be required to record
  deferred tax liability with respect to such tax-exempt income. As of December
  31, 2007, the Company did not generate income under the provision of the new
  law.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>b.</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Tax benefits
  under the Law for the Encouragement of Industry (Taxes), 1969 (&#147;the
  Encouragement Law&#148;):</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company is an &#147;industrial company&#148;, as
  defined by the Encouragement Law and, as such, is entitled to certain tax
  benefits, mainly accelerated depreciation of machinery and equipment, as
  prescribed by regulations published under the Inflationary Adjustments Law,
  the right to deduct public issuance expenses and patents and other intangible
  property rights for tax purposes, and the right to file, under specified
  conditions, a consolidated tax return with additional related Israeli
  &#147;industrial companies&#148;.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 30</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 11:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>TAXES ON INCOME (Cont.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>c.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Measurement
  of taxable income under the Income Tax (Inflationary Adjustments) Law, 1985:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Results for
  tax purposes in Israel are measured and reflected in real terms in accordance
  with the change in the CPI. As explained in Note 2b, the consolidated
  financial statements are presented in dollars. The differences between the
  change in the Israeli CPI and in the NIS/dollar exchange rate causes a
  difference between taxable income or loss and the income or loss before taxes
  reflected in the consolidated financial statements. In accordance with
  paragraph 9(f) of SFAS No. 109, &#147;Accounting for Income Taxes&#148; (&#147;SFAS No.
  109&#148;), the Company has not provided deferred income taxes on this difference
  between the reporting currency and the tax bases of assets and liabilities. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>d.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Changes in
  the tax laws applicable to the Company:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>In February 2008, the
  &#147;Knesset&#148; (Israeli parliament) passed an amendment to the Income Tax
  (Inflationary Adjustments) Law, 1985, which limits the scope of the law
  starting 2008 and thereafter. Starting 2008, the results for tax purposes
  will be measured in nominal values, excluding certain adjustments for changes
  in the Consumer Price Index carried out in the period up to December 31,
  2007. The amended law includes, inter alia, the elimination of the inflationary
  additions and deductions and the additional deduction for depreciation
  starting 2008.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>e.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>Tax rates: </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>In June
  2004, an amendment to the Income Tax Ordinance (No. 140 and Temporary
  Provision), 2004 was passed by the &#147;Knesset&#148; (Israeli parliament) and on July
  25, 2005, another law was passed, the amendment to the Income Tax Ordinance
  (No. 147) 2005, according to which the corporate tax rate is to be
  progressively reduced to the following tax rates: 2005 - 34%, 2006 - 31%,
  2007 - 29%, 2008 - 27%, 2009 - 26%, 2010 and thereafter - 25%.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>f.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=JUSTIFY><FONT SIZE=2>The Company
  received final tax assessments for the 1997 to 2002 tax years. As of today,
  the Company filed an appeal with the court on one issue left open. The issue
  is being deliberated in the Tel &#150; Aviv district court. The next hearing was
  set to September 2008. See note 11(k) regarding provision recorded in the
  financial statements in respect of this matter (all other items determined by
  the tax authorities as increasing the Company&#146;s taxable income, were offset
  against net operating loss carryforward). If the tax authorities position
  will be accepted, the Company will lose most of its carryforward losses as of
  December 31, 2002, and as a result, will have to pay approximately $1,200.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 31</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="100%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 11:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>TAXES ON INCOME (Cont.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>

<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>g.</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>




<TR>
<TD  VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD  VALIGN=TOP>
<P><FONT SIZE=2>g.</FONT></P>
</TD>
<TD  VALIGN=TOP>
<P align=justify><FONT SIZE=2>Net
  operating losses carryforward:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Through
  December 31, 2006 and 2007, the Company and its Israeli subsidiaries had operating
  loss carryforwards of approximately $39,194 and $37,053, respectively,
  which can be carried forward and offset against taxable income in the future
  for an indefinite period.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Through
  December 31, 2006 and 2007, Magic Software Enterprises Inc., CoreTech
  Consulting Inc. and AAOD had federal operating tax loss carryforward of
  approximately $11,747, and $1,450, respectively which can be carried
  forward and offset against taxable income for 15-20 years and will expire
  from 2022 to 2027.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The
  Company&#146;s subsidiaries in Europe and Japan had estimated total available tax
  loss carryforward of $13,606 and $2,358 respectively in 2006 and $14,692
  and $2,195, in 2007 respectively, in 2007 to offset against future taxable
  income for 15-20 years and 5 years, respectively.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>h.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Income
  (loss) before taxes on income:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=83% STYLE="MARGIN-LEFT:17%">
<TR style="font-size:1px" >
<TD WIDTH="63%" VALIGN=BOTTOM>
<P> &nbsp; </P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%"  VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Domestic</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,379</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(2,414</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(2,735</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Foreign</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>19</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(3,688</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,348</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,360</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,102</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,613</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=100%>
<TR style="font-size:1px" >
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>i.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Taxes on
  income:</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Taxes on
  income consist of the following:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=83% STYLE="MARGIN-LEFT:17%">

<TR style="font-size:1px" >
<TD WIDTH="63%" VALIGN=BOTTOM>
<P> &nbsp; </P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="8%"  VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Current:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Domestic</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>63</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Foreign</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>399</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>309</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>362</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Taxes on
  income</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>462</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>310</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>362</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 32</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>


<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
</TR>

</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 11:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>TAXES ON INCOME (Cont.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>i.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Deferred
  income taxes:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Deferred
  income taxes reflect the net tax effects of temporary differences between the
  carrying amounts of assets and liabilities for financial reporting purposes
  and the amounts used for income tax purposes. Significant components of the
  Company and its subsidiaries deferred tax assets are as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%" STYLE="MARGIN-LEFT:17%">
<TR style="font-size:1px">
<TD WIDTH="75%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Net
  Operating Loss carryforward</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>17,694</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>14,859</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Allowances
  and reserves</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>829</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,283</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>18,<FONT SIZE=2>523</FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>16,142</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Less:
  valuation allowance</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(18,523</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(16,142</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Net deferred
  tax assets</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company and its subsidiaries provided a
  100% valuation allowance against the deferred tax assets in respect of its
  tax losses carryforward and other temporary differences due to uncertainty
  concerning its ability to realize these deferred tax assets in the
  foreseeable future.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>j.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Reconciliation
  of the theoretical tax expense to the actual tax expense:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Reconciliation
  between the theoretical tax expense, assuming all income is taxed at the
  statutory rate applicable to the income of companies in Israel and the actual
  tax expenses are as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%" style="margin-left:17%">
<TR style="font-size:1px">
<TD WIDTH="62%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Income (loss) before taxes on income, as
  reported in the consolidated statements of operations</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,360</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(6,102</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,613</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Statutory tax rate</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>34</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>31</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>29</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>%</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Theoretical tax expense (benefit)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(2,162</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(1,892</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>468</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Utilization of tax losses carryforward for
  which a valuation allowance was provided</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1,121</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(292</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1,297</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Deferred taxes
  assets for which valuation allowance was provided</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,453</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,334</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>885</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Non-deductible expenses and other</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>120</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>63</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>116</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Compensation expenses related to FAS 123R</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>134</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Tax in respect of previous years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>138</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>114</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>85</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Tax adjustment in respect of inflation in
  Israel and other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>34</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(17</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(29</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Actual tax expense</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>462</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>310</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>362</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 33</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 11:-</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>TAXES ON INCOME (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>k.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company
  adopted the provisions of FIN 48 as of January 1, 2007. The impact of
  adopting FIN 48 is estimated at $530 on our sharehodler&#146;s equity and an
  impact of $50,000 on our tax expenses.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Interest
  associated with uncertain income tax positions and penalties expense are
  classified as income tax expenses. The Company has not recorded any material
  interest or penalties during any of the years presented.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>A
  reconciliation of the beginning and ending balances of the total amounts of
  gross unrecognized tax benefits is as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="96%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="57%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Gross unrecognized tax positions at January&nbsp;1, 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>530</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Increases in tax positions for prior
years</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Increases in tax positions for current
  years</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>50</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Gross unrecognized tax benefits at
  December&nbsp;31, 2007</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>580</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 12:- </B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>SHAREHOLDERS&#146; EQUITY</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Ordinary
  shares of the Company are traded on both the Nasdaq National Market in the
  United States and the Tel-Aviv Stock Exchange in Israel.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>b.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Treasury
  shares</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The
  Company&#146;s Board of Directors resolved to authorize and empower the Company to
  repurchase its shares from time to time on the open market. Accordingly,
  through the end of 2007, the Company repurchased 1,275,368 of its shares for
  an aggregate amount of $6,772.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>c.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Stock Option
  Plan:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>During the
  year 2007, the Company granted 1,735,000 options in a new option plan.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2> </FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Under the
  Company&#146;s 1991, 2000 and 2007, Stock Option Plans (&#147;the plans&#148;), as amended,
  options may be granted to employees, officers, directors and consultants of the
  Company and its subsidiaries. Pursuant to the plans, the Company reserved for
  issuance 6,750,000, 4,600,000 and 1,500,000 Ordinary shares, respectively. As
  of December 31, 2007, an aggregate of 788,769 Ordinary shares of the Company
  are still available for future grant. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Each option
  granted under the plans is exercisable until the earlier of 10 years from the
  date of the grant of the option or the expiration dates of the respective
  option plans. The 1991 plan expired on December 31, 2000, the 2000 plan will
  expire on May 5, 2010 and the 2007 plan will expire on August 1, 2017. The
  Option Price for each Option shall be determined by the Board committee and
  set forth in the Company&#146;s award agreement, unless determined otherwise by
  the Board committee, the option Price shall be equal to, or higher than the
  share market price at the grant date. The options vest primarily over three
  years. Any option, which is forfeited or canceled before expiration, becomes
  available for future grants.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 34</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 12:- </B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>SHAREHOLDERS&#146; EQUITY (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Under the
  2007 Stock Option Plans some of the options are vested in contingent upon
  meeting various departmental and Company&#146;s wide performance goals. The fair
  value of each option grant with performance goals was estimated on the date
  of grant using the same option valuation model used for options granted
  without performance goals. If such goals are not met, no compensation cost is
  recognized and any recognized compensation cost is reversed. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>As of
  December&nbsp;29, 2005, all of the unvested out-of-the-money options, which
  amounted to 611,517, with an average exercise price of $3.46 per share with
  related vesting period from January&nbsp;1, 2006 through March 2009 had been
  accelerated. The shares which may be purchased by exercise of the accelerated
  options shall be subject to a holding period according to which the employees
  shall only be entitled to sell a monthly fraction of such numbers of shares
  (1/36 per month).</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The
  Company&#146;s decision to accelerate the vesting of those options and to grant
  fully vested options was based primarily upon the issuance of SFAS
  No.&nbsp;123R, which requires the Company to treat all unvested stock options
  as compensation expense effective January&nbsp;1, 2006. The Company believes
  that the acceleration of vesting of those options will enable the Company to
  avoid recognizing stock-based compensation expense associated with these options
  in future periods. Additional purposes of the fully vested grant and for the
  acceleration were to make the options more attractive to the recipients, and
  to avoid discrimination between groups of option holders, respectively. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The
  acceleration had no impact on the Company&#146;s statement of operations, however
  the impact of vesting accelerating on proforma stock-based compensation
  required to be disclosed in the financial statement footnotes under the
  provisions of SFAS No. 123, was to increase such disclosed compensation cost
  by approximately $1,021 for the year ended December 31, 2005.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 35</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 12:- </B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>SHAREHOLDERS&#146; EQUITY (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>A summary of
  the Company&#146;s stock option activity and related information for the years
  ended December 31, 2005, 2006 and 2007 is as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="33%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="7%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended<BR>
  December 31, 2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended<BR>
  December 31, 2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended<BR>
  December 31, 2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Number <BR>
  of options</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Weighted <BR>
  average <BR>
  exercise <BR>
  price</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Number <BR>
  of options</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Weighted <BR>
  average <BR>
  exercise <BR>
  price</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Number <BR>
  of options</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Weighted <BR>
  average <BR>
  exercise <BR>
  price</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Outstanding at the beginning of
  the year</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,513,237</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=left><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.95</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,061,216</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=left><FONT SIZE=2><B>$</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.62</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,352,632</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=left><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.52</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Granted</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>820,028</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.70</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>62,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.69</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,773,332</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.78</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Exercised</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(80,604</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.04</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(253,346</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.11</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(218,205</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1.18</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Forfeited</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(191,445</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.54</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(517,238</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.41</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(234,231</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.98</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Outstanding at the end of the year</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,061,216</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.62</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,352,632</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.52</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,673,528</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Vested and expected to vest at the end of the year</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,061,216</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.62</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,336,982</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.52</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,489,741</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.21</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Exercisable at the end of the year</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,061,216</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.62</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,290,632</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.54</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,407,532</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Weighted average fair value of options granted during the
year</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.1</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.7</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.31</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Aggregate intrinsic value of the &#145;vested and expected
to vest&#146;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>476</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,364</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,344</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="17%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Out of the
  above Company&#146;s stock option activity, during 2007 the Company granted
  selected executives and other key employees 500,000 share option awards whose
  vesting is contingent upon meeting various departmental and companywide
  performance goals, including revenue growth and net gain index. The options
  are granted at-the-money, contingently vest over a period of 4 years, and
  have contractual lives of 10 years. The fair value of those options was
  estimated on the date of grant using the same option valuation model used for
  the other options granted. If such goals are not met, no compensation cost is
  recognized and any recognized compensation cost is reversed. The inputs for
  expected volatility, expected dividends, expected term and risk-free rate
  used in estimating those options&#146; fair value are the same as those noted in
  the table related to options issued under the Share Option Plan. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 36</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 12:-</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>SHAREHOLDERS&#146; EQUITY (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The
  weighted-average grant-date fair value of options granted during the twelve
  months ended December 31, 2005, 2006 and 2007 were $1.3, $0.98 and $1.08,
  respectively. The aggregate intrinsic value in the table above represents the
  total intrinsic value (the difference between the fair market value of the
  Company ordinary shares on December 31, 2007 and the exercise price,
  multiplied by the number of in-the-money options) that would have been
  received by the option holders had all option holders exercised their options
  on December&nbsp;31, 2007. This amount is changed based on the fair market
  value of the Company&#146;s shares. Total intrinsic value of options exercised for
  the twelve months ended December 31, 2005, 2006 and 2007 were $107, $161 and
  $168, respectively. As of December 31, 2007, there was $1,436 of total
  unrecognized compensation cost related to non-vested share-based compensation
  arrangements granted under the Company&#146;s stock option plans. That cost is
  expected to be recognized over a period of approximately 3 years. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The options
  outstanding as of December 31, 2007, have been separated into ranges of
  exercise price categories, as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="97%" style="margin-left: 3%">
<TR style="font-size:1px">
<TD WIDTH="11%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="4%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="11%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="11%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="11%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Exercise price</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Options <BR>
  outstanding <BR>
  as of<BR>
  December 31, <BR>
  2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Weighted <BR>
  average <BR>
  remaining <BR>
  contractual life <BR>
  (years)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Weighted <BR>
  average <BR>
  exercise price</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Options <BR>
  exercisable <BR>
  as of <BR>
  December 31, <BR>
  2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Weighted <BR>
  average <BR>
  exercise price<BR>
  of exercisable<BR>
  options</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>0-1</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>494,887</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>8</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.25</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>494,887</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.25</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=2>1-2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,542,956</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>7</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.56</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,034,956</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1.36</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>2-3</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>878,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>9</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.37</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>120,004</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2.37</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=2>3-4</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>402,470</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>402,470</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3.81</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>4-5</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>193,004</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>6</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4.12</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>193,004</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4.12</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=2>5-6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>128,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>6</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5.95</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>128,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5.95</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>6-7</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>711</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>6.14</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>711</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>6.14</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=2>10-11</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24,500</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>2</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24,500</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>18-19</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=center><FONT SIZE=2>2</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>18.79</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,000</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>18.79</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=RIGHT>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=RIGHT>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=RIGHT>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=RIGHT>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=right><FONT   SIZE=2>3,673,528</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=center><FONT SIZE=2>8</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,407,532</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2.22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>d.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Warrants to
  service providers: </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>During the
  year ended December 31, 2007, 25,000 fully exercisable warrants, at an
  exercise price of $1.69, were granted to a consultant of the Company. As of
  December 31, 2007, those warrants were not exercised or forfeited.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The fair
  value for these warrants was estimated on the date of grant using
  Black-Scholes option pricing model, with the following weighted-average
  assumptions for the year ended December 31, 2007: weighted average volatility
  of 58.3%, risk-free interest rates of 4.7%, dividend yields of 0% and a
  weighted average life of the options of 3 years.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Stock-based
  compensation expense, recognized as general and administrative expense, in
  respect of options granted to non employees amounted to $19 for the year
  ended December 31, 2007.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>e.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Dividends:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company
  does not intend to pay cash dividends in the foreseeable future.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 37</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 12:- </B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>SHAREHOLDERS&#146; EQUITY (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>f.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Accumulated
  other comprehensive loss</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%" style=margin-left:17%>
<TR style="font-size:1px">
<TD WIDTH="73%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended
  December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Accumulated realized and unrealized gain
  (loss) on available-for-sale securities, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(83</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>85</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Accumulated foreign currency translation
  adjustments</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1,254</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(581</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cumulative effect of changes in accounting
  for uncertainties in income taxes (FIN 48)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>-</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(530</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Total other comprehensive loss</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1,337</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(1,026</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 13:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>GEOGRAPHIC INFORMATION</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Summary
  information about geographic areas:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company
  manages its business on the basis of one reportable segment (see Note 1 for a
  brief description of the Company&#146;s business). The Company&#146;s business is
  divided into the following geographic areas: Israel, Europe, the U.S.A.,
  Japan and other regions. Total revenues are attributed to geographic areas
  based on the location of the customers.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>This data is
  presented in accordance with SFAS No. 131, &#147;Disclosures about Segments of an
  Enterprise and Related Information&#148; (&#147;SFAS No. 131&#148;).</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The
  following table presents total revenues classified according to geographical
  destination for the years ended December 31, 2005, 2006 and 2007:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="88%" style="margin-left:12%">
<TR style="font-size:1px">
<TD WIDTH="63%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Israel</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,013</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,307</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,471</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Europe</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>22,636</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>21,713</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>24,916</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>U.S.A.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,529</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>13,995</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>18,612</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Japan</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10,107</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>10,223</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,080</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,551</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,333</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,349</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>51,836</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>52,571</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>58,428</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 38</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>
</TD>
</TR>


</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 13:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>GEOGRAPHIC INFORMATION (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The
  Company&#146;s long-lived assets are as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="88%" style="margin-left:12%">
<TR style="font-size:1px">
<TD WIDTH="75%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=black ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Israel</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,854</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>4,561</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Europe</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>679</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>725</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>U.S.A.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>98</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>88</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Japan</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>313</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>259</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Other</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>105</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>125</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>6,049</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5,758</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 14:-</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>SELECTED STATEMENTS OF OPERATIONS DATA</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Research and
  development costs, net:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%" style="margin-left:17%">
<TR style="font-size:1px">
<TD WIDTH="63%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>


<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Total costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>6,322</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,944</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,743</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Less -
  capitalized software costs</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(3,909</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(3,482</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(3,027</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Research and
  development, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,413</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,462</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,716</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>
<BR>
<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>b.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Financial
  income (expenses), net:</FONT></P>
</TD>
</TR>
</TABLE>

<br>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%"  style="margin-left:17%">
<TR style="font-size:1px">
<TD WIDTH="63%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Interest and
  bank charges</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(115</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(127</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(12</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Gain (loss)
  arising from foreign currency transactions</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(694</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>459</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>173</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Financial
  income (expenses),net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(809</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>332</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>161</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 39</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 15:-</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>COMMITMENTS AND CONTINGENTIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Lease
  commitments:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Certain of the facilities, motor vehicles
  and equipment of the Company and its subsidiaries are rented under long-term
  operating lease agreements. Future minimum lease commitments under
  non-cancelable operating leases as of December 31, 2007, are as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="40%" STYLE="MARGIN-LEFT:17%; MARGIN-RIGHT:40%">
<TR style="font-size:1px">
<TD WIDTH="79%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="13%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="2%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>2008</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT   SIZE=2>2,568</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>2009</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,986</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>2010</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>795</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>2011 and
  therafter</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>410</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,759</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Rent expenses for the years ended December
  31, 2005, 2006 and 2007, were approximately $1,184, $1,274 and $1,<FONT SIZE=2>116</FONT>
  respectively.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>b.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Guarantees:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company
  has provided two of its clients with bank guarantees totaling $86, which is
  linked to the NIS and valid through November 2009.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>c.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Charges:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>As collateral for a subsidiary&#146;s line of
  credit, a charge was recorded on the subsidiary&#146;s trade receivables.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>In respect of a lease agreement, the
  Company placed a lien on the leased computer equipment.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>d.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Legal
  proceedings:</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>Lawsuits
  have been lodged against the Company in the ordinary course of business in
  insignificant amounts. The Company intends to defend itself vigorously
  against those lawsuits. Management cannot predict the outcome of the lawsuits
  nor can they make any estimate of the amount of damages; therefore, no
  provision has been made for the lawsuits.</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="17%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>1.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>In June
  2004, an Israeli Company has filed a lawsuit against the Company in the
  Tel-Aviv District Court in the amount of NIS 8 million (approximately
  $2,080), with a possibility to increase the lawsuit&#146;s amount to approximately
  NIS 17 million (approximately $4,420), for recovery of damages caused to
  plaintiff by the Company&#146;s failure to integrate a software system. During the
  last three years, the parties tried to settle the case with an external
  mediator. This attempt failed recently and the parties returned to the court
  to proceed with the court proceedings. Preliminary court proceedings have
  commenced, such as disclosure of documents and questionnaires. As of December
  31, 2007, the Company&#146;s management, based on its legal advisors opinion,
  cannot predict the outcome of the lawsuit nor can they make any estimate of
  the amount of damages; therefore, no provision has been made for the lawsuit.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 40</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 15:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>COMMITMENTS AND CONTINGENCIES (Cont.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="17%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>In May 2005, a client of
  the Company&#146;s subsidiary, Magic Software Enterprises (Israel) Ltd., filed a
  lawsuit against the subsidiary claiming an alleged breach of the agreement
  between the parties. The plaintiff is seeking damages in the amount of $336.
  The claim was moved to arbitration. The Company&#146;s management, due to the
  preliminary stage of this litigation and based on its legal advisors opinion,
  cannot predict the outcome of the lawsuit nor can they make any estimate of
  the amount of damages; therefore, no provision has been made for the lawsuit.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>3.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>In March 2006, a client of
  the Company&#146;s subsidiary, Magic Software Enterprises France, filed a lawsuit
  against the subsidiary in the commercial court in Paris claiming an alleged breach of the agreement
  between the parties. The plaintiff is seeking damages in the amount of
  &#128; 548 (approximately $806). The Company&#146;s management, due to the
  preliminary stage of this litigation and based on its legal advisors opinion,
  cannot predict the outcome of the lawsuit nor can they make any estimate of
  the amount of damages; therefore, no provision has been made for the lawsuit.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>4.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>In May 2007, a former CEO
  of the Company&#146;s subsidiary has filed a claim of alleged breach of the
  agreement between him and the Company, in the amount of $441. The claim had
  been moved to arbitration, which commenced during 2008. The claim is in its
  initial stages, therefore the Company&#146;s management, based on its legal
  advisors opinion, cannot predict the outcome of the lawsuit nor can they make
  any estimate of the amount of damages; therefore, no provision has been made
  for the lawsuit.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>5.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>In 2006, a subcontractor of the Company&#146;s
  Italian subsidiary, filed a lawsuit against the subsidiary in the court of
  Milan, claiming an alleged breach of the agreement between the parties. The
  plaintiff is seeking damages in the amount of &#128; 524 (approximately $770). Due
  to the preliminary stage of this litigation the Company&#146;s management, based
  on its legal advisors opinion, the Company made a partial provision for the
  lawsuit. However, at this stage, The Company cannot predict our chances of
  success in this matter.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>5.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>On May 2008, the Company&#146;s president and
  chief executive officer filed a claim and request for relief against the
  Company and the chairman of the Company&#146;s board of directors, in the Tel Aviv
  Labor Court regarding his discharge from his roles that occurred on April
  2008. In the claim he is seeking permanent relief that among other things
  would prevent the Company from terminating his employment or taking any
  action that would affect his position as President, chief executive officer
  and Director. The claim that occurred in 2008 is in its initial stages,
  therefore the Company&#146;s management, based on its legal advisors opinion,
  cannot predict the outcome of the lawsuit nor can they make any estimate of
  the amount of damages; therefore, no provision has been made for the lawsuit.</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>e.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Royalty commitments:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="17%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>1.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Government of Israel,
  through the Fund for the Encouragement of Marketing Activities (&#147;the Fund&#148;),
  awarded the Company grants for participation in its foreign marketing
  expenses. The Company received an aggregate amount of grants of $1,526 for
  the years up to and including 2005. The Company is committed to pay royalties
  at the rate of 3% of the increase in exports, up to the amount of the grants.
  As of December 31, 2007, the remaining contingent obligation of the Company
  amounted to $442.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>2.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Company was committed
  to pay royalties to Enformia Software Ltd. (&#147;Enformia&#148;) in the amount of 40%
  regarding any sale of products related to the IP purchased from Enformia and
  to comply with all of the terms required by the Office of the Chief Scientist
  (&#147;OCS&#148;) in connection with its grants to Enformia. </FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 41</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

</TD>
</TR>

</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 15:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>COMMITMENTS AND CONTINGENCIES (Cont.)</B></FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="17%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>As of
  December 31, 2006 and 2007, the aggregate contingent liability to the OCS, in
  regard to Enformia products, amounted to $42 and $31, respectively. Through
  December 31, 2006 and 2007, the Company has paid and accrued royalties to
  Enformia, in regard to sales of its product, in the amount of $84 and $11,
  respectively. </FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>In January
  2007, the Company sold the above mentioned IP to Axcepia Technologies. Under
  the agreement, in consideration for the transfer and assignment of the
  Company&#146;s rights in and to the technology, Axcepia agreed to pay the Company
  a commission equal to 50% of its revenues derived from sales to customers who
  held licenses to use the technology for a period of five years as of the date
  of the agreement. In addition, commencing as of six months from the date of
  the agreement, Axcepia agreed to pay the Company a commission equal to 20% of
  the revenues it derived from the provision of maintenance and support services
  relating to the iBOLT Portal technology, for a period of five years from the
  date of the agreement. As of December&nbsp;31, 2007, no commission was
  received.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>3.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The Group is
  committed to pay royalties of 1.75% of gross sales of the Hermes application,
  including license fees and all services fees to Menzies Aviation Plc
  (Menzies) for a period of 5 years until mid of 2009. Through December 31,
  2007, the Group has paid and accrued royalties to Menzies, in regard to sales
  of the product, in the amount of $44.</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 16:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NET EARNINGS (LOSS) PER SHARE</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>The
  following table sets forth the computation of basic and diluted net earnings
  (loss) per share:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="88%" style=margin-left:12%>
<TR style="font-size:1px">
<TD WIDTH="57%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Numerator for basic and diluted
  earnings (loss) per share &#150; net income (loss) available to shareholders</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT   SIZE=2>(4,607</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT   SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT   SIZE=2>(5,006</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT   SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT   SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT   SIZE=2>12,608</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Weighted average shares outstanding:</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Denominator for basic net earnings (loss)
  per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,124</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,184</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,443</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Effect of dilutive securities</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2> -</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>*)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2> -</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>*)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>580</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Denominator for diluted net earnings (loss)
  per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,124</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>31,184</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>32,023</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Basic net earnings (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>0.40</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Diluted net earnings (loss) per share</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>(0.16</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>0.39</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-LEFT:8.65PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>*)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Anti
  dilutive.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 42</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

</TD>
</TR>

</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="88%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 17:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>RELATED PARTIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>In July
  2005, the Company signed a memorandum of understanding with a related party,
  to implement the ERP system in a total consideration of $670. In 2005 and
  2006, the Company performed only part of the project in the amount of $235
  and $263, respectively. There were no additional transactions with related
  parties in 2007.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 18:-</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>DISCONTINUED OPERATIONS</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>During 2007,
  the Company disposed two of its subsidiaries (AAOD and Magic Italy), which
  met the definition of a component under SFAS 144. Accordingly, the results of
  operations of these subsidiaries and businesses and the gain resulting from
  the disposals have been classified as discontinued operations in the statement
  of operations and prior periods results have been reclassified accordingly.
  In addition comparative data of the assets and liabilities attributed to the
  discontinued operations have been reclassified in the balance sheet.</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>a.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The
  following are the results of discontinued operations for the years ended
  December 31, 2005, 2006 and 2007.</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%" style=margin-left:17%>
<TR style="font-size:1px">
<TD WIDTH="63%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,455</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,415</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,650</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Cost of
  revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,709</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>3,577</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,349</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Gross profit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,746</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,838</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>7,301</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Operating
  expenses, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,455</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>4,329</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>5,099</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Operating
  income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,291</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,509</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>2,202</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Other income
  (expenses)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>941</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>(174</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9,281</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Taxes on
  income</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>28</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>15</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>18</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Net income</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,204</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,320</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>11,465</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="17%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Revenues
  relating to discontinued operations for the years ended December 31, 2005,
  2006 and 2007 were as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%" style=margin-left:17%>
<TR style="font-size:1px">
<TD WIDTH="63%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Year ended December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="8" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2005</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>AAOD</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>8,906</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,241</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,611</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Magic Italy</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>549</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>174</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>39</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,455</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9,415</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>11,650</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 43</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT   SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

</TD>
</TR>

</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="12%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="83%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><B>NOTE 18:-</B></FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=TOP>
<P><FONT SIZE=2><B>DISCONTINUED OPERATIONS (Cont.)</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>b.</FONT></P>
</TD>
<TD VALIGN=TOP>
<P align=justify><FONT SIZE=2>The
  breakdown of assets and liabilities attributed to discontinued operations of
  the Company as of December 31, 2006 and 2007 was as follows:</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%" style=margin-left:17%>
<TR style="font-size:1px">
<TD WIDTH="75%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007 (*)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Assets:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Cash and cash equivalents</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1,227</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>22</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Trade receivables, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>1,570</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Other receivables and prepaid
expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>356</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>9</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Long term lease deposit</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>54</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Property and equipment, net</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>365</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>1</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Goodwill</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>5,931</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT   SIZE=2>Other intangible assets</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>593</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>10,096</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>41</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="83%" style=margin-left:17%>
<TR style="font-size:1px">
<TD WIDTH="75%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="8%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>December 31,</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="5" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2006</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>2007 (*)</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Liabilities:</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=2>Trade
  payables</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>438</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>250</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=2>Other
  payables and accrued expenses</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>472</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>253</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P STYLE='MARGIN-RIGHT:0IN;   MARGIN-LEFT:17.3PT;TEXT-INDENT:-8.65PT'><FONT SIZE=2>Deferred
  revenues</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>2,606</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>&#150;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>3,516</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>$</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>503</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<HR SIZE=3 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="17%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="78%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>(*)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>As of
  December 31, 2007, AAOD&#146;s assets and liabilities are not included in the
  consolidated balance sheet.</FONT></P>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>F - 44</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<P STYLE='PAGE-BREAK-BEFORE: ALWAYS'></P><PAGE>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="10%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
<TD WIDTH="50%" VALIGN=TOP>
<P ALIGN=RIGHT>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>MAGIC SOFTWARE ENTERPRISES LTD.</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=2><B>AND ITS SUBSIDIARIES</B></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=RIGHT><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD nowrap VALIGN=TOP>
<P><FONT SIZE=2><B>APPENDIX TO FINANCIAL STATEMENTS</B></FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="3" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=gray ALIGN=CENTER>

</TD>
</TR>

</TABLE>

<P ALIGN=CENTER><A NAME=A207></A><FONT SIZE=2><B>DETAILS
OF SUBSIDIARIES AND AFFILIATE</B></FONT></P>

<P><FONT SIZE=2>Details of the percentage of control of the
share capital and voting rights of subsidiaries and an affiliated company as of
December 31, 2007:</FONT></P>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="69%" VALIGN=BOTTOM>
<P>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="6%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="5%" VALIGN=TOP>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="3%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="11%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
<TD WIDTH="1%" VALIGN=BOTTOM>
<P ALIGN=CENTER>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT   SIZE=1><B>Name of Company</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Percentage of <BR>
  ownership and <BR>
  control</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT   SIZE=1><B>Place of <BR>
  incorporation</B></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="45%" NOSHADE COLOR=BLACK ALIGN=left>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="2" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE="1"><B>%</B> </FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=BOTTOM>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>

</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD COLSPAN="3" VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Software Japan K.K.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Japan</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Magic
  Software Enterprises Inc.</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>U.S.A.</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic
  Software Enterprises (UK) Ltd.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>U.K.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Hermes
  Logistics Technologies Limited</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>U.K.</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic
  Software Enterprises Spain Ltd.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Spain</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Coretech<FONT SIZE=2> Consulting Group Inc.</FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>U.S.A</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Coretech<FONT SIZE=2> Consulting Group LLC</FONT></FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>U.S.A</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>MSE Holdings, INC</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>U.S.A</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Software Enterprises (Israel) Ltd.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Israel</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Magic
  Software Enterprises Italy S.r.l. *)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Italy</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic
  Software Enterprises Netherlands B.V.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Netherlands</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Magic
  Software Enterprises France</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>France</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic Beheer
  B.V.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Netherlands</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Magic
  Benelux B.V.</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Netherlands</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Magic
  Software Enterprises GMBH</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Germany</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Magic
  Software Enterprises India Pvt. Ltd.</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>India</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Onyx Magyarorszag
  Szsoftverhaz</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>100</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Hungary</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>CarPro
  Systems Ltd. *)</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P ALIGN=RIGHT><FONT SIZE=2>90</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>.48</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=2>Israel</FONT></P>
</TD>
<TD VALIGN=BOTTOM>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>Nextstep
  Infotech Prt. Ltd.</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P ALIGN=RIGHT><FONT SIZE=2>40</FONT></P>
</TD>
<TD VALIGN=TOP BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=2>India</FONT></P>
</TD>
<TD VALIGN=BOTTOM BGCOLOR="#CCEEFF">
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
</TABLE>

<BR>

<TABLE   BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="5%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2>*)</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>See Note 1.</FONT></P>
</TD>
</TR>
</TABLE>




<P ALIGN=CENTER><FONT SIZE=2>F - 45</FONT></P>

<HR WIDTH="100%" size="1" noshade style="margin-top: -2px">
<HR WIDTH="100%" size="4" noshade style="margin-top: -10px">
<page>



<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="65%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="35%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><IMG SRC="img001.jpg" ALT="(Levy Cohen & Co LOGO)"></FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>37 Broadhurst Gardens, London NW6 3QT</I></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><I>Tel: 020 -
  7624 2251 Fax: 020 - 7372 2328</I></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><I>E - mail:
  lc@levy-cohen.co.uk</I></FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>To the Board of Directors and Shareholders of <BR>
MAGIC
SOFTWARE ENTERPRISES (UK) LIMITED</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheet of MAGIC SOFTWARE ENTERPRISES(UK) LIMITED. (the
&#147;Company&#148;) as of December 31, 2007 and 2006, and the related statements
operations, changes
in shareholders&#146; equity and cash flows for each of the two years in the period
ended December
31, 2007. These financial statements are the responsibility of the Company&#146;s
management. Our
responsibility is to express an opinion on these financial statements based on
our audit.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Company&#146;s internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;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, and evaluating the overall financial
statement presentation. We believe that our audits and the reports of other auditors provide
a reasonable basis for our opinion.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of the Company and at December 31, 2006 and
2007, and the related statements operations, changes in shareholders&#146; equity for each of the two years in the
period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.</FONT></P>

<P><FONT SIZE=2>LEVY
COHEN &amp;CO</FONT><BR><FONT SIZE=2><IMG SRC="img002.jpg" ALT="-s- LEVY COHEN & CO"></FONT><BR><FONT SIZE=2>Registered
Auditors </FONT></P>

<P><FONT SIZE=2>January
12, 2008</FONT></P>


<p align=center>
<font size=2>F - 46</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="65%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="35%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><IMG SRC="img001.jpg" ALT="(Levy Cohen & Co LOGO)"></FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=2><I>37 Broadhurst Gardens, London NW6 3QT</I></FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><I>Tel: 020 -
  7624 2251 Fax: 020 - 7372 2328</I></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2><I>E - mail:
  lc@levy-cohen.co.uk</I></FONT></P>
</TD>
</TR>
<TR>
<TD COLSPAN="2" VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=GRAY ALIGN=CENTER>
</TD>
</TR>
</TABLE>

<P ALIGN=CENTER><FONT SIZE=2>To the Board of Directors and Shareholders of <BR>
HERMES
LOGISTICS TECHNOLOGIES LIMITED</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheet of HERMES LOGISTICS TECHNOLOGIES LIMITED. (the &#147;Company&#148;)
as of December 31, 2007 and 2006, and the related statements operations, changes in shareholders&#146;
equity and cash flows for each of the two years in the period ended December 31, 2007.
These financial statements are the responsibility of the Company&#146;s management. Our responsibility is to
express an opinion on these financial statements based on our audit.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform
an audit of the Company&#146;s internal control over financial reporting. Our audits
included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company&#146;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, and evaluating the overall financial
statement presentation. We believe that our audits and the reports of other auditors provide
a reasonable basis for our opinion.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of the Company and at December 31, 2006 and
2007, and the related statements operations, changes in shareholders&#146; equity for each of the two years in the
period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.</FONT></P>

<P><FONT SIZE=2>LEVY
COHEN &amp;CO</FONT><BR><FONT SIZE=2><IMG SRC="img002.jpg" ALT="-s- LEVY COHEN & CO"></FONT><BR><FONT SIZE=2>Registered
Auditors </FONT></P>

<P><FONT SIZE=2>January
12, 2008</FONT></P>

<p align=center>
<font size=2>F - 47</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<P><FONT SIZE=2><B><U>January 31, 2008</U></B></FONT></P>

<P><FONT SIZE=2><U>Kost
Forer Gabbay &amp; Kasierer <BR>
</U>Certified Public
Accountants <BR>
3 Aminadav St. <BR>
Tel-Aviv, ISRAEL</FONT></P>

<P><FONT SIZE=2>Gentlemen, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Re: <U>Magic Software Japan K.K. (hereinafter -
&#147;the Company&#148;)</U></B></FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with our audit of the financial statements of the Company for the
year ended December 31, 2007, a
subsidiary of Magic Software Enterprises Ltd. whose financial statements are
audited by you, we confirm that:</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are independent with respect to the Company and Magic Software Enterprises Ltd.
and other affiliates, under the
standards of the Public Company Accounting Oversight Board (United States) and
the Securities and Exchange
Commission.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are aware that the financial statements of the Company, which we have audited,
are to be included in the consolidated financial statements of Magic Software
Enterprises Ltd. on which Ernst &amp; Young will report and that your report will rely on and refer to our report.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are familiar with U.S. generally accepted accounting principles and with the
standards of the Public Company
Accounting Oversight Board (United States) and we conducted our audit and
reported in accordance with them.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have knowledge of the relevant financial reporting requirements for the
statements and schedules to be filed with the Securities and Exchange
Commission and the financial statements of the Company comply with them in all material respects.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will make a review and inform you of matters affecting the elimination of
intercompany transactions and
accounts based upon related party information that you will furnish us.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will provide you, upon request, access to audit documentation supporting the
work performed.</FONT></P>

<P align=justify><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will have complete and final documentation to support our report no more than
45 days after the report release date or the completion of our work. If we have
any issues meeting this requirement, we will bring the issues to your attention as soon as they are known.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
<TR style="font-size:1px">
<TD WIDTH="60%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
<TD WIDTH="40%" VALIGN=TOP>
<P>&nbsp;</P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Very truly yours,</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2><IMG SRC="img003.jpg" ALT="-s- KDA Audit Corporation"></FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<HR SIZE=1 WIDTH="100%" NOSHADE COLOR=BLACK ALIGN=CENTER>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P ALIGN=CENTER><FONT SIZE=2>KDA
  Audit Corporation</FONT></P>
</TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 48</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<P><FONT SIZE=2><IMG SRC="img004.jpg" ALT="(LOGO)"></FONT></P>

<P><FONT SIZE=2><B><U>Magic Benelux B.V.</U></B></FONT></P>

<P><FONT SIZE=2><B><I>Auditor&#146;s report</I></B></FONT></P>

<P><FONT SIZE=2><B>Report on the financial statements</B></FONT></P>

<P><FONT SIZE=2>We have audited the accompanying
financial statements for the year ended December 31, 2007 of Magic
Benelux B.V., Houten, which comprise the balance sheet as at December 31, 2007
the profit and loss account for the year
then ended and the notes.</FONT></P>

<P><FONT SIZE=2><I>Management&#146;s responsibility</I></FONT></P>

<P><FONT SIZE=2>Management is responsible for the
preparation and fair presentation of the financial statements and for
the preparation of the management board report, both in conformity with U.S.
generally accepted accounting principles. This responsibility includes:
designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the
financial statements that are free from material misstatement, whether due to
fraud or error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances.</FONT></P>

<P><FONT SIZE=2><I>Auditor&#146;s responsibility</I></FONT></P>

<P><FONT SIZE=2>Our responsibility is to express an opinion on the
financial statements based on our audit. We conducted our audit in accordance
with Dutch law. This law requires that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.</FONT></P>

<P><FONT SIZE=2>An audit involves performing
procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor&#146;s judgment,
including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity&#146;s preparation and
fair presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity&#146;s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of
the financial statements.</FONT></P>

<P><FONT SIZE=2>We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.</FONT></P>


<p align=center>
<font size=2>F - 49</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<P><FONT SIZE=2><IMG SRC="img004.jpg" ALT="(LOGO)"></FONT></P>

<P><FONT SIZE=2><B><U>Magic Benelux B.V.</U></B></FONT></P>

<P><FONT SIZE=2><I>Opinion</I></FONT></P>

<P><FONT SIZE=2>In our opinion, the financial
statements give a true and fair view of the financial position of Magic Benelux
B.V. as at December 31, 2007, and of its result for the year then ended in
conformity with U.S. generally accepted
accounting principles.</FONT></P>

<P><FONT SIZE=2>Dordrecht, February 5, 2008 </FONT></P>

<P><FONT SIZE=2>Verstegen accountants en adviseurs</FONT><BR>
<FONT SIZE=2><IMG SRC="img005.jpg" ALT="-s- Drs. L.K. Hoogedoom RA MGA"></FONT>
<BR><FONT SIZE=2>Drs. L.K. Hoogendoorn RA MGA</FONT></P>


<p align=center>
<font size=2>F - 50</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<P ALIGN=CENTER><FONT  SIZE=2><B>REPORT
OF INDEPENDENT AUDITORS</B></FONT></P>

<P ALIGN=CENTER><FONT  SIZE=2><B>To the Board of Directors and
Shareholders of <BR>
</B><B>Magic (Onyx) Magyarorsza&aacute;g Szoftverh&aacute;z Kft.</B></FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheet of Magic (Onyx) Magyarorsz&aacute;g
Szoftverh&aacute;z Kft. (the &#147;Company&#148;) as of December 31, 2007 and 2006, and the related
statements operations, changes in shareholders&#146; equity and cash flows for each of
the two years in the period ended December 31, 2007. These financial statements are
the responsibility of the Company&#146;s management. Our responsibility is to
express an opinion on these financial statements based on our audit.</FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company&#146;s internal control over financial reporting. Our
audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion,
on the
effectiveness of the Company&#146;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
statement, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits and the reports of
other auditors provide a reasonable basis for our opinion.</FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our
opinion, based on our audits and the reports of the other auditors, the
financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of the Company and at December 31,
2006 and 2007, and the related statements operations, changes in shareholders&#146; equity and cash flows for each of
the two years in the period ended December 31, 2007, in conformity with U.S. generally accepted
accounting principles.</FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>Budapast
May 9, 2008</FONT>

<DIV ALIGN=RIGHT STYLE=MARGIN-RIGHT:10%><FONT  SIZE=2><IMG SRC="img006.jpg" ALT="(INITIAL)"></FONT></div>
<BR>


<p align=center>
<font size=2>F - 51</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR style="font-size:1px">
  <TD WIDTH="20%" VALIGN=TOP>
  <P ALIGN=CENTER>&nbsp;</P>
  </TD>
  <TD WIDTH="60%" VALIGN=TOP>
  <P ALIGN=CENTER>&nbsp;</P>
  </TD>
  <TD WIDTH="20%" VALIGN=TOP>
  <P ALIGN=CENTER>&nbsp;</P>
  </TD>
 </TR>
 <TR>
  <TD  COLSPAN="3" VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=2><B><IMG SRC="img007.jpg" ALT="(STUDIO NASSINI AND ASSOCIATI LOGO)"></B></FONT></P>
  </TD>
 </TR>
 <TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
  <TD   VALIGN=TOP   NOWRAP>
  <P ALIGN=CENTER><FONT SIZE=2><B>Damiano Nassini, Giovanni Nulli, Federico Pozzi,
  Alessandro Masetti Zannini</B></FONT></P>
  </TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</tr>
 <TR style="font-size:1px">
<TD VALIGN=TOP>
<P>&nbsp;</P>
</TD>
  <TD VALIGN=TOP STYLE="BORDER-BOTTOM:DOTTED BLACK 3PX">&nbsp;
  </TD>
<TD VALIGN=TOP>
<P>&nbsp;</P>
</td>
 </TR>

</TABLE>

<P ALIGN=RIGHT STYLE=MARGIN-RIGHT:10%><FONT  SIZE=2><B>Brescia, 14<SUP>st</SUP> February 2008</B></FONT></P>

<P ALIGN=CENTER><FONT  SIZE=2><B>REPORT OF INDEPENDENT AUDITORS</B></FONT></P>

<P ALIGN=CENTER><FONT  SIZE=2><B>To the Board of Directors and Shareholders of <BR>
MAGIC SOFTWARE ENTERPRISES ITALY SRL</B></FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheet of MSE Italy Srl. (the &#147;Company&#148;)
as of December 31, 2007 and 2006, and the related statements operations, changes in shareholders&#146; equity and
cash flows for each of the two years
in the period ended December 31, 2007. These financial statements are the
responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these
financial statements based on our audit.</FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to perform an audit of the Company&#146;s internal
control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company&#146;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, and evaluating the overall financial statement presentation. We
believe that our audits and the reports of other auditors provide a reasonable
basis for our opinion.</FONT></P>

<P ALIGN=JUSTIFY><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company and at December 31, 2006 and 2007,
and the related statements operations, changes in shareholders&#146; equity and cash
flows for each of the two years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting
principles.</FONT></P>

<TABLE ALIGN=CENTER  BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="100%">
 <TR style="font-size:1px">
  <TD WIDTH="100%" VALIGN=TOP>
  <P ALIGN=JUSTIFY>&nbsp;</P>
  </TD>
 </TR>
 <TR>
  <TD  VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=2>Yours Truly</FONT></P>
  </TD>
 </TR>
 <TR>
  <TD  VALIGN=TOP>
  <HR SIZE=1 WIDTH="15%" NOSHADE COLOR=BLACK ALIGN=CENTER>


  </TD>
 </TR>
 <TR>
  <TD  VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=2>Federico Pozzi</FONT></P>
  </TD>
 </TR>
 <TR>
  <TD  VALIGN=TOP>
  <P ALIGN=CENTER><FONT SIZE=2><IMG SRC="img008.jpg" ALT="-s- Federico Pozzi"></FONT></P>
  </TD>
 </TR>
</TABLE>
<BR>




<p align=center>
<font size=2>F - 52</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>S I G N A T U R E S</U> </FONT> </H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
registrant hereby certifies that it meets all of the requirements for filing on
Form&nbsp;20-F and that it has duly caused and authorized the undersigned to sign this
annual report on its behalf. </FONT></P>

<!-- MARKER FORMAT-SHEET="Signature (Single)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLSPACING=0 CELLPADDING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAGIC SOFTWARE ENTERPRISES LTD.<BR><BR>
<BR>By: /s/ Guy Bernstein<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Guy Bernstein<BR>Acting  Chief   Executive   Officer  and<BR>Chairman of the Board of Directors</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated: May 15, 2008 </FONT></P>

<p align=center>
<font size=2>79</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>2
<FILENAME>img001.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img001.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D
M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$"
M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#
M`P,#`P,#`P,#_\``$0@`/@#(`P$1``(1`0,1`?_$`'T```$$`P`#`0``````
M``````@`!@<)!`4*`0(#"P$!`````````````````````!````8"``4"!0,"
M`@D%`````0(#!`4&!P@`$1(3"105(187&`HQ(B-!&5$R<4(S)#0E)I@:U=8G
M6%D1`0````````````````````#_V@`,`P$``A$#$0`_`._C@-3/F$D%-'*9
M0AB1,D8ITC"54@E9K"!DS`=,2J%$.8#U%Y#_`%#@."C\-N]9!O>Q_D=6NMVR
M7<6L#6<8L8@;39I6Q5V-3D<AY/?+-T"RZD@I'RZJZ1U2`@X(FJ11<QTSF`IR
MAWV\`N`7`+@%P`0^17>K%WCAU%RKMEEA):4AZ"Q8LZY4(]]%L9V_7FPO4HJK
M4Z`&6?,$%WK]ZL*[@"&.JA'-7+@J:G9$HAR':D:4^</SHT2(W@V6\F.3=)\%
M9)5FY+!V)L$J6RMKO:B5PM',9MI2Z+;\=P\=5GJJ"B;-_-/Y::DT$>^<`150
M64!G9XR5Y@/QJ\Z:SW7.V[5RW_\`'WEB[MJ7>&^0BSDS.0C6.[KJ>@T"W>4O
M-MI%M;0$LYEH9S%S:K*96C3(O$NA,$N`[X*E:(2\56LW6LO!D*W;Z_#6BOOS
M-W+07T)8(YM+13P6KQ)!VV%RP=IG[:J9%"=7(Q0,`AP&^,8I"F.<Q2$(43&,
M80*4I2AS,8QAY`4I0#F(C^G`?-!RW=$[C9P@Y3Y@'<0536)S$H&`.I,QB\Q*
M8!_T#P'VX!<`N`7`+@%P"X!<`N`7`+@%P#7N[]**I=OE%_\`8QM7GWZW\9UO
MXF<2[<*?Q)F*HK^Q,?VE$#&_0!Y\!^?E^%!,0\CL;Y%E4WD^64EZ-BN8:1Z1
M&Z-75AQO5Y,L\>I*N3203[=P_1(U`$S)D;JN`.?J$H"'Z&O`#+EK9ZLXXRE1
M,`URLV3*&>\F5.Y7>JX[JA&B+6(J%+!DVD+MDZVR"I(C&U&<STHUC&S]V59=
M^_6%!BV=K)J)E"JW$/GCQ[D&-Q0]N&JV<:"VR!OL[\<L_=(Z<QUD'$-;V$*Y
M?MX@U8OT!8&TME*C3!HY9():(A!0;NTS(*](@!A`PLZ>2NG83R/M]BLF"\T9
M(MVG>L-,VRN#>BDH"[>Y8RMQ[\DJWIYIFZQ3PUF@5,=/Q<,GB#8ZZ8`=N*P<
M!DG\FV'%L<^//,4)0,MV7%/D8M^/*)CB[PU?B188OLV5Z:O;,?M,OM'TXQ?0
M;>==,UXOOLB/TTWZ(EYF(9(R@4;?F=R$\V\76*V$="G?PLEM[CP+%+%;K*D@
MDFF.<KKQ:BBY`%)J$C(=*`"<0`XCTA\>`Z(_'<O37&@VE*N/58I:E#JI@$M<
M4A#@I%C')XMJZ:96A@$1Z4SD,4P#^X#@(&_<`\`Z-M-D-3]7\9Q]_P!QLB8T
MQIBN4N4%4XZ;RHDW<5QU<Y0CYY!QZ2#EC(D]?V(URN"HI@1NB@HJ<Y"$,8`P
M\T;D8%P50<37>5GG]U0SU-5JJZ]5'$<&\R);\W3UL@U;'6X_&L)7"+I2,6ZK
M;<T@M+.%FD'&QX>I>O&S?DIP$$T[R6ZK91A]PZG;4K+CG(&F-(E[+M9@/,L%
M$15SI%$7ICVVMYIX,1,VJ@W"HVNJIF.@[B)>2:F!4$EQ24."8A2'X1]U=1-0
M\`:^X]RA+/JML3Y5]CKYG^E8MQE4+YD&CXN8YRLRR.`\22EBA(5U5,9HQ^*(
M:+690BK@KEJQ6,\43*S.5P(="NP.]N`-;I>[P%Y=WJ>F\88=F<^Y/CL;X\M6
M0#XVQ+"EDS&MUZ>5^/<1M:1E@A'PQS9RN1Z_(Q<*((G214.4(,;>8?0%SDK%
MF+PS&^;2N9-=GFUU&L\A0;U&XW?8#95QQ95<@.<C/X!O4&T>9!BZ9]KU9G!)
M9L=@<A'8I(J`0^FV\&M^_.+93,FK]TD[S086[V7'<K)2U,N5'>L;;4W)$)>+
M<0UV@H&53632717`!1`P(N$Q.!#&Z0#?[B;#P6J6K^>-@)J4JK!?%F)<BW>M
ML;?.L("*LULJU-FI^MU,KM^]8`N[L<M')-4T$5/4*F4Z4P$PAP'.YX>;5L!M
M_E[4;>/%N0=IG.`9?6:^GW[R9L+=I)"C;/;13IB,:[C_``GAJ5FI"!K%+UFN
M1YMNTGZY%0<4:/3;QQ5WZP.S<!T[98RG1<(8PR!F3)L\UK&.L7TZPWVZV)X;
MDUAZQ5XMS,3#]3D/-3L,6AQ*4/W'-R*'Q$.`I@TTL>R'E^Q6AMOEW)E\UCTT
MR=(69SJ_KGKW;)_&69[-1X*R2]8@\L[%9V@EF=P0FK`M#JR$;5ZHXC8ALW50
M.\=2?^4`GS7'5;975+;3(]@LFV>3\A>.JLZUQY\=5'8/*L?=[A1,UN[>[DLE
MSEAODQ68^X3M#@J'7&SAH]LT_)J,EY-X5,2)%$2@6>&]Z=2=@+)`U#$.<JA<
M+%;H.P6BC1R9)F%'(E8JLNY@[)9<:.K'%1#+)->A))H<KE]!*2#5),2*B?LJ
M)G,!9<`N`7`-NYQDG-T^UPT*Z(QF9>M3L9$O5%54$V<F_BW31@Z4703571(W
M=*D.)R%,<H!S`!'X<!^=KXO?''^2/XB[_G:WZ^Z4X`R7+9JC(.K6>2RKF7'4
MU'':4ZP3,JPG:X6#SA1Y),\PM*JG,+\AE#(G+U(I*@/(+R\1[:?E+J9TP37,
MZ^.O4F%PO<<L5&O98ME*M<;+2E-QPXE6HW:S=QELM.^VKQ==%PJT449NBK.B
M$2*DH8X%$)"SGK#L17?+!M;F_)V"=O-@-;=H\'8+QSB:P:?YQ88Y^2(7%=9M
MC:Z82S;"DR%B6P(P%_O-D7>-'R+Y9BV2DUEE72)NZ"`2AY"-0=B<@^*?"V+]
M:-3<88[S-@S8S5_,V*M5<>75HUJM(A\:YPAY]*O.+ZQ85Z,+8F%8D%W5ED6`
MBF+DS]5JZ>GZ%W(65UW`H4C"FR=XSE8*^XS!GZD6J=S]?(T&K6N5:&9T.4AH
M?'U0F7$-%RI\68?KJ[A"*6DTSO%SJNW[@"K/%2%"L3P9:X9XM^D>B&1MR*[&
MUB+UYQ#"Q&I^"TTG_*&8DBG<%![+96:2\>S=FS)::0_4;P<;UKQM<A'HKI$+
M)/%CMPM,\A>CF*O(OJ1EO4W+H+LX+(D,12O6EBDDK+T*_0BGN5)O4.58.A5W
M79Q%-15`1*5XT,LV.($6,/`<B^INU/FI\!%3C=(MAO'5D??'6VH667;85S7@
M&3O]L?H0,\JNK"52!FHJMW^.8UQ!TQ56:0$E%0LC'"Z4+U*)F0#@-)D_&WE;
M_)BSOKU7=A-0K1H9XP\49(D,@6)O=WDG6\@W9FQ<IPD@+5U::XQM5CR&\K[E
MU'Q!VL#'5]F5TZ64644(0PA>OEBG+:]^8S%FPN7*?EEUJCAWQKVG%VH[C'M*
MLF3*C2,RLKL1SF2G+5VCPU@M[/)%VQ!$0;:O@Y2$LZDR6:-U%'*()`%6.PFH
M.W^1:!O?M;;L;9/Q[G3S;;"8`T$Q]A]:+EY5;5G2>1L<358O-F=H.N.9M_!7
M&1QS57:\S&J/$8^"5E$T'``99PV3`Q7&DU*UG\C/AOTNP]AS*L]K;IQA;8?8
MQ&^I1;RSL[KL1;&]:PO7[1FRYN%(VNQ<G4X8SZP%<*"+A-,K=A$M`220:"`*
M:6LY6]&W#U@WSS+O`_VUSWN#E2=VATIPSA%DP<;$XW9RL-4ZR6(V(>4A.8^U
M1SB9@U8+`PNM9:H0Y7#5OTE4YNP/ZM:=8_N?DHW8WVNVOMS:X=\86OF--9-'
M,32$'(5''<]-X9QK.Y<OTQCNC-12A[53Z]+3D1&5E4@>W%DP65!`7;-!1N!@
M_CTR\E9_%SAB\VBH9'KN2<G6W,&6<PV'*-06I]AR;EO*64+3>[KD!DB]Z)*P
MUI^ZG4V4;+N$R"^:,2"3J2(0Y@JQH^:]88#RT^0N8\T=L^1\@4.U2=4\?#/8
MQS8DM<V^HERA'E=F97"%>F&"^*7MYG$DT?>I11)2:6]Q513,!`=IE`./$O*0
M-;G<?>/7R5W3[?=>-+[]D'9G0RIY.')V&YK?"F6S(N0`HELD3VY&!C\E8VQR
M5R,E!U"-30?S+N0:&=1RZ#`R:H=:ODOPI=-K_')N#@[$:35]?,SZW9$K>/V<
MN+N+0E9^:J[EQ`QC@5FHNXY>6<%3;E[J11255#N`4`-R`!O%WY2]"X[3;`F!
M\@Y.Q]J!G+77$=`PUE#5K/$I&8;RE2;AC^$;TQVQBZ7;&M5=VX+(\@S/FHPC
M9V94'A"'*5P)TP"$O+-DJV[28_\`'[1\AU[)6MVD.>/(G&T79^<O@QT#&Y&U
MUH;.>M6,SY+`J;PV.<1[%VNLMTTVUD/%.DTS-0?-RE6`G`/#8BZXCV7\B&K.
M<,=W6KQ.G?ANQML!G_8K8RHI^X8Q;V2]XO:U2O8!H]J@6CRKV%6J4B&<S]H:
MQ2KKVEHBT9J%2=KI)@%_6.LA4K+5!I>4L;V.-N&/LBU:"NU)M<,L*\58ZK9H
MQM,04U'+&*0QV<E&O$U4^HI3=)OB`#S#@'EP$'Q^SFMDM+2T!%;"8/DYV!9S
M,A.0L?EBA/9:%85Q)1>POI:-;3ZCR.9P**)SO55B$(U*415$H`/`:Z+VSU6G
M!<!"[,:_2XM$"NG01>9L<R`MFQQ$".''I+(KV4#"40`YN11Y?KP#E9;`8'DT
M57,;FS$<@W1<)-%EV62*:[12=KE(=!JJJA,J$3<+$4*)""(&,!@$`^/`.QED
M*@2+<KN/O%/?M3R1H<KEE9H5TW-+E,)#115D'ITQDBG*("@`]T!#ET\`X?=8
MOJ,7W)AU$Y=9?6-^HG,.8=0=SF7F'Z<^`]BR4<<PD(_9&.'0(E*Z0,8`44[2
M8B4%!$.M4.D/\3?`/CP`KY$UIA<J95DKK?\`..5YW%4]1(.IRNK:E@IS3`,X
M:'G%+$I:9J*:U1*[S;R=3Z&LDT7G#P\A')B@X:*(F.00*Q'T;9)HU;^F;H]H
MJ+%NCVDDNRBD`D2:(DZ2=I)`GP*0.12!_AP&3P"X!<`N`7`+@/'27JZND.KE
MT]7(.KIY\^GG^O+G_3@//`>"E`H`4H`4I0``*4````/@```?``#@,-Y&1TAV
M_7Q[)]VA$4O6-$'/;$1`1%/O)GZ!$0#].7Z<!@RE9K<XZAWTU7X28?5Y^25@
M'DI$L)!U!RB:2J"<E#N';=9:,?IHKG(59`2*`4Y@`>0CP&[X!D3V,\<6JP0E
MLL^/Z18[3654UJW99ZJ0,Q8*^LBL#A%6$F9!@XD8I5)P4%"F043$IPZ@^/QX
M!PSL!!6F'D*]9H6)L4!+-CLY6#G8YG+P\FT4Y"HUD(R01<,GK8X@',BA#%'E
M^G`:N/HM(B*G\AQ-.JL91O0.HKY,CZ]$,JG[6^!4'L;\NMF:4/Z!X"Y^ZCV>
MVIUFZ@'F/`.!BQ91C)I&QK-K'QT>U09,&#%NDT9,F35(B#5HT:H$30;-6R"9
M2)ID*4A"%````#@,K@..>_\`X9.D5MN63KO6]H=EL>R%XNMPLU8AJZTQL-9H
M<):W#QTG3F[$]91E9F+AS/U&Z2@OFIE6`%1.43`94X0<;\(/6KD';WKSF0>H
MO4)L6T$P&(`_O*`%F2"!C%^`#S$`'X\A_3@$?\(76WD':WMSF3_/S`^+J&<#
M"*9@3Y=,TGT]*H@)OUYE`0#D(]0!Z_\`A,X<:-F;:(\A6<6"3=9M)J(?2ZK>
MF"?0Z"#+,T6UO:%:K$0*)4CCUK$^'\@@'(0^,M^&"D>PIN(+RA9K:5HY#@\9
MRV+BO["LH!7!4!3EV>5XU@4B?-+J`S,XB!3@`AU!T@Q__"_R8FD)T?*M<P>"
MY.41^B]@22,R1,LLR.)R9U,J#D''082<A(01,)3"(!S!N2'X8N?O62!8WRF2
M"\>C'1*4&I(8JNB#P[HQ`2G&L@BAF!R@TCD$A$K0R*BIE0'DH1,.`RB_AX[?
MU>:1G\>>6B:B)F"28+5.<+3<GUV:C9%<'#*<%%_!Y;<.XA(D4H":"C94QUP.
M=-0J9/B(.A;\5+R=-4T4H?S79"32<M$G$LDL_P!@FJ9YEP4Q9,$2-<OJ%=-#
M`4@%65`BJH<^LA>0<PU:GXKOE@.#QL;S36Y1B+15%J12S[)"#OJ2(F5H\:CD
MDR+5HJ0QR'$IU^1`#]ANH0*#:<?BQ^8I$'SB.\Q#E5ZVC&[2%%QDW:-B#KD!
ME%8Q\Z0F'RL3&(."$[9DB.^OF)A2()0`P94!^,]YVJ18!L%*\QY(N38LA)%2
MZ>=MM&4@*[UL@C)-5DBQS])FUY*+$*J51<RI2$$4TQ.()A(?]@[\D3_]O77_
M`'&[;?\`M/@/`^`_\D4"F$/-VZ,(%,)2_<;MJ'48`$2EYC5.0=0_#G_3@(#-
MX4/RMP,8"^39P8H',!3_`'T;$%ZR@80*?I&B")>L`Y\A^(<^`SW7A,_*M:*1
MRC#RAN'YC,F+YSU[N;%(%8R0G,=:,.FXHJJ;XK0R9>I3D**H&Y<A#F'`2"W\
M67Y=[:6D)I+R8U'UTF5N5V"NRUW78<FK=-JEZ6)7PDI$QX]I(.L6Z"0J'YG/
MU'$3"&8X\9'Y?CD18J^2NE>F=-U06=I;#V)N1#D=,H)"JA@U*1275*<3%,B4
M0`"#S,41*!@C5YH;^96U>.VR&WTK(H-W*Z",@SV8QLFT?I)*&(F\:DD(5B_(
MV<E*!R`N@BL!1#K(0W,H!C?8I^9A_P#;*>_[F\5_^G\!]VVCGYFC1=-REMA+
MG42$PE*YV1Q"]0'K(9,>XU>1*[58`*<>760W2;D8.0@`@&V8:;?F?1J1T4-J
M!6*>.6C.;_.F!Y-4K==1)4ZQ%I&M.EBR)3)`!'75ZE,HF*50"F,`A]HW4C\T
M5NVDD$]GTB%=/C"H:2S'KL^<\VI@(1:-<.JJ\68,7(!S!-(R13A\3$`1'F&+
M8\+?FNU5HL9GF!6W^F"*:%1KEST\>NW1'!774X1/.5^'!06/;Y.U#G*<PG)T
M]SXB4--2:Q^:"&1Z`VO<UDL*;)WZGC;UFT[I:9FRK'S'#(6!1RM""=XPCTXG
MNJ+$0#NF2!02%,8>0AV<>2';*9T:TLSGM578"H7"<P]7XVPQ='NEA>5:.OCI
MQ8HB)+2HJ;CV<F\;6RRDD#-H<B;1V*\D=%+M'`X\@&_%'D3RU"[HX*T5VZPG
M3,?93V4UM=Y[Q-:,-76TWZL%EZ8W6=93QQD.'M5&I\Y1Y"NH!U1LB!W[*2%!
M9-4S1844E`MQ,8I0YF,!0$0`!,(``B/Z!\?ZCP"$0*`F,(%*4!$QA$````.8
MB(C\```X#P0Y%"%43,4Y#E*<AR&`Q#D,`&*8IBB(&*8!Y@(?`0X"*!RD\^N@
M85^F>2_;QQ.;*`YD^7B_1T'@6\M4+C/YK]6)_J4*`C*^W]@"^UAW>X(_M`)9
MX#0SMJK%7&&+9K'!5XUCG6%7KP3DLPBAG;+*]WVNO0X/W"`R<Y(]@_8:(]:Z
MW0;I*/(>`WW`+@%P"X!<`%>G^Z]6W"G-HX&M8[O-"=ZI;%676:ZJ7%:L.VE@
MOM.@H":L;NK/ZG.6".>0C$UA20ZCKD<@H40512-^P`-3@!QR?ME@C#^<-?-<
M+U=4H_,^T$E=(_#M&8Q\A,2TZGCZKO+=:YJ22BV[KY=K49&,A3&2?=AD9XHF
MW!053E+P!'<`N`'';39BJZ>Z_9&V-O%+R5?:AB^$7L-CK^):XQM5U/%-BF,Y
M=Q\-(S4`U<(M2AS4$SD@E`?@`_IP#V4S-2X3$M;S)D-TMB>KS\)191XWR,+6
M#E:K(9!5A&$%5[,BBZ>M&5E+/6!M&JH)K+$!\;ME.<.1A"6.`7`+@%P"X#G0
M\YS%SM3FCQ>>,REW;Y7LVPFW+;/>2)VK3U?C\B8\PUJE67]\G+76CS*,JWA[
M([DY%/V19S'NTG3]@9($S@50`!>%"OXQ=9WWQ2SO=)_-GE*URSO?]=,S9ES%
M)KO\JR^KK*U.9W6B5H=>408UG'N)+M2%&KM9I76C9N_FT5G;T5#+-AX`5K%F
MC9_?G;KRIUV5>:WX]PWJ;:&6F.#Y#97),[4H+`+FYQ!H+*^R5@UY3@D)7+E_
MR9#6DIL?RTI*0D1R8D9,5.2SMVH!H>2:$L>J>M_BJP,-QS?EO`T)M9KGKYL3
M%U=S,VG8C9.@P&*+HRKL`Z@:_P`K7D)E8[S5XZ5ML7&F%RYB6KCF0Z!%0`'=
MXXM.;1';F[D;GSF/,L:^X&N=HI->TXUFM-VO=3AZNRK^.$*+FK-,]KLA8?DB
MDRV69Q@B2*:O&9W:$<S]2"#4[@IC@XO&-D"`R/GSR[[1H6M(F$QV[5Q-0921
MR-.SM.BJUK=C"$BLM7*%CK%8).#I%<GLLRE@=N%V!&+!X9J94$^VB10P#QC9
M_CS(/E6L^NF<,BY[D<SNL@U_R8:/9YQUD*TP>*\K:ER%685537E[&PUA=4^0
MHE`EC.F;YFJS.E963HKP#(K"<5`SMDL18SW"_('UJI%^DI23I^B^G9=CG]3=
M9,ML-676P>0LL2D!@=Q#5"#L$7')WBJP,!-S*SKI]0\9E:HKIK-DR``.G/>S
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MBQ7;&=LI;QMC#5C$6L+RV3\9+PV.9.72=N<@.">ND21P.Q<K+/`:L0V.;O(5
M=\@VCR7Y*K5H'$>H'BLQQD>J*Y$BYJ7;O]A=V8J@)VL\$G*1D<#,^/\`!#\4
M8)]7DEG+B9LTJ0KQ)1JDB@<"O\)NOEUUZ\;^`6>6ROEL\YJ93^S^PDO,E;_,
M<[F?8J<>91MK^T*-#G;JV)HE/MF#D2<BD%F!"E*4H%`#ZSQG;'.N&-)K*F4)
M1VQK\6O&Q4?&0\<YG;7<+78'R,15*+1ZTP*I)6BZVZ;=(LHY@W**BZZH"82)
ME44(','JVTL^2?R'<296S31[OBG:2:\;V:<RYDQ_<'?K8VCTFXYEK6/L`8;J
MR;"7F:N5YCBA-%U;#)1ARHR5@=.SF$XF_:%B6PVT>PM/\TVN6#XG9S%](TWI
MFFF:]H=KL<SM8KT.I5("`D4\?5*X9(RU,23T]?BYJW6-JXBNZ:OL&Z$*_,L9
M\=1($P?VF.^5CFM%MI/([L_9WZ6`4\K[.YBP:@E56D0YA--,6R3NMXH5B6#)
M@WD+(^R%%TMS/-'CAR]-(^]H"BJ5N9)-,*OMMYK=/.V0?&UA[+>T#&"G/)5L
M7B2^Y(T)J=,H3BFX0T_P@A]RL\/S0XBAS7.WHKFDQ4/99]V\2KLC).UV;5HS
M003!4+:M\]BLY4O<[Q<:R8#MU:9K;#9SR)8-@J=*4QC<'TCK9AN@'MMMGS/%
MFK]U1V3>Q*Q\:UDB$0[LM(M2`N0"*%.`]>44V:\][[^,/1S#&QMDPK"6B?RW
MMMGIK1*E`6"RH5'5\E,GL134[(3*+A-I2K%EN13A'$>L`,Y8RQBJ`H*`$X`M
ML\;27O(6W<-XZ=7KK#T+,3#$*.Q&Q&9I>L-+C]&,+/K(E3JK"42L22A:[-YH
MR58E3F8C+%<1<)$-%7KAH],LV0$&GXV]MLN9E;[SXVV!M-6MCK1W:6]:^M]D
MHR&B:5`Y3K%=JD%=CV:U0\:\7I-<N%$:V+VZP$CUD6*:K4%#H-#G41*`B^*O
M=GRG^0*(IF=[!0M;*/J:&Q.=(6?N\_!9#K-_S1@B#8+Q.&9_7*H-9*T0Y8UQ
M8"@O-6&>F#(R!R*(QC444Q6,!&9?W&V40WTROIQC&YZ]8XO3;$&!\C:PX\S_
M`%"ZH,MF(:8NDH79&QU;)L-9X9(9S%U7B56+>`CHZ5<(NC)/G?\`NJAP0`OL
MB_V_?N?HWU3^U/[QO86?TZ^<_IA]Q'RW[[&^A^5/=/\`Y`]H]_\`2]OTW\7=
MZ>7`*-^P;[VK'[-]M?\`<%^G;'YO]L^1ON;^EWMS#VKYF])_UY\H>U>G]+ZO
M_=NQT]O]O`-JW_VU_O#9_//VE??)[!7?3?,OTV^OOL/97^3N][C_`-4]KT_<
M]H[O[^CJ]+\.?`55^<2P88QMEG`V0M\,?PNQFA$O0K-2&F"7%G7Q[:J1LXE,
M*S4;FO'T\N-6B+Y?Y#&"CZ%C((ELA9MDDDZ=Q:+M514$PG7P912"N.-C+[0;
M!GR+UNO>5*ZKK?@?.[W:2TOL)TF!IS:/FOE_(>U&/J-8+(VR!9%5I!9C7UY^
MN0A4D4&\FY4.J(`9>HO]MCZ8;'_9I]OWTR^J&4_ND^E_MOHOJGVG7U0^J?1_
MS+WCT/<[GJ_X_1_\/_!RX"*M%R^*L,QVD=-CTX^=!PEC$5`G`RF&0R:U?\P^
MF9<5_6XA9H<"@X[G:^4^==]5V>__`#]C@'+00\7H>3W.8TTV)!\HPXNI7U8+
M)?,'U9+BX*S"?+_RI\S%"M^W#5_;O=/E<17['8]R_P!3@!*W-8>%MQOQ`N]C
M)NT,-T&=;H`7:+PXEM@=C*U!648&QB.U:FN,0]QPG66X)=,;]07#9F,2JMU=
M3$!$@']N:EHTI5=4AVZ<5MO1D]M]?E=9`7+:S5!QLX49L,`-P^1D%X8L>=<S
M@60S/17.\5'O&`W8`0F7;L-<3:OYZ+MZ:L$UA-BVWAG0]R]8-=)C<8EP%C,^
M",*>8%4K/F+;T(#(>J[?I0%QVN`![QK0^@\)"UYIJK:MD[>L;';!?&\IMDWW
M$;6A/#:J,4:(9X;3V^K=7=CC=LP]`4@UMN9L+;TW>.<G:'@*RMJJ=^/N\F/)
M/);'97RS$T2PY.8Q6X%?/';8J:V47:J/-75)^RXA6B<:R6*W>VL['+1Q)Q.H
MOIBQ$C4E.;5N@+XQPZ4L+%H1,38])BX\PKCPM3ABT]6PA;0GE($K)((\\T%]
M(G=0E#MP`5O=2E?=?/O`!^8<`(FRM7U<=[F:(6W/N1\CQF48JTY1B]3,8*L;
M$I@>S9E?8SLYYZQV&0C:'(5=OEV'Q>$R2N)S5ACS&0%U[>U7<]9@`;D\?Z%G
M\WSR^,\Y9W1\D1-3&B$MA5O$7<V&EM7`?^B:O7LJIB!3'Y8X]U,#L@!;2OO?
M"])4P'J1$(:VHIWB(<>0S--PV=RQ?&&;2ZL8]K^Q>*;/%9>4U5/AQ::L2^)+
MUF64)CMWA4';2=,\1AD)>P@R-+E1$&)I+L',&ZUZI/B^@O!7;Z)6LQ9DNWC.
M2P%F"(N.:LI0N;X[);O&#_WWYNM41!6G'5>R&BTA2.C#7T8:M!'F;MF_H&SA
M(0[H#M@#$WB?@/*)KO(5K:#=V[^1.EZQ%BXZ"R]6-GV;_+V!9>O0PU6RWUU8
M\#5+'\-5:M"I\DT81S78U5RHO[J@Z>%7'@#5V&HNCS_S'Z;9`R1FK82$W=A-
M=[Q!81P7CR`S4XQ3<L8/K?*KV*ZY%L>.L=25381L+-F40D&T]98^(5*#$S]J
MH`,S'!VVNB:@NO-7B_(CC->8HW>2+T6L%;9X"JE<ORF);'KL[R98W:>0\I6J
M'Q^^I#8(N[&>-(UE+6-D0\F5JHFU4=`U$X-'*V(<%Y"\C&<937O;/*>ON[B6
MFU*KNS];QIBQ]D-E(8!>WMW)8LO#5U9:+-4.%SK%*L9B.KIF;R1EO;GJRAX9
MR":"Q`]<`U/QT37B0SC2M*\I2M+U%D\4;)5W)&9*U7[]8,T5FQNJW8V&=;_D
M2LWNLCE^6SQ&%.X>O6DW#C-*J$;D3:"@+5+@#XT=C<&0VFFJL1K'875MUVBM
M>\0QN$+6^:2S!_9L6L:)!M:187[&>C(6:9/YJOI(.5TG3-HNFJH8IT4C`)"A
M4.PPAK=4MCO&%*;5;M9'R[DVK9NVZ<Z,U2]X'O./\SY&RC<)"TKW=ED.QA`/
;;JEC'$M:.];QA7[>L5R1:ECUEW#YJ#%)0/_9
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>3
<FILENAME>img002.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img002.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D
M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$"
M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#
M`P,#`P,#`P,#_\``$0@`)P"6`P$1``(1`0,1`?_$`&P``0`"`P$!`0``````
M```````("04&!PH#`0$!`````````````````````!````8"`00!!`$#!0``
M`````@,$!08'`0@`$1(3"10A(A46,4$7&%$C)!D*$0$`````````````````
M````_]H`#`,!``(1`Q$`/P#W\<!P/F$TH9AA032Q&DX!DTL(PY,*P9C.2\F`
MQG(@8,P'.0]<8Z]/IP/IP'`<!P'`QSN[M4?:71^?G)`RL;(W+7=Y>'560@;&
MEJ;4QJUQ<G%<J,*2HD"%&2,TXXP02RRP9$+.,8SG@>>N":U3KW#VG2N_%]S>
MU(#J)5]Z(+/T9UHBLG4UT7)X'767$J,[)W8)O9<2>4/]X2M`F=&)H`N;"6.'
M")Z'*37!3@8>B7@0[NC<&/U'M/J/J6DA3U-[#VM';[PG4-+DWMR"M:[I6)(Y
M%++#E&'`'5:UF.STVM"9,G'A4<L7AR`(@@,Z!,3@.`X#@.`X#@48>@JWII)-
M6[QUIM>PI'8MN:([B;$ZK2AXF9AZN7J(O$9NL>*V<WIV4J5AK\!RBCT`)"O)
MHOM3Y(Q]I&.H=^]G.VUDU`V4WJSK-(XW$MN]R7F91JLK%F!+4OA>NM6UI'/W
M*^]I9ZUN^<MSE'Z?A60B1(U/8F<'Q<B)-%X?-C@5X>B_6#"#8S=O=Z#RNX9'
MKI:::`:_T3/K=L.=3F5[=FU`8N%;F[,A/EKLJ0&--LV$881$!-J9(UDL"<P*
M$DE(8#!@>F#@.`X#@.!31[/5)^TUJZT^J6/N3BA:MH3WRZ=MG-E7*D"]FTMH
MUV8U$OB(E2=L7@3&[!6$YM,1!DP118VP;H$6<_0.0N&:&AJC[2UL+$VH&9C9
M&Y$T,S.U)"$#8U-3:F*1MS:W($I925$@0I"0%$DEA"666#`0XQC&,<#(\"E2
MD48MC?=IMK?!"E,O@.B^L-9Z30]2A<4[@W*KBN=\*V&O,>0EDXRB?8G'$L2:
M%9>!B\8C!`%G!F!EEA=7P'`<!P'`<!P*5+1U&VCU+W5M/>3UY5S5MR-&VS-"
MF3<;5BQK+5TM^=GE?F+4D-V'J:Q<1B8Q]LE@8Z[JFZ0M#@@`0YA\:HL[Y.1]
M`JZW0T#]H&Y.V.O6ZVR^HU-SJI:VBDEHZ9:!Z\;D/<8GTZJN;*R)&O5V]<DT
MBU>UE9$,/F"=()\AZ3#<F7MZ`!)AZT`QAP%M[72/L9V?7H6JTYY'/6IJO'&E
MF98WKUJ,_,$XV2E+:B:/A9;IEL:JBJ*!TO&6<9"<M"TP)C4+<)PB+R]%A"#&
M0XU?,,G7J:L>M=O:]M;86T=(G%4W5EOK75UV[:.P9]30]R/RGA6X4$=)Z]3*
M7QLFL'Q0%'-$#;C*%;'5HEQI)8F[*@`7KM3JUOK6VOC&Y('EE>4"-U:'=J6)
MW!K=6MQ3EJV]R;5Z0PY*N0+DAP#23BAB+-+%@0<YQG&>!6#MC;%W6?N=KYZ_
MZ%G;U3C<_P!8RO:;:FZ(F1'E%@1RBHG)T%?PJLZX')V]V;&.2W18Z\Y,J>@)
M5*QH9VA6-*$"@TL\D+1TY(4Y!"<(SC`D$EDA,4'&*#QA*`$&!GGG"&:><+`>
MHABSD0A=<YSG.>!R:Z;WK&@(RWR:S)$%J#(']MAT*CK>D5/<TL6=/@AEL$"K
MN(-12E^F4R?#"A83H$))IOC`8<9XR"C30!2CZACY;MCN1[-_959<3=(.YO5R
M%:"TI!G5P9G4Z%U!J8;E/,?(X-0UI!SI,+;>UBEQ"F4FH2EJ(99(C<`\H@]!
MO`<"A7_SI1HY5H=.]@WQ`@)G.WNYFX.PDV<R3,*'-T<7.\97!&_#PH&I5J2S
M6]K@Q91*8T>!)B>@1!"/(^H7U<!P'`<!P'`<!P'`_,YQC.,9SC&19Z!QG.,9
MSGIG/3'^N>F.!K$XAD9L>%R^O)JTIG^'3R+O\,EC$M#WHWJ-2AJ5LCZU*P?3
MN3.+6N-)'C^H1YX%0GI!L"?M^O-QZ4W)(%,BMGUO[$SW4@]W=5QB^026EV$I
MMEFMLS=33,9[BWFG)(W(DX^X8AEM><F9P;Y`A#>=T*"V'@.W%(^QW4&M$=Y6
M/!*DFFLNPVNYDYCU</MV:_2I_1SR(*J^E\RP3"FJPJEM)%^2))=5*%*YM:]8
MG^24;@G`PW<K9GV!6D0@CM7>OASHI\<E)B)YLO;*YZC.@$#**)"<8[I(-0<W
ML>>6D,9I1J=.B*/CI1I@BC#%Q)0A9"';*3U#20.P55[W-9TMV0V*7M.68BQ)
MLE0,D0K=G/P9^1CE!U,TB/C-1,#MWXPM.+-<9`Z``$#@ZK```$(0:]7LOB=&
MWQO]H)-3_P!3NYAW"O7;*!1][SA(?;&N>STE(LB)V="%)ZL1<K11U_=E\??,
MHB2@-3BWX)-!WBR8,)_;(;AU3KDJBL*7'J;#ORS5@&FFM;H"I;'*X;3=1Y&(
MX]H8%"Q,6PPYC2DFJGB2.QB)A9T9!ABE4`7C`8$J$XSC$Y!B@G"8\9)0ST^#
M0G8(.$`(C"<'!P$)N"AYR'NQC&!=.O`HHJ.O]D/49.;4@D&I2Q]L/6O8,PF]
MQU@UT2T1B0[&:A3^Q9<^3BRJY7U>H<8LZW'2$@DD@/<6)8QF.$B93!&I%")2
M4(H_`3<3^T#3+YXV5XGM@1&1$%M(U<:FNO.Q43?D@WM,)4@)-0/=5),FFC+`
M+`O"(T`!@$'(NN.!G8M[,O7W+V]6YMFXFOS:E;UA;<O#,K(C]>+4#B:8,HMO
M7-L^51IR2+\C!G_9,*";@.<"R'M%C.0[DR[/:U24YH3QW8:C7\^0B+`P$,MM
M0%U.?!FE`/*`T%H7\\;D(TDP(PX)P/(@BQG'TSC@=9:I''WWR?A'UF>?%W^7
M\4Z(G#Q^,S)1GD^(>=V=AN.W/7^!?3/UX&9X#@.`X#@5S;X45;5ES'5RU-<-
M@X14.R]`3>QY+4-;6_EP<Z3V*!+:U=(S.ZZL.+QU]89FI,0Q$9ZUN>6<2Q7'
M3`&JA(E)0AAP$8XO[--V:N"X,&Z/J(VV99$UA4Y(FFDIL)W'JZ5D$*"RRES0
MG8I)$;(8OE$&8-"D7-`E0.F0]!9#G/`USUJSB2WU[%?9OLL75DXH&#3N!Z0P
MC%/7>JB\6V,S,8%"+//.L2T:(:I1)Y54#1(XO)$"*/B?,(#WM"VC4DD9"$S(
M0O8X#@.!`3<6C-'-@)Q2T'V,F<4@6Q'69N&LTEC-WFT/M(A`0U%8LG-'RJ*2
MN*V<O:!L&0AD"-O$J;QI!!$L)S@)8@AJVGE->M*CK=M2&:NR6CY;M:6@3*+_
M`'P^ZFJ]-O5J`1R<))]Q2V5S&9W2G9S5N"Q%)G`XAM+.R'PD@^W'`LDX#@.!
MPJY?\9_PJC_(3^Q7Z[\LKY?]Y?T#\+\_XF/!\C]W_P"#\OX'3L[OO\/\?;P(
MWJ,>JL1J@*G_`*_?D9;!85>06N@5'X?*<OO\PLYP:%N^+V=<YSX_'T_ITX$8
MIU3OH=M!\.;'=WT#;)BI0@*$;6-YUM4,]"A`N4##E,[5%8,*EB4K+B,SJ,HX
M'<;UQG.<XZ8##PO1STLN+*B0U+/86B;DYB=L:U=4>P2Z$@BGD2\O\:K+4Q?8
MT1;A*"7<90B%"C"A4)1@&.HL]`\"8J;2*2QM<6]5KNYNE%UZ5,4F:T$LM"-W
M7#RTI2?P%DN,>N"$3!0\X%U\@E!JW"\8\]<J.F,8P')'=S]FL>OF&ZZ(76"V
M+4]APZ53)_W;;JD;(4OUV71B4M*MB@4BJUVLAXB]SO-GL!:IG2GM'X@UC-.P
*Z*DIY!."#0__V3\_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>4
<FILENAME>img003.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img003.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D
M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$"
M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#
M`P,#`P,#`P,#_\``$0@`)P#(`P$1``(1`0,1`?_$`&D```,!``(#`0``````
M```````("0<#"@(%!@0!`0`````````````````````0```'`0`"`@("`@,!
M`0````(#!`4&!P@!``D1$A,4%0HA%S$C%B(8$0$`````````````````````
M_]H`#`,!``(1`Q$`/P#N%^RW64KQ%BFY](5]$&.P[)AA4'8ZUKV0K%2-NG,_
ML6QHC7$4C/R@4HW%4H7NLK!T!"<P)QO0?4/>?Y[P-VN72=)YFKYHL32MIP&E
MF)R7,,>+73.1H6I.Y3!],3(TD7C9!IQBZ2/*E>H^A25"6I/$6$1GU^@1"X&7
M:JW]DW%JR#L>@[5)C$UM`+MVKZSCD7F-C6I9(V,UO*=B8-6]=L$HF,C-1#="
M>"XG1B^?MWX^>A%\!^C.N],I:GJ6P+KIZUD2Z"5$XR9HN`R8,4GK225$[0YM
M&\R9MM"&6&S1F6056T,I?5I@7%&GY^I_VA[T'^?`QOUC^R6`>S>H;-MR!P"6
MUBFKB[I74QL5G/R7)5S.W,T;ED)G2A'^DB_CD$_ADL1.29/_`-WXRS/CAIH?
MJ8(*2>`NVA=<9BR<UQEXTK?%7TDWS-[(CD2,L27-,=.DCR>,L'Z;*B6*`K7'
MB;\H1*32BQ$I2Q<&<,L'?MX#"$'DJ225*8XI0G4%%GD'D&`-)/)-!PPHXDTO
MH@&E&@%P01![W@N=^>>!R^`I>Z=>P'!N3KJU?9")8\QVH8F-X31=L5HT;S-)
M0Y+D;##82RG+AA("Z2N4NB1"4+X,$7^;IG"Q_3Z]!:,[5SOJV,!PMNT!H`=>
MZBOQS3V):DJB<69&AYH"L[&D!<E74C38&UK0)6Z:P"N3RH\AD#L4XJTKL)0X
M#$H,+(YP/CL$/U)H-1:BI3%U8L:'.%$(X[`]"7R.3RJ5NMJ;22!1&N\.:7UX
MD[TFELBKB`G]-L&0*@C=%\F=TY"@TU0F4F="OG@3-T?[1Z@H9WLQHAM47UJ+
M_0#<Y/VG'O-L.99I$\XL,?3H'22EV5*7J41IH43QDC:[KJ;$64QVE`&X@P\U
M"27^,1@46C,D8YE&X_+XRXIWB-RIC:9)'G=(+HTCHQOB!.YM+BE'WG.B3KD"
MHLT'?CGR$7/`]YX!X!X!X!X$VK8]J^5ZJG,LK@EKT5;LP@<\5UI,T&?LO7M=
MK?&YBWL++('!H<9-`8,[Q;I[:G?DZ94$E::)&O\`NE/X6>6,`0CS[!?["$J1
M3*O,8>NNFK5!N&VU#,M/!IO-MRPU%3L`<ES9WLU<:U<X\W2:0?ML"E6Y@6FE
M@9&YN;SSU(SAB)3C#L^*)&V0J#ADUC2V.L[;'H\F<)A-'I8ABT82\2(BNNKZ
MN5NBE.@8VL9W!&]Z<:$!(!<YT7^/`F]*/:#'[#5N,1]?U'61OR:$\,3D36KS
M&V'Y.:5X.&!4@DFM9F-'5*T;2+@!*4,<.D+MT(OH6F$9\AX#7Y/EVLY?`Y,?
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M^?(6A1#43B1V_>RTME1JVGI_3D<4,XI4)TB8[O`F!HZ;S1\T$KR=:547=<]Q
M;?M5GV;[<,_XAK0FT9W1>7JIBT6:L>XQ=GU(_1>(."";E(V\BQ'96HXI=BE2
MX!'>)5J4)H6A]2,L=9'KWV\=54O8>?VESO3+<X9JJM,F#-,SB:21Y*KUA1I%
M48@+_)F-@:E;+#$1Z,@"T[I`!B2F?C.3&%A!ZMT:TF>?6.`59GZO2+GV-I!T
M?H=F^K5ZO^.B*=P86CKK+;=N-\+/)51>CJG;CB5;ZL3\-6J3E"1O1EC5+"^A
M"'GL(1QW"E'IH.N71G=/NY]B[.TYUCDSL2)?^S7`8[+=PQ2P7>(U8VD+R*,R
M56S=(5Z=`W-:-.E6K.D"<AN!_%AP0WG,/LDSI@S*DVS<EE=R:[COK;9J:RC+
M-!(E[(\KM#;*GSV8S-.4Z)1/\A)52V510U46C$`2P+?&VTDA&<H'Q,,[H4\T
M=OMEH^3PZF8%1]MZ6U=-($;:)&9:6+BRZ41&NVX/0O<VLR?R!^9JLKV-DN11
MC6V'+W<!LB>?HC:BE8Q"Z6$3Y?L[,OM$N9MV3+IBYLWJ?]44717I9K?8C(O@
MCG/_`&#')4+K!8-(X>\HD[Z]BSK'W()9;>2<)*Z3ET3)$X'$OA8Q`V'M6LN:
M:3P9EBMX2AO/-.P]X6M3T8SA#8O;TOJVVZAD$@2'2RP)I8+K43N0<Y1JF*6"
MZO,C:E!HF\*HLA,>("C\7>!5O(F-:`Q!5*:I<_09OB32J/1ODV?0\&HE%G3T
M+*V,SW9E@O1YAJN1SJ5!:BSW%<<+HSSN][_CGQS@8Q[--%6EGW.C,UT&D;3=
M#Z5N*LLET&[/AQ!,=A=GWHYJF)!8\@">+Y6-=;,*-P??U0`-$K.;RR>@Z`P?
M>!Y*,*PJK/7]/,74;*TU8-4IK>5169V_+4I<ED<C7V$6,N[[>L1T<E11TEL>
MP&UP=5BUV6GBZ6O4@,[WA)`"PAUUF3^QRZH)E95>88S=4DGQ-@J1U'13L*1V
M1PVT[3JQ),$=/FV)4'4\H:$,5AT/;DS?QK"J;)8HD0E2<(!I3#!`+"T+9[`;
M:DON8,Q?#XZV27*S%GZ5,DVFC6G1+G*-ZQBP(O9SFB5/*<[\J>-LU431I;%R
M?O#/POKF06/\1G!!$&8:A]J=_D\TF^XPJ&D7+.V1_P":;KGW'I&PWM+2+M9,
M/;N+)91=#UE7*8$^N^PTK\<GBXEB1U;VQ+*SQ-P>JU10B!AFVQ?[`+5C6/4;
M`WS'ULW%LF;9OCNH+VS-5KVF$/-]9\B@Y18CA-98O8E2U2[0A&C5GC;@-03`
MH4IBE4<D(X$TP-8TO[79RMB$&F^"X[4-DM%;5E%=7[86:#E+S5,/I/.,CK]1
M-&*JWV=I&]U10#4]AIE:=0T,+@F6'($1'[:](!&L2J!AJ]P>X6I:FKB%S(=-
M7!()=S.4*U_H6J`(&MCEV4,W29M*<7.6W*X.RDN+(+`1"Z>G9X24N_\`32@]
M$I"VIC?PB[X#46]I;+^+LF61L64%-=94^:PK+X?`BCA\-DDXF%@H4;NWHCHL
MN;T#Z?:UC.ZM(AXC5)N.1CB<$L\`1`']0C;ZR*NA-`ZC8-4^P)\6)?;%[=EE
MLR.I:L=UCE,W2B<SU^SI;`8Z.2*&IH2LL5'!ZY;6DIZ<%8$X3EY!3:08,PD[
M\X;SHG3OIQ6[UAF<=<W:R7'H5-+5ZZ)1.W7YSD.;J#E:Z.JS6NO9*DX-MSW&
M)ZZ-[&8:@0R0E?)1*32C!#+Z:E[X#60[VLX#290NW633.2X!D3-T_E=2#M%=
M#CXO7]@/L)&B1.).?4",G]NSV59)5HV9L,:4?>.;JF/*2@-`#\G0H@GGL4'!
M$-E.+NFCD,61EOEQKS*S`1I.TL3BWD.92I]Z\"2!91$)5`?S!4=+Z2/Y"/X[
MSO/`1'`&5;4I62:]O_1JJ,N6A]?:,D-BNX8U)'>:M]>4A$42:%9\I1ME[TT1
MLYX:H'#D!ZSOX6MN(*7O2HOA9G0?L&@S(LLT8AM:P[[BE<Q*%WO:\#+K.P;@
MC;*G;YO)X:0;U2A0NR],(E.Y+FI8$LU*K5%*#BA$@#WHBP\!X$]L8^FW//KN
MK?\`<H[DPT'H&O8+/VJC;"UC.54P(@CM*E+A+3HW"$#2S)HU4,3F%A'\6OJM
MA:`NZT1YIB@]3W@`<!F/75C];D7/S:UV0Y,TYU!:KR^7)K&X$2;@UEE7Y9"[
MLBG:M.Z'D$N!T0C:TX#.P)Q!**3,S<F"$DKOV#P&6AE&P6!6U=-T1X#N3,;\
MY7(["`I=#%+*I5U=&U<1C3@U-8P?1K6F1]06G5B`+H5`4I/>AX('>B!!M;87
MT]9&O:]V5DC5->Y^L=@SS(<RRINM7/1-]LA\%?;!1V1_Z6$%_P"PX"HBLR+>
MD19"GHAJ$B]*42$X'>$AYT)]R'^O;,)5J.+:$DGL1T+)%$UI!UIO8\M=P&<O
M30C(\SX^<.L0KBP$;\0PY=J5X2D(6$]@B#03P$=3G)`'?E5F*N!S6)_7=21^
M?Q2S,;Z^E^;W"MM42?2E-U6\U5`K%SK2KA8,"'")LKAE1\!&D[_9B81"1:P2
M.0+7,3*8FX`I-WHS3#`U*/\`I*M%KM'0B=Z]AE]2S/>I>5NX7NK?6QG'MFR!
M5Q&D4<0U8X:W0&-Y<4H!;]%AW6*/15I7I2G`],D7I@FFFF`N+O\`UL"C:8FE
M.Q77CM"XW!=/.6D\20IGJU'RHJ"DKM9S'8"F06]!`RTAWU!8B!D:Q1EO<)(]
M<;$#&$L!;=^3I@A`WTR]/4P@4QR]>N1="HF35],2BYW"U]$:LB;_`*!E%X%:
M&@P81/IH_HVR9P,E%,(66G)4Q5I1C1QI&24%`-,%+SXZ%:Z!ILVD*\;XBZV-
M/KAER@]2\SBU;-=2W.7SJ5.)@CW)W5)D1*-BC;24(7"&YG:TR5M:T!12<DOX
M!T8PQK=&256OZEBL8C%E.%.6W3]O5_HB@[12L:.6-L*NJJU#@IASG*X6O/1)
M9M#%13JJ1NK5U2C&J1J1\+4$F\`8$%/GF0O9IH>H;5J2_=[4I"H]9M-S2LUR
M7+V5W>%/O\U*HPO80R$4_LRZ;*<FUM_85<&K1H&Y.I-3#,*(5IQ]`>`,!JOT
MDM%CN-2+?8D1DFZH;GV%<AU)4#G/-2^CJICRPIG98ZEG$YD3[8LYL6S),T,C
M-TMJ(4*T3<UG*SU`"35'0'`!)-IX[NO$NM:^;/739-0U,\[/JM+B?-F=HU0[
MN_6#5L*2R9=<FMK^;+<66K'VN+N+4C=5$C<9*[HWA:L="6=#TH8P%F^!6#+G
MJ7JZAUE3`GLPEUTPW.Y)R7-M*ND?A<+S_3ZD]0:K#:#A6+`I</\`:NEEBM8J
M5ND_E"YW<AN:U2J;BF\1GSX"2V5Z@K]U%;^QZFOYWB4,R=?>RF_7X+VK*9.;
MAI^7QTFJ815T?SC$B7%J;6ZA&F.,\:<4C^^E'/W7QG=C$"1.FX<H4<!RK^]2
MD.=,H4UDG&4B@V8*TJB\(-<DDB,SK=TO>#WV&#!7.*"*WL@>+#C$MLEL4R[^
M,=E(W5X5=4GLJ,DT(DY198`569^@5XN<N\IK>?L*TPZW?H6RJPNB;K:K9()`
M,XEV;3"=A15RN<,^/R:<K)S%H^WQ\@HIB?)(X-/#/N<$@HWH1!#(?8#Z?]96
MG9^+;W235Y]E-K4A>RBQYNS:DM:+9YHYIC$;AZPN!Q6*TO5==GURB:72SE2%
MYD*_^&=)$L1L_$8%02CN`"'I+D]:WM7H^QKBWK0]B4YK#==Q8LE].S^03!>]
M5SRL[(>IVQN#<FQ?"S^DQ&-1R+5TWD-340^OC,:M<6X3HYKCCUQJ;@+1CG^M
M]*)=25@%ZD/E+9%4CQ;=GYCRGHAV@=K.R#44[@#)"56JM>6'3S@B;;7<GYZC
MA;@VPHE>M;6-M4")6JW-2:HX(&*9_P"O-9$:QQG1"X6'25O[?RQ-,^3:HF6:
MMLVC>+8K':0FIDQ>::B\$9B7-8T_[>6N"U5*YZJ8UTC?'0_[B3)4?U2%!5^M
ML,WG>$U9+I]G=HU_=;]&A1]TK?)E*-$OCN,ZBE;`Y]>$,\7L4T>7"3Z!M5"L
M"#B-^DY*9"V`"+]!I2F#Z;X%6O`/`/`/`/`/`/`/`/`/`/`/`/`/`/`E!G:'
M_P#Z+]B^D]MNB)5V$T##!X'S<K,6IEK-(#663)Y]J2RF4@*0L:4Y1:):"&<.
M`:=P?8BK#]^?818`J_X!X!X!X!X!X!X!X!X!X!X!X!X!X!X!X!X!X!X!X!X!
MX!X'Q=D/LCB]=SV2P^.GS"6QZ&2A[BT23?/[$HD;4R+ES)'B/@97?S/3F04F
M#_\`0?\`)G_//^?`7?!E>H:KR73T%(G\9M)Z9VZ3*+#GD.=&]XC4@N1\G$GD
M%XFM2ML..2%E(KB=7Q*--\A-1&D"3F@+-*&6$&\\`\`\`\`\`\`\`\`\#__9
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>5
<FILENAME>img004.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img004.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D
M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$"
M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#
M`P,#`P,#`P,#_\``$0@`,``R`P$1``(1`0,1`?_$`'4```$%``,`````````
M``````H`!P@)"P0%!@$!`````````````````````!```00"`@`#!04&!P$`
M`````P($!08!!P@)`!$2$S,5-0HB(V,4-#%A5196&2%Q8B4V&#DZ$0$`````
M````````````````_]H`#`,!``(1`Q$`/P`_CP$#N7&V.:#61#I?A'H:OV#9
M=DJQ9ASR)WQ,KK?&G43=T=['-5OF<`J1V!M.^A.V]N*OQC)LUP)8R.WX!JRG
M(4S73H<Y6\EIPD_RP[R>9LWMTK5S/3-0X]/(O26M*H&PC?,&PJIKR!G\Y8UE
M#EJ0+<I0!RY&`H\_>**OP%:?)?J[[].JR*L/)?@7V0[OYH:\H4BFX6C2FRY6
MR6N[NJC!QSEY*.9#7]ZLMRKFQ634+?(SL84C65*,GM&S?)$>>`M(Z)OJ)]?]
MI)L<=MYUJ%TSS0KU>>3'P"'*_P`4+<<3`(`F?GZ'B3P5U7Y^.0;!WE?<.G3A
M($E.W*4`C8"!-W@%X!>`IVY;=^'5-PINQ=;;LY5UL]_:)S\5J>KX"U;?DH$O
MI(I+2PFUS#6*,@GZLBRG+=TX$<:O+VB$>>/,`6>3/U%KZK]ZLQV(\3I"W7+C
M4&HZQTE+Z]M@)"LIVCIFMQC9=S`BNO3B3!S:[1*S$A7G3P>3,7)TD(A*3'#D
M":.+GUA76GO2_,:'MRI[FXM#F7H641?-C1U>LVN@D*/S]5GG*9+/Y:L!4XS@
M:3DCS-$8^V8P48\_`#`_4,:CC.O/M0TQV`<&;BW@*5R59-N4>M+[K6?AY"O-
MMNPUH=LMHIISV%":)'7YO\XS=F:JP<*URKL*DY#G(DAIE<6=]57E'QOT;R*I
M+H3JL[HU=3-B1J@E4=+?^98-G(/8Y95MF:B'B9`I6I<^Q'YD"K[*?V>`?OP`
M&OU0G>EL>L7B0ZMN#EFFXV[.E1,/R2V1K\TA_/(YV<*R/!Z(UP_@7&91I,OQ
M.@9G2M4X>J4<<<'.,J=)R`>O,SJTY1\"AZE'RL/K?6MSW1I>=WK#:_E;OAS>
M86$B92/C$U6V,`QQ&K+8\RYD?4WBQ.'*ON3I,41`E0D*V_`+P#G67<VT+CK3
M6NG;/<Y>:UIIYY='^LJB^($L;3'&PW\?*W/X,KV6'0`STG%A<%%DBA8,E2T)
M2I:\J#:+ZA*'8-4]6O`BCW)N&-GZUQ4U`B8;X7Y":$=4^/E,8(LB!>E2&SQ.
M29SC'DKS_P`_`6(?%8O^)1_R_P"*_K&_RO\`B7O/E_XWN_W^`SD?I:^,,1SC
M[/>9/87O&%C;L33ULL5VJ0K(N,D"M-Y[MO%BFHZU9A#9,K\Q4:Y'2.61THP!
MF[.%8<I((>4!QOK:]3R<1RKX>[J1'R:H.[Z+M6OBRRF2$PR)JA78TTF,%(('
MA9))4?=\&6(BL^D7IRC'^*_`!&^`7@/:ZVL<13=AT2X6"H,=@P%3N58LL[0Y
M1X]CHNZ0T%-L9.3J<E(QO^X1\?8F;9;,QP??"&;*D?:QCP&RWPY[-N,W8;P&
MV)R(U0B<H5;H^IK0SVU3+=6Y&MDU-,15`DI&>KR7Q&+:"G8>%8-2+;O(PA6Z
MVF!J4D*U9"@`UO\`M_R._J5S_P#*3\=^>27O_P"I_>_./]/O?QO`6D_3N50G
M7IVE=KO6!L?#*+LTU9H+>VF'[D?PTE^UO%OYMQ%.X!J1*OS054?8$:[(@9,X
M`L#A/EG(U^@.@^LIWNTG]1<5.!M!U:3:>]=O[#=;>C,0=1=VZ\U6K4X!ZTS8
M4MM#A>3@9:_3TVH!1!"K#AI'+3G"LY3E`9T.P=<W_4]MEJ#M"E6K7=X@%MQS
ME/NL#)UFRPY'34+YL.3A)ALSD6)#LW(R)P0:<Y0O&?V9\!*3B/US<WN=<BIG
MQ4XV;0V[&MI9K"RUP@J\Y;:_K[]R5J-0I^^2F&-4BULQO1F.,COVP@*P3*/3
MG&<AJ`](70AI[K%T1-XW5$:ZWKR>VT2)D=H7%_66E@JM4C8L1#0NNZ"WLS-T
ML<;"NWS@CR22%L:6<J2M2$""`:`C=WY]EK!5=)TT\#/:;#YV<O2Q.H+'6M=!
M;C9:;UC=&XCW`=CD4"%"M)RVT+#IN5I@N%1L(=P]=Y`A(/:A.'^Q-Q>_AIO_
M`"V_MH_/[)_Q/^I/UGZK\7WW[O`.5V8=7YN5EUTUS%XT7)GHSL+XHR`9S1^V
M"M5&J]_@F;@[Y_I#=#!KD;F9US:TN7+7VR59/')?.,HPL1C"4#A<,.74SNR]
M#UYRZXB3W$?G57JW*M9>)G*UBVT"_P!5K\CA+N=T+R/CHDE:O=1<F-^=S#)D
M$RT:A:LN&ZDHR=01([IN@?CUVVPC38+67%I/EO4H$,!4-VLHT\I%V*O,%O73
M"D[/K;9VSQ/03=X]6IJ_%G$E&^M6!*(%2FZ@"/B.NKZD[IUN-L:<9JYR$:T]
MW*96^L'&*5%M[4UX&W/@;&<>T(`IA07#UN!'VI*#:/QCS@:_3Y>GP$BJ8;ZO
MCG8R=:B^(\M*+4[()]'S]HNT75^,4(&..R4WD&[^]'AJ58DMULW6<^P8$*X*
MKW:%DQC'@"M^E+Z?[4G6$-QOK;EE%R#YP76,SBR;9E0N3Q&M!3##([)5M9?$
<SN)%R23,X*.1GWGID)(6,(2AL'*Q$`BKP'__V3\_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>6
<FILENAME>img005.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img005.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D
M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$"
M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#
M`P,#`P,#`P,#_\``$0@`4P#(`P$1``(1`0,1`?_$`'@``0`!!0`#`0``````
M```````)`P4&!P@"!`H!`0$`````````````````````$```!@(!`P,#`P$$
M"P`````!`@,$!08`!P@1$@DA$Q05%A<B(Q@9,4%")&$R,S1%)C96)S<*$0$`
M````````````````````_]H`#`,!``(1`Q$`/P#[^,!@,!@,!@1U<DF[AWY`
MO&H1HN\3/')<RYR12133%FXA$--5N"6(\44.7L.G.6...D!`,H80-_@`XX$B
MN`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P(_B2;#8GDV6B"0T3*(\8N(2;
MU:Q_'6-*UBZ\F]F"FG`D>%#XY0E*1HKY*B)A[RIJIG`!`_4`D!P&`P&`P&`P
M&`P&`P&`P&`P&`P&!2770:H+.G2R39LV247<.%U"(H(((D%1999902II)))E
M$QC&$`*`=1],#66IMUZKWM`R%LT]=H78M0CIM[7@N-57-*5&5E(TB(R!*W9T
M"&A+0T8JK@BJZCEW+4K@ITO<]Q,Y2AM+`8%@A+)&SR\VT9BX2>UZ66AI5D\0
M,U=-W"9$UT'!4C^JL?(M%2+-ER]4UDS>@]P&*4.&.06]>84EMJ:T/PJU3H>:
MMU"J%1O^QMA\G]AV^HT)M&7-]/M*W4:75=9UFTWFRSDR2LOC+RR_P8F*%`""
M#Q4XI)AR]XH^0CC?NY/(?,;<I[75O*^,WS4ZWM'6,5,.+;3(W6NNJ0AJ[65C
MU9LE>J4Y/:=`G;33K8?ZJFS3.VD??9KD3.D7O":?`T5N;DKI3C[-:8K^WKS'
M4R4Y`[4B]*ZH0?HO%2V?8\U$R\S%0(*M&[A*-*];PRJ97+H46H.5$414!5=(
MIPW<Z=-F+9R]>N4&;-F@LZ=NW2R;=LU;-TS*KN7*ZIB)((()$$QSF$"E*`B(
M@`8','%[F-I/E]'7V1T\^M!PUU:25V:8W*HS5*E)&*E&GU2E[&K4?.MVSBPZ
MJV=!`,C6+`V`T?-,2F5;G,!3``1%_P#SU;+W'MRE>22^;'NUBO5-G?)_R9>:
MG=V9U('?5J#6<P)YJC(14D(&KC2L28E)\%L7X":ZJAT#'`YC8'T-8#`8#`8#
M`8#`8#`8#`8$2=@KTUY,=N[)I%AEC-/')I6P6'5%LK-7L;0_\X=Q0RJD+LZH
MWYU')ISD#H'1UB9*PKF*;.4!N,^1V1V=2*:%0=A*I7J]`5&!AJM582(K59KD
M6QA*_78".9P\'!PT6V391L3#Q4>BW8QL;'LT2)(((ID223*!2E```,"\8#`T
MA:+9$5'>6K81Y*NFCO;D'>*S&0K2LHN6LS-TJ/:W1"0E[2G_`)N*&'KJ$DFV
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MWW#UR-79N`TGH'CYLG4$6#5LG)H[_P![^1[CUI^*F&TBF4LHJ`4FH2#,$043
M;)`[444Z]WZ0E=\IMSF:+P!Y*2T!-.ZW)S%2@]?IV)BZ%BZ@6NU;S5=824PD
M^*4YV0QD9;UEA6)T42*03$$#``@&G^)ZFOZWR@\CVWH)RQKVC-*0?''BZSD$
M?V*[!%XIZCLUQV0@D1'O.LWHR6VVT8NJ)1,DK'+(EZ^V.!SW_P#/-?(.Q\+]
MD50:1*:SV%6>5?(&\7ZCSY'`3:49R-NSWD=J&V*+NR).9.(N&F=GP2S)X8I?
M>31,7M+[8@`3R8#`8#`8#`8#`8#`8#`8$<'BPAXS67$VK<;)!(\/MKC9-V_7
MV[:Q)R,<\LJ=\E;E9+BOL*3(Q<K@I$;J;SWW9%/.A4W;.5#M`ITU4TPD?P&`
MP.)>:#I]1?X[\@4$7"D!H7?,/.[.=I+()MH'3VP*C;M47^WR20MEWKF*I*-T
M:S#L&XE,FS8K*F`Q$S``:LN$]"\S^5]%U?44VEOT%PRO:6U-X7)LH<]<DN4U
M<;(GTMIF'>INFH3TOK$DRM;[#\<CV/CWR4.U7.1Y[B*81K<JW#7C_P"5AOL>
M$E8N)UK6KMPHY2;M<R"I&D'K>3WP._\`Q_7J[.EE%",H\UVK(TTL@8WM]21/
MRS&,)#]0V;Y5*)L+4;>C:UX@C7[==>;_`"7J=GL?"U]#M&+K<EIUQ;Z-NW;>
MY]=;54D&+/2,W"576"9[%(SJ$E6'B[U`QDFLBX(LY#6%$@^07.[R^5">Y.\8
MY_AUK[COQ4T_N4^H[E?-2;8N>ZKK7=_;%D],RTA:]4S4VSH]3UEL)C(2IHTC
MY<\P]8LCND@1[2`$G/EW4J0>-OEPA;9*5CCN]6/4**6NPIK+:9;<)92,=:2K
MU1K"?56R6J?VTVAFC!B4#?(<JE*8!)W8$0ND+G!;(\9W!#AYQYMB^R=W>46;
MLMGYC['CE/I=TJ\-*3?W;Y.]MW<AUD5("[5^WS#G7S=F[,DLE,2S1LB0XM@3
MP)+.34NQ\>V_*KS0CZO9PXIWFAP&D.9Y*-`#/L--P^O6[L^DN4EBK\<H%C=U
M2@1SES6K7)-4WZL76U&CI1N=!B=1$)2:?<:EL*JU^\T.S0%TI=LB&,_5[95I
M=A/5RQ0<F@1U'2\)-1:[J.DXU\V4*=)9%0Z9RB`@(A@9)@,!@,!@,!@,!@,"
MBLX;MPZKKHH!T$>JRI$PZ`(`(]3F+Z`(A@>DM-PS840<2\8@+@O<W!9^U2%<
MO<!.Y'O5+[I>\>G4O7U],#G'='%:G;5N-;V[6K%9],[\IJ:+*`W1K5=DQL<A
M74UQ<+4+8<-(-7M9VEKEZJ8QC1$XU=I-5C"NQ.T<_OX&CWFUN?.A$.NT=`53
MF#42V>82^^N*,M':ZVI#T5)HT-`2-DT'N>U-X"SV99Z95-]]O7,2B4"J(L"@
M)DRA=8GR6\7`8L#[(=[=T!8'J9E%:5R`T%N75]GCQ(4QC`X"8I2D`[2-V&]M
M=D_=-EP((I*'*'7`HK>4W@4)&HQ'(&-N;A\G[C*-UK1=I;2FW9>B@B5M`ZXH
MUIFEU0]HP"0J`G`Q1*(=P"&!KR.VGRVYMKRE4I.CKMPXXORB<W!6K<7(**@V
MG(O:-<=L7\4Y8Z<T'\N;+JUA+F4*HG8;P/SBLE!]J`*L)54@QO6?%'F;P9UY
M5M"\&;=Q\VEQTJ$1/LJ-1^6CB^5?8NLEY*07E8^/C]J:BK$VCLNJ(R<@Y77+
M.0J4^H94>^76].@;GTKP:A25W?-EY<%HO(#>?+Z+K\3R6D$*X^;ZF5J55AW$
M-3=-:IIUG?SLK6=1T5%\[<L4WCQU*.Y=^ZDG+@SE8@(!3XF>.S7G%G8MKW')
M;?WSR4W#-TZ*U/5MF<D;E$W:SZMT97WYY2$TWKHT+6ZQ'0U8^IB1W*/54'$U
M/O$45Y)XY.BD)`Y_V3M6OZ.\M6PME['M0UO45?\`%369ZZO%&\I+(P@U_ES8
MV2%E4B(5C)RA(V.96MP,@Z(B*3=N`*J=$TU#D#,Z##&\A'("B\E;/7[_`%WB
MIQ;M#J9XJUBVL)VDAOW=9F$M!RG*&>I<LWC)AQK:DPLD9AKI.3;IB]=N'LZ5
M/VS19P#J+3G!SBSH'>F[N26H]1P--W)R&&-#:%L8+R:H2"$>I\Q=G`0SMZX@
MZ8PGYKK*2Z$0W9)3$L/S7A5G(`H`=6+H(N45FSE%)PW<)*(+H+ID51715(*:
MJ*R2@&(HDH0PE,4P"`@/0<"*]]XA^/=6NE@OW%S:G)_@U+VB0<SE@JW$[=$A
M2]+2]B<'66--NN/-OBKWHUBN9=PHHJE'0#!!=10ZBA#*F$^!LD>(?*I%@WC&
M/DXY(D;MA;&*]D-0<29*<7,W>`\,#N3'139-9-P(>RH4$"=4!$H"`_JP/%/A
M%N:30.6X>27FS*NCO'#P%ZK_`!JUZBD#DBA#LTFT!QY.(,DO<$4BG.<R8@40
M,(@`X&%J>,!JZE?J\AY`O*$^7]Y1P5JGS"F(2**HJB1!0/I%7J4%'&1$B8"5
M(R8I)GZF(4IC&$P6W^DAIYR<5IKE-Y(["Z%597Y<KY`>2*:G<JR^`7]J(N44
MTZ((=1)^UU`X]P]1Z=`MSOPJ<&Y2#6@)[^55B9.2$(\5F^=?,QV\>%$3F>^^
MN7>2/4)94XG=`4"E5-T]``.F!>77A>\=+YVK(/=/;%=2"OL"9^ORJY<'=E%L
MS0CVHD6_.@"0S9FV(0@AZ@!0_OP*$;X5O'/#*)N(K4&R6#Q)B,<B_;<KN723
MY%L<5C+`DY+O7W"'<'7.90P#U.8PB/\`;@5_Z+?C?.(F=:-M\@<ZZCM=24Y*
M<II([MXJ)A4>O!>[K7!V\/WB'N*`8X$'M`0+Z8'L'\+_`(T3IJIFXTH@"R9D
MCJ$VWO9-QV&<).A*1TGL\KE+HL@40[3@(`':'Z>H8%?^C-XTC)-T%^,,4]1:
MLW3%NE);)W-*)I-7JX.G9"DD=C.B]Z[H/=,<0[Q5$Q^O<81$,T9>*+QTL95K
M-I\2M5.91BD=!HZE&4O-"W143524232F)9\@4BA%C=P=OJ(]1]0`<#6^YO"7
MXMM^%I1=C</M>+GU]-)3=8<520N&O7;55-T#U6-=O*'9*XYE(%XZ*4Z[!R=5
MJJ8H").N!*C@,"BBV0;BL*"*:(N%C.5Q3(!?=7.4A3K*=`#N4,4@`(CZCTP*
MH%*7_5*!>H]1Z``=1'^T?3^_`_<!@,!@1RWYU!0GE>XR#[44RGKYP6Y>P3A^
MHV,>8FVE(W7Q&GH.";.2^B3&-"R2[Q0#^@F,'00$1`0D:P&`P&`P&`P&`P&`
MP&`P,'NFSM;:W9+26Q-A4>A1S=NJ\7?W2V0-69(-$``5G2SJ<?L4$VZ("`F.
M8P%+U]1P.=ZKS^X8W[:D+I+7O(W6FQ]GV!95&-J^MYA38)^J#-T_47D):FMI
MN"AF0-62A@</'3=`PE`H'$QBE$.HB6JKJ6=>DDLD">YMH)O:'-1),1QK.WK+
MQ^YBFEB7@`<#*I03J39K-DW9D@;G72.F4XG*8`"_8#`8#`8#`8#`C>WF@I'^
M3CQ_SGTXJB4OHCG/1AE3N>XS-1W_`!NN16"$>GT4)]0+3!44='[DB_&(E^DZ
MA.X)(<!@,!@,!@,"WRDO$P;)62FY..AXY#M]^0E'K:/9(]Y@(3W73M5%!/O.
M(`'4P=1'I@<UW;FUQ-U])MH&Q[\URK9'K=PZ952KS9;W;GJ#4@J+&9U.C)6*
MQNC%3*(@4C4QC``B`#T'`_(+E"G=^HZZT1R(M+91E'OV,O-ZT7U1!/V\@?H`
MMWNXI"A/14;)`)U2?%$Y0``Z"8P`(>5*O'+*YMIA:PZ'UOI;M;/`KQ;3N!39
M,NN\(N=%B:<A:+4F$,Q;JHD!8Y6\VZ,!3@3N[NX0"VSVM.7%S:HMW?)FFZI(
M68^2X/J/2$;)S#B#%!1$T.$UMFT7N,;NA.<%/F)Q`'`Y0`"`7J!@\2<.*+*/
MR2>P=F<A]INCPDE!OVEPWK?XZKR24NW%M(/'%$H4I2Z,@^42$0240CD?C#ZI
M`0WK@>M">/WA%!.G4@CQ6T;+RCU<'+J9N.O*_?9Q=P!%$O=/.7=G89<3BFJ8
MH_O>H#ZX'5$+7H"MLD(VNP</`1S9%%LV80L8RBV3=NW(":""#5B@@@DBBF4"
MD(4H%*4.@``8&.JZPUTMLMIN56DUD^V&%(>ZU9[%&'9?>+?7\E.,K,^IA)_V
MOJ/VVYL,<@],S$XH_*3!0"@;J(AG6`P&`P&`P&`P(V>3)6J7D4\8CKZZ[8R*
MK/FU$I0**L@1K/1CK351DW[AZFW3&.5+#/H1F9/Y!RF*=?JD`CW"4))L!@4'
M3ILQ;+O'KE!FT;)'7<NG2R;=LW13*)E%EUU3$2223*'43&$``/[<#FVY<P./
MU.-(,T;LKL"P1KHL>O3M.5RR[EN0R)T$W16'VWK.)L\D@Y!LL4YO>(D0A1ZF
M,7`QIIR-W#;)-LTUYP\W*K#N&#=\:W[:G]=:>A$S.T060:#!O[+9=DD=$`P%
M6(K7TC('ZE,`"'3`KR33F_<(]@W92W'31YW3QT$R^:LKWO2>CHH0`S$8,L@&
MH:\$V4Q>U8SI!XUZ&$2D$2AU"RCQ(MUF<RCK:W+OD[=$I670DSUNH6FL:0J,
M<W;$,5*$B$]256LW=&&-W=52.9]VJN(![BA_7J&00?!OBM#*?)>:AAKQ(GM!
M[LO,;7E+'M^8=6PS4&1)YS);.F;8Z4>-6H=C8.X$F@?[`B>!T36:/2J4V,SI
MM/JU2:'-W':UFOQ,"V.8.H`8R$4T:)&,`&'U$/[\#*,!@,!@,!@,!@,!@,!@
M,!@:XV5N+4NF8->S;=V=0-7UYNW7=*S6P+A`5"-!!J4#+J%=S\@P14]L#``@
M41'J(!TZB`8'S_<K?(7KJU^3/Q1RO'BH[]Y.UEG4^;<B_'0>MI&1J]K/:M>:
M^JT*,3;;V_U_0;"C4W**[V67:R;@(=FJDHJ`?((!@E75VEY!;Q#+$I/%/3FE
MIH5U"I/^07($+8W1;%*`)K!6M$U&U%?K',?K[1IQH7H00$X=0'`\H+C?RJN$
M9*I<@>;EJ.>8."R5?XP:SJ&A8:ND4!T"T6PM5D4VYLJ3033<E(5W]58KF%$B
M@%2,)@P,BJO`'B_7E6$C/TN=V]962_S%+?OK8-]W;99![["3<73]ULBQV%F<
MWM(E`J2:"3=/I^A,N!UK!5Z`J\>G$5J#AZ[%)**JI1D%&,HB/357.*BRJ;*/
M0;MB*+''N,8"]3#ZC@7C`8#`8#`8#`8#`8#`8#`8#`8#`Y9YC?>7X1E_L/\`
ME-]P_58SV?X<_@;\W?&[7?R_I'\D/_%_TKVO]Y]__-]?;^/^Y@1/.O:^F,/S
M]_6-Z_#7^'_(_P";^*O<[U__`&!_30_1W=O3V/G_`+7?[?\`BZX&#:\^S/S=
MJ;[+_H^?3?FF]O\`/GY[_EAV?4HK_P!:_GW_`)L^K=>G7W?U_(]K_3@3EW3I
M^9M!]?P?U^#M/I]X]_YA_P"FX;K^".W]'PO^Y^[_`(;\?I@;UP&`P&`P&`P&
,`P&`P&`P&`P&!__9
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>7
<FILENAME>img006.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img006.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D
M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`,
M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8
M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?
M'Q\?'Q\?'Q\?_\``$0@`.0""`P$1``(1`0,1`?_$`'\``0`#``,!`0``````
M```````%!@<#!`@!`@$!`````````````````````!```0,#`P(#`P8)#0``
M`````@$#!``1!1(&!R$Q01,4<3((46$BLQ46H<%2<C-C)'4VD;'A0F*R(S1T
M-587-Q$!`````````````````````/_:``P#`0`"$0,1`#\`]4T"@4"@4"@4
M"@4"@C\AN'#8_)XW%RY0-9#+FZWCHR^^ZK#:NN:43P`$ZK[/EH)"@4"@JW*L
MN9#XSW5*A.JS*8Q4PV7A)0("%@E0A).J*GA02&R\<SC=H83'L:E9B0(S+>LE
M,K`T*)<EZK03-`H%`H%`H%`H%`H%!FN+*'G>=\U+].KR;2Q47'M235=+4N<9
MR'D;!>FHF/+133PZ4&E4"@4%2Y<;\SBS=X65;X>=T3JO2.:T$GLB1)D[,P,B
M4VC,E['13>:1;H)DR*DB*GST$U09APUR=+W#@<*SNB?#/=.<C/9.'#A-N"/H
M6C\G4XJZ@0]8E=-7L3HM!I]`H%`H%`H%`H%!G/&DH9>_N2WQ1;#EHL>Y6O\`
ML\!EM4\>FI%5/;0:-0*!0<,UIAV&^U(%#8<;,707L0**H2+[4H*CPLX3G$VT
MB(D-?LR,*$E[:1!$%.J)V1+4%TH/,'P_8[#CRDF,0')!;6Q^7@X\Y`W\GR\N
M6E6S3HJDS)5%5?GH/3]`H,ZW(]N3(<Q;?P</,NXW#1,:]EY\1E!199-R6V19
M(E^EHL76WXZ#1:!0*!0*!09_Q&V`R-]$KH/O%NF?YIBB(J(C3&@"LB74`L/]
M-Z#0*!0*#X2H@JJ]K=:"I\2XI,5QOMZ`+@O"U$!1<#4H*AJIIIUH)6L72Z4%
MMH/-FV6%PGQBYK'0WR8A9&&[)<C$2J+CDAAN2Z@)9;7=%3\.W?PH/1.,RN.R
MD!K(8Z0$J$\A*U(;6X%I)1*R_,0JBT&13N<Y)8KD_*X@XDR#M$HT?"/HA*#K
M[S>AQ7"0K."DBZ#ILBIX];T$%'3DO9O*&Q<QOC+?;D'.QW,*Y(".RRL.;.1M
MWTR^5I0P\YD=)][(5!KO)VZTVGL'.Y\76VI,*(Z4(G;:5DD.E@;+[VIQ12WC
M0?>.=NY+`;3AP\IEI69R;J>IG39;BNJK[R(;@-71-+0E?0/@E!9J!0*!09GQ
M@VQC>0>2,,3J+*<RC&6%NY7\F=%!4)-2>!@0K9?Q4%UP.Z<3G9&68QYD9X6:
M>.FJ0V%)#8`X:"M^J(CB)[;T$O0*#CDQF)49V-(!'&'P)MULNQ`::21?:BT'
M#BL7`Q.,B8O'LI'@060CQ6!O8&FQ00%+]>B)0=J@\U<Y8C*1>9V=U8>2UB\G
MA-N%F(DMY1%B04"20R([W]8O,8>0$M\J)VZH'>V)M'G+<^V,9@\R<;9.S0"\
MEK'ZDRDMIVYN#J4G19%WS%55Z*GY/A00?-6#P^Q9NY8<>*SCL)NK;;,7$NA]
M!!F8EX"*->VF[C%BN?4E2U[T%_F;IQO)V[-I8_:+BY'&;:GL9S.YG3:.TK;!
MBQ%$E1-;[BNW)!3Z-OF6P=[G)Y,EA\7B7([<C$SLWB(R2D=`T.1]HH#T8FO[
M+8$JJO3NE!;.59I0.,MU2V]8FSBIA`K9JV:+Y!(BB2=15%H,>Q^0W;!^&[96
M?=R,KU\#)P9;[BF2.N0WIQ1P9+NK@DT^-D+PM\E!Z+H%`H,\W[L#=TW=>-W;
MLG,,8?-LL+C\FDIGSV),)25P$,$ZJ3;EU'MW[IXA6-GX_?/%N1R4C<JRMT87
M/Z<A/R6.C+(?C9515)&N.TGF^G)IL4$D14'2B62]!-1?B2XI?DI'.=*BFKBM
MD4F%):$$%;$XX1!8&Q5;$16T^-J"5C<Z\02&]8[LQP)K<"SCPMK=HE%5L5ET
MK;Z*]B3JE!^IW./$4.(_)/=F-=&.!.$VQ(;=<)!2]@;!2(R7P1$H(,/B-V9D
M00=K8[+[FDDBZ68$!^PDBBFEPW1!`Z&BW[=>JI03OWPY)_X&??S/]SB_H/R?
M=_S'ZOW/UE!WM]\8[.WRF-3<</U28M_U$:Q*-UZ:FSM[S9V34/C:@M(B(B@B
MB"(I813HB(G@E!T\S@\/F\>]CLO#:G07Q4'8[XH8JB]/'M[4H,E'X:<?!F2(
MVWMT97!;5R!^;E,!$-$1XU5;H#_0FQTZ1M8NB=Z#O\K8'%[0XPQB8:"X&)VS
MEL=DW6F4)YQMAB8CTEU=>HB6Q$1*J_@H*[O7D'-<L[7R>WN+X;K^-?B/?:NX
M)C1L,**`O[%'%P=3CSRII5;6%/Y4"#?STCDGCC;G%>U6)<><,"%]X\E)B.-,
MP@Q[0EH17%:U.'*9`14>G?K0:?Q?R?`R&U6X>Z)K.,W=@F_3;C@3'0;>;=8_
MPU?)"+Z0.]#0DNG7O0:%$EQID5F7%=%Z+(;%UAX%U";9HA"0JG=%1;I0<M`H
M%!^7&FG6R;=`3;-%$P)$451>Z*B]TH*Q_P!5<9ZC+[K8JYGYI+Z-GW_E]W\%
M!R.\9\=.L@R>V,6K3:W;'T;"66XKTL'CH&_LH+"U&C,DI--`V1((DH"@JJ`E
MA1;>`IVH.2@4"@4"@B=W_P`)YK_0R?J2H(KBO^!,7^8?]\J"T)^G+\U/YUH/
E''Q5_P#ITW]R#]:-!ZPV1_!>`_=L3Z@*":H%`H%`H%`H%!__V3\_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>8
<FILENAME>img007.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img007.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D
M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`,
M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8
M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?
M'Q\?'Q\?'Q\?_\``$0@`2`&W`P$1``(1`0,1`?_$`*<```$%`0$!````````
M```````#!`4&!P(!"`$!`0$!`0$```````````````,"!`$%$``!`P,#`P,#
M`00'!`L!```"`0,$`!$%(1(&,1,'05$482(R%4)2(PAQ8H(S)#06@9&SM/"A
ML<'ADD-39"8G*!$``@(!`@((!@$#`P4```````$1`@,A,1($05%A<8&1L2+P
MH<'1,A,S4G(4\4)#X8+"(P7_V@`,`P$``A$#$0`_`/JF@"@"@"@"@"@"@"@"
M@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"
M@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"
M@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"
M@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"@"
M@"@"@"@"@"@"@"@,-Y%YYY/E>7N\4\;8IC(OQB()62E[B9_AKM,@02;$0$M-
MY$N[T3I?NIRM:UXLC@Y+<Q9VX:(LN%YQY)Q,V'%YOA8S\*<Z$<,QA2<<!AUT
MD`$DL.7-!(E_,=$J5L>.R]C\&45[K\EY&FUS%PH`H`H`H`H`H`H`H`H`H`H`
MH`H`H`H`H`H`H`H`H`H`H`H`H`H`H"M9+R'QJ#E)&,W2IDR$@E/"!#DS4C(:
M7'O+';<0%5-=O6VMJJL-FI)O(DX$&O*G!7>/'R%O(D>'"4D#Y(1Y!J4@MM@%
MH6R=6^]$_&O?T7GAC4?NK$]`U+S+X_&>./*7,&>8=T(:XO)H\3=U3>C?QMRC
M=%UM7O\`C7B>CO7W//WUF/HQ1[R_P!C#GF79T@,6T\45Z4L"?L;>%416W/X%
MP*Y)^5J\7+WF(U[T/W5B?N6/'YS'Y#$IEHJ/E")M704XTAMT@0=UQ8<;%XKI
M^-@U]*FZM.#:LFI(5CR9Q%^#.GM.S2AXTG&YSWZ;D41HV?[T2O'ZMV^[V]:V
M\-I2Z^U&?VUB?HQE'\S^.Y$#]19G2CQVMYR8W(_'2RJBJKRQ^VEE14U6M/EK
MIQ&O>CQ9ZQ/T99,=R3!Y/$KE\7+#(8]$)>]#O(OM_(4!I#-23]U$O]*DZ-.'
MHS:LFI1&<:\B\2Y-,D1,))?E/1#5J5>',:!IP;W!QQUEL`+[5T5;UN^&U5+]
M49KEK;8]G>0>,Q<N[AVW'\AE(Z(4J)CXS\PV47IWE8`Q;O[$J+18;-3L@\BF
M.D=\<Y?Q[D0/_I4KN/Q"[<R(Z!L26#_=>8=$'`7^D:S?':NYJMU;8=YK-P,+
M`.?/[R16[]PV([\HA1!4E(@C@Z:"B"MR5+)7E:NSA'MK)*6-^+\LX]RG%#E<
M!-&=`(B;[HH8*A@ME$@<0#%?H2=->E>WQVHX9Y2ZLI0W:YQQYW/EQ\"E_JP"
MCAQU@S11&R-6T<5PF4;[:F*HA[MOUKW]5HGH[T>?L4QTDEF,OC\/BI>5R+J,
M0831/R'515V@"76R)JJ^R)UK-:NSA&K-)2Q>'+CS(C$R,:.QI+8O,.CJA`8H
M0DG]*+7C4.`G)%<@YA@L"]%C3G7#G3E5(4",R[)DN[=34&61,]HI^16LE:IC
M=MC-KI;B/'^><:S^2DXO'/N_J4)M')L.1'?C/,H2HB(X#X-JBK>O;XK54O85
MR)N$<Y7G_',=E7<2129F2CMB]+BP(LB8;#9?B3WQP<V;O1%U7VI7%9J>@/(D
MX%L!S;C?(,9+R>&DG-A0728D&VR\IHZ#8.D`M;.X1(+HZ(-[Z=:7Q6JX8KD5
ME*&>#\F</SLF;&Q,B5*?QJF,YL8$X59,$)5;/>P-G/L)$#\E71$O7ML-J[]/
M:CRN6KV%^.>0.)<CR$W&XF:KN1QUOFPGF'XK[=UMJW(;:/1=%LFFE^J5Y?%:
MJEK1GM<E;.$*YWFG'\%,BP\F<EM^<8M1$:A3)`N.DBJC8FPTX&^PJNV][)>E
M,;LI7JA:Z6XUY!Y(XCQZ5%BYB1)BOSB$(8_!FN(Z9HBHVV3;)B1_<GVHM[Z6
MKVF&UMO5'ELM:[EBC2`D,-OMH8@X*$*.`;1HB_O`X@F*_0DO4VH*(Z=15;-$
M)1545$)+733JE[UX#YU_EEQ:8'EW+>,Y=I&LXPC!@A)JXRT1B9!?J/\`$`D5
M.J+7T>=?%6MEL<7*KALT]SZ()AHE1;65.BI7SCM,U\[8SR+D\+CH?#92Q!-\
MERCK;Z1G$:VH@+W-PKL3[E-$U72NGE;4JV[$,];M>T5\)\@+(P\[C&LH_F\;
MA)R1<=EI1(XZZVK($8JXG]X@.[MI?NJE.9I$.(;6PP6F5,I&DUS%R.P_(L-F
M',@UC9(R',7*.#.$;HK<AM$4P6]NF[JFG^ZM6HZQ/29K9/8D:R:&F6RV-Q&.
MD9+)R`B0(H[Y$AU;"(]/^M=$3U6O:U;<(\;24LK)>6N&M'#"6<V"61<;:Q_R
M\?-CB^3IH`=LG&A%?R1>O37I5?\`'MT1IVHG^ZI<:B5(KD7*,)QV(W)RLA6D
M?<1B*R`&\\\\7XMLM-H;CA+["E;I1VV,VNJ[D?B_(?&,CFF\$TY(CYET#=''
MRXDF*]VP2ZG9YL$VKZ*BV6M6PV2GH,K(FXZ2RU(H1'(^6<?XW':?S$P8WR#1
MJ*R@DX\\XMD0&66T-QPM4T$5K=,;ML9M=5W&$7R+QA[)Q\7(.3C9\S_),Y*+
M(A=]?46B?``(OZJ+?Z5IX;1._<9653!9JD4$Y$B/&8<D2709CLBKCSSA(```
MI<B(ELB(B=56O4I#956?*?$WXQ38WSI&+%5OE&<?-<B6'0B1X6E%0%>II]OU
MJKP6VTGO1+]M2=X]R'$<AQ+.7Q#Z2<<^3HLOHBBA]ETF35$)$6V]M;+ZU.]'
M5P]S=;*RE'N>S^,P.-<R63)UN$RBD\ZRP_(V"(J1&8L`Z0@*"MR5+)2E'9PA
M:R2EC;B_+\#RB!^H81UV3!7\)+D:1';/4A7MD^VTCEB!47;>WK7M\;HX8I=6
M4HF:P:(W.<BP^"9BO962,9N9*9@QR*]B??+:V.G3ZJNB)K6JT=MC-K);DE63
M1'<AY#A^.X=_,9A]8V.C*"//(#CJHKK@M!]C0F:W,T31*U2CLX6YFUE52RM.
M>9?'[4QF"Y+F!-DHI1XI8O)HZX(HJDH`L;<2(B76R57_`!KQ/U7W,?OK\)D]
MQOE^`Y(W*/#R#>^$[V)8.L/QG&W-J'M)N0#1_B2+TJ=\;KN;K=6V'V3R47&P
MG9LI'5892[G99=D&B>Z-LBX:_6PUFM9<'K<$#AO)O#,SAIN;QTQU[$8YIV1+
MG+#F-LBVP.]W:;C((9".NT+E]*I;!:KA[ON,5RU:E;&4SLYRWQ1R[D$Z;BG,
MSPK.SW<FY,B_W\5U];DA>EA2PHAV%=+$BW2NI5KFJDG%TH.=VMCLW$U9HG``
MX5R#$/Y?C[R2X,O)GDR%44"8FDV(N(0:*)?MV+U*Z>E<^7CJXMU1X%\?"U*Z
MRLY9I$_F;PP76W^G2UOK_?R*K7^!_P!Q-_S+N/?YB<7$A>*<\\P&QR=,B2))
M75=[B&RSN6_]1H$T]J\Y-MY$.9449J>'0?TB'M6XJPW94]MB5RVW.A;%&X^'
M_P!2YNMUNF2S-M?J57O^5>Y$J_C;O8V_EW81SPY@;DJ7^8GT_P`Z_7O.?ROX
MZ#SEOXT5K@C"<7_F"Y%Q?&_P\+E(23RA-Z-LOH@%N04T#\ST3T)$]$JN5\>%
M6>Z9/'[<K2V8GX\R;^'B>9,K&_S&.R63DL(O3>RCYC?_`&C7N:LO&NM(8W'&
M^UEB_EQQ3(>,H>3,E<FY=^3+G2%+<;CO?-K<9=57:VG7UO4N<?\`[&NHWRR]
MD]9$\[=<XYY[X9DH"J)9YL\=DFQT1UI"0!4_=05Q%_LI6\2XL-D^C4SD]N2K
M72;2X.X%2ZI]4KB.H^9>+KFO&4;%\Y@"[+XGFA0.30!7<K)]P@&2VG_36X]"
M2WT[M96Z/\EL<%9QQ9?B]S6<+D(&3\O/9#'OC)@RN,0GH[X+<3`YLA45*Y+5
M:QP_ZGZ(Z:M.\K^D3\K!'Y'-QW`CD=B+/`\AFC0T`DB1UVLAK;^]DJ*]>@%7
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MSCOICIFYLO\`M%?5-:B\3H[)_P!/U17]BNJM=?T8AYT&W)/&VJZ\BB_\5NO>
M5_&_]IYS&]>\UY$LEJXSI*)YA\H1O'_&4FBV,C+325G&1#5=I&B(IN':R[&T
M76W551-+W3HY?!^RT=!'-EX%VF/\*\;\_P#(4AGFW)\]+QQ/@OZ<D&S$CLGT
M4"':+39>B65237^GJRYZ8_952<^/%:_NLR^SN=8KQ+C9$3D/))W)9SR">-QD
MGMN3`1-UU-Y++L/[?N<]OM1=4J-<3S.4E4J\BQK5R9W^J>6/-DR1"[S?'^+L
M&*28K:KNVN"A@AIHZ\I`2$E]K:]:Z&L>!3^5B*=\O8C?O'_",3PSCK.&Q@*C
M0JKCKAK=QUTD3<X:I;[ELG]":5\_+E=[2SLQXU50A;G7)/\`3G%9^4;%#E@"
M-0&55$[DI\D:CAK[N&E_I=:8J<5DADMPJ3'_`!^POCKRPU@'9OR\9R^$!_)4
M]Z+E&!NX2JO_`+A*:V_KBGI79E?[,<QK5_(YL:X+QT6]3?J^>=A2?,7%<KR;
M@\C'XET6LDTZS+B]S\#<CFAH!7NFMM+Z7ZU;E\BI:7L2S4=JPC/<?Y4Q?(7H
MW#O(N.=XYR%N3&>9>-/\,X^P\+C9@9W[>\@LBW4515^[6NA\NZ^[&^)$5F5O
M;=0S>*X3K,O\TX/F!S..<JXJV$O)<:=DN+CG/_7;E``.(.J7)!!4M>^NFMD7
MJY>]=:VVL0S5MI:NZ&O`_)G$N;\F@#+C/83F.*1\/TN4GWJC@6>!LU$5)$VH
M2BJ"6G2U>Y<%L=7&M6>8\M;O72R-:KD.@Q3"N.<A_F4SJSB0V>-X\6<6RJW[
M:N(TIN"G[RJX=U^J)Z5VW]N!1_N9RUURN>@L?GW#1I?B[+O%='H"-S(KJ?DV
MZTX*H0+Z+M51O]:GREHR(WS"FC+'XTS<S.<!P.5FJI3)4)HI#BZ*;B#M(_[:
MINJ>:JK=I&\5IJF4'^8R=*D-\2XF#BM0^295MB>2*H[F@<;'82I^RI/(7]FN
MCDU'%;^E$>9>U>MFLQ<?'C16H[(HTTR`MM-A]H@(I81%$T1$1+)7&W)U)#3C
M7'H6`QYP(([(Q2'Y`-:((+(=)TA!$LB#N-;)Z5[>[LY9FM4M$-^>I?A'(/IC
M9?\`P#K6+\EWGF3\7W%;\`I_^1\>7W:=_P"8<JG-_P`C,<O^"-!KG+&(>8\4
M?.YV8QD:3VPXG#1R(*&@=W+/;7MM[Z]N."!]%<^E=W+V_6D_ZO0Y<U>.5U>I
MH/BCF(\OX'BLR1(4LF^Q/3U22S]CBJB=-ZIO3Z*E<^?'P7:*X;\54RR9+'1<
MC&2/)!'&A=9?05NEG([HO-EI^ZXV)5)-K8HU)E/,FD3^8?@`;ELL/(:WU_R[
MU=>/^&W@<]_Y:^)JD3%1(LV5,:!!D3.W\ARZW/M(HA?TT1;5R-N(.B!TX*$V
M2+TM7AZ8!XH3_P#F7DJ__#S'_+G7T,_\Z\#BP_POQ+GB<]RR$N9AY[C$_(0_
MU+(%BIT,H[Y.1793AM@ZTX\!@B"5@6VW99-+5"U*N&FDX1:MK*972=^%>%3N
M.M<@FRH@XP<W.*5&Q`$)I%9%2[8$H*H;U0M4%;)HE.8RJT+>%N,&/AE[2,LC
MB>5.^>(')PP4@L+$QBXTGT?A;B-3=/N(VKZ%L_B(G[WTK2M7]3K.LSTGCK;]
MG%&D%K\K<2=Y;P/*8)DQ;DR``XSA_BCK+@NA=4O9"4-JK[+4<&3@NF4RTXJM
M$'QSFG+\?QJ%C)O#,D]G(3#<9>TY$^&Z38(".?)5U$`2VW6XJH_6J7QU=I5E
M!BM[)0ZN1[C,'F\1XZR;#L5<CGLJLZ7+8BFV`?*GD;BB!2#:'MMJ:!>_1+VK
M+NK770E'R-*K5>UE>\7/<YXCXX@8%[A\R5DX7?VF,S&A&)77W'1N:R5<%$1R
MR_PUJF?@O=VXM/'[$\7%6L1KX#[QWP7.8_D6;YUR50E\ERXJ*1(BHK;#`VVL
M-FXH(2V;!+JJ)]O7JM9RY4TJ5_%&L>-INSW8Q\5\9Y`Q.YPSR'!NQ(7)LA(E
MM[WHCH=F0KEVG.R\9;K';0;?6M9\E6J\+_%&<5&G:5NQ7@$;DWCF!(XS*Q4O
M.8)E]QW#9#'HT;H-NEO)F0P;C1"HDJJA#=%OZ4RNN5\4P^D]QIXU$2A3'\4S
MO*?)T;FN?A+BX&'85C!XEPP<?W%N4I$CM*;8JN]=H(2^E[6U\MD5:<%=9W85
M':_$](V--G/N1XCKS4=R4X"7&.RK:&?T%73:#_S$E<R1=E-\?X*6[X\BX'D.
M)**XTT<>3&?..\#@F1*ME9<=1145UW6JN:RXYJR>.OMAHJWB[QME>#\\SNQ'
M9>`."*8>YH1`/?)U8J;R%$5",E35$6][WO5LV=9*+^J=2>+$Z6?42_$N.2\Y
MR#D68YCQIMJ3*DB..6;\*8`0600&6A[;CZ@=]YN:6N6BK6,EX25;>NYJE9;=
MD0A<6Y'Q?S.&<XQQTCX[-AC$S#4=R%'`BNJHZRT;S?X;0O<4_:]ZVLE;8N&S
M]TZ;F>!UR35:%HSV5Y;CN?..LX21E^,/XN,,CX[C*.L2@?D*I--.N-HY<#%'
M$%;_`(^UJE6M73>+3]C=G96VE00?'.*3,CY>_P!:CB7L%CX\$HRA)[829C[B
MJBN.--&X@B(+:YK=;)I[;MD2Q\$RY\C-:3?BB"2BY[E>/RN>C9;CD[(XE9SI
MXF=")AYSM&B*H&RXZV:#NOM+IZ:6URZ5:4-)P:5K)N5H-O$/$<A@9O+,Z[C%
MQK6<D-NPL$V32N--,(Y;<HDC(FZKJKL0K#TO6L^165:S,=)YAHU+B)Z!/P_A
MN3XCD',GLMAGX<?-Y1[(PW2>B.(C;AF2`:-/N$A_<G1%3ZTYB];*L/91TGF&
MMDW*W9,\/B9H.;<OES\/(AP<Q(BNQ)#CD0TVQX@,%N%I]PT52;NGV]%UM6,C
M7#5)[?<W1/B;:W*QD/$\G%^6\-R;!HHXF5,)_-017:`OHP\(24'HM^Z2%[*5
M_5;4KS$XW5[]!-X8NK+;I'WF+"\GR_(.'/8C#/3H^#RK.0EO"]$;$FVS`E!M
M'GFR4OM7JB)]:\Y>]:JTO=0>YJV;4+9FI,.$XR#AMDR1(BJT:BI"J^B[%(;_
M`-"K7*SH/ES^;PY2\IP0%?XHPG%:]NXKJ]RW]E`KZO\`\_\`%]Y\_G-T?3>.
M9BQL6P$$!^,VR/QQ!?M4$%-B(OM:OEO?4[UL8=X<\4-9H4\@<N3]2S67-9C#
M;Z;FV1-;B6PM%*WXWT%+6KNYGF&O971(Y<&&?=;5LT"$PS"\R2&8PHB3<"#\
MZWJXQ+[<<B3W43<2_LE<_P#Q?]Q;_D\"^5`J9WS.#G,[SG`XZ1@')?$X!N2)
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M:&0V-`%U+:*)N);DMDZJOO7&=)3.;3N60>5<?DX?%.Y?%)'GMYF*TZTT2"91
ME9,.\;8$Z*@6U%75-R:5;&JNK3</2/F2N[)J%**G.XU,Y7Y+XUGX^#E82+@S
M-Z;/G(TT_(73M,`VTXX9"BWN1V2RJB?6M;JE'69DFZ\5TXB#8:Y#I,OY#Q/.
MX/R:'/N/1?U%)L?X6>Q(F#;KK2(.UY@W%%M7`[8?:2I=!LBZUTTR*U."VG4R
M%J-6XEXB7D`N5<_PJ<7QF'EX7'3G6_U;*9-&FE%ELT<[;#+;CCCAFHIK9!]+
MZZ>XN'&^)N7T0>9.*ZA*#1\'B8F(P\+%Q`V18++<=@.JH#8H(W7U6R5S6LVY
M9>JA04WS+X^D<PP$9<>\,7-XE])>+DE?:C@_L$J7L)636VBHE6Y?-P/79DLV
M/B6FZ%,-S[EYP@CY7AF0'-@*"Y\8XA07#M;>$@WQV`O6RHJI_66EL59TLH^8
MKDMTUU+9@ARZ0$/+N@Y.=,G#;93^$TA+]K+9;1(Q!--Y)<ENMD2PI*T3H5K/
M2,>=A/>XAEXL"$Y/ES(C\9EAHF07<ZT0"1$\;0H**NNM_HM:Q1Q)MF<D\+@@
M_"N,S6'\>XS"YC'N0)N/$P/>XPX![W3-%`F''=$0DONM6^9LK7;3F3.!-529
M;LQ-F0L9(DPH+F1EMBJLPFC:;)PO1-[QM@*>ZJO3WZ5*J3>K@I9PM"B>/>#1
MG^.)(Y3Q^.G(9+S[^3=FM1))NO/.*Z1@XV3R=O[]H(JHJ(G3U6V;*^+VOV^)
M+'CT]RU(;Q;@^6<4YQR2`.!>9X?EI7RH#B/0_P##.]#561?4D;--/M151!'[
M>MJ9KUO1.?<N\QBK:MGI[6;!7&=)E'+<3RF3YIXOR&+@Y$C$85B2S(?%Z&)&
MLAMUM";`WP+:.]%7=9?I77CM58G5O5]YSWK;]B<:(U=%NB+:U_1?_"N0Z!MD
MI+\:"\_'BN37@%5",T38&:^R$Z;8)_M*O4I9XV8[XXXAR[&^$^0\3R&)<C95
M^)D1BW>BFVZ<E@A;`2;>/:NY;?>B)]:[,V2KRJR>FAS8Z66-U:UU-G6.TNNW
M5>M<1U'8B(I84LE`>=IO=NVIN]Z`Z5$5+>E`)_'9O?:E`=J`JFU4T]J`Y[#/
M[B4!UM&UK:>U`>"TV*W$41?I0'A,MDMU'7WH#H`$$L*6H#U414LNJ4!X("*6
M%+)0!L&][:KHJT!X+8#^*(E^MJ`":;(MRBBK[T!X3+9+<ANOO0'H-@'XI:]`
M>*PTJW4=5ZK0'0@`CM1+)[4!X+38K<11%6@!&P%;HB(J]5H#U1%51535.E`>
M$TV2W(45?K0'2);1*`S/SKXP7G/'&TB*(9C'$3D`S6PEN1$<:)?1#04U]T3T
MO73RV?\`7;79D,^+C7:43QOYS<XE!9X?Y)B2L;)QXHS$R)-$:$P/VB+@@BD6
MQ-!-M"0D^NJ]&;E>-\6/62.+/P^VY?R\X\#)I(G&%D<DR:I:/C<='>W+Z(IN
M.`#;8)ZDJZ)Z5S_XM_\`=[5VEO\`(KT:LE/'O',S'?R/(^1DV?(\T0+);952
M9C,-(J,Q6E7J+:$JDO[1*O7K6,MTXK7\4:QU:U>[+I42IRK8*6Y13=[T!Z8`
M:6)+I]:`!$12PI9/:@`@$TL272@.48:1;H.J=*`[H#DVP/\`)+VZ4!X#38+<
M4U]Z`[H#P@$DL272@.19;%;H.OO0'=`"HBI9>E`)_'9O?:E`*(EJ`\(1)+$E
MT]J`!``2PI9/I0`0H265+I[4`"`BEA2R>U`>(TVA;D%-WO0'5`<JTVI;E%%+
MWH#J@!414LJ72@.4:;%%1!1$7JE`0D#G'&IWQE:D.LMS-B0GY<:3$9?)VW;!
MEV2VTVX9WN(@2D2:HED6K6Y>ZGLZFGZ'/3FL=HUWVE-3W2B=J)T#3)Y;&XQ@
M7Y\@6`,D;90M3==5%46F@2YN.%M7:`(I%Z(M:I1V<(Q?)6JEOX^XAC.1X?(O
ME&CO$$P15Q84EIV+)[2*@]U&)`-.JWN7;O0=M]+WK5\5JJ7MYKS1FF:MG"WZ
MGH_)ZP253*D3F>48G#.`$])0]S8@N,PY<AO<Z?:;#N,-.`AD=A0;[M4TU2JT
MPVMM'FB.3/6F\^3?HA_!FLS8H2F1=!MR^T7V78[B;545W-/"VX/3U'7KTK%J
MPX*4LK*5]O44D/@PPX^:$H-"1DC8$X:H*77:`(1DOL(HJKZ5XE+@];A21&,Y
M?ALE-*%$&8L@"5MWNP)S`-FC:.[7''60`%4"0D0B2]TMU2J7PVJI<>:^Y&G,
M5LX4S_;;[$U4BXQRF<Q6+[0S']KS^[XT5L3>D/;+;^RPTANN;$*Y;!7:FJZ5
MNF.UMOCQ)Y,M:;O[^"W#%YS%93NC#?W/,;?DQ7!-F0SOOL[S#J`ZWO0;CO%-
MR:II2^.U=_CQ&/+6^S^_BMQ]6"A"RN88&+-D0WG'T.&0A,?&)*.,RI-B[_%D
MBTK#:(VX)$1&B"BW6U56"S2?7VJ?+<A;F:)M.=-]'"\8@FJD7.)#X,,./FA*
M#0D9(V!.&J"EUV@"$9+["**J^E>I2X/&X4C?$Y6%EL;'R4$B.'*'N,.&VXTI
M`O0MCH@=BZBMM4U31:]O1U</=&<>17JK+9CNLFPH`H"%D<PP+3[C`./S#9(F
MWU@1)4X&W06Q-.'%:>`'!_:`E0DTNFJ558+-3MWM+U(/F:)QJ^Y-^B>I-5(N
M(3I\#'Q3ESY+42(U;N2'S%ML=RH*;C-4%+DJ)6JU=G"4LS>ZJI;A#"#RK"3)
M01`==CRWK_'CS8\B$X]M12/LA*;9)W8*7/9?;I>UTK=L-DIZ.QI^A.F>EG&S
M[4UY3$DM4BPPGYO%0IT.!,>[4B?O^,*@:@NP@!=SB(H!<W@`=ZIN(D%+JMJW
M7'9IM=!.V6M6DWJ_CZD?*_TU/RY81Q0?G`V4@XQM*XV(@K>ZYJ*MH8]YM5#=
MNL0E:RHM>JEE7BZ#S]E7;@Z?C[KS)&'AX41OML-BTUU[;8B`_P"X42L-ME$H
M/)N;Q./G0X$I[LR)V[XHJ!J"["`%W.(B@%S>`!WJFXB04NJVK5<=FFUT&+9:
MU:3>K^/J>AG,4>9+#`_NR(-$^;2":B@@K>Y%<1.VACWVU4-V[:0E:RHM/UVX
M>+H"RUXN&?=\?=>8^K!0B<CRC$X^>L!Y)3LL6@?-N+#ER]K;A&`$2QVG1'<3
M1VNOI5:X;64Z1WI>I&^>M7#F>Q-^B)..^#[#;X(2`Z(F*.`39HA)=-P&@F*^
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M/BIML+U5/N5->B*2-FHBNI(!JET`K:5'$]'Q\>768>2JMPSK\?'@^ICNLFQ"
M?.BX^!)GRS[42(T;\ARREM;;%3,K"BDMA3T2M5J[-);LS>ZJFWLA>LF@H!BS
MF\>]F9&&!7?GQ6@??%6'A;1MQ;`2/$"-%N5%1-I+^)?NE;;QM5XNADUEJ[.O
M2NQ^NP^K!0C<GR+&8Y\8[_?=D$*.*S$BR9A@"JJ"3@QFW5;0E$D%2MNL5KV6
MU*8G92OFTO4E?-6KAS/8F_0=P9K,V*$ID70;<OM%]EV.XFU5%=S3PMN#T]1U
MZ]*S:L.#=+*RE?;U%ZR:(*-S7!R9Z0&@G_+7MJK9XW(-[!>(@;-Q38$0`B`O
MN)4'1==%JSP62G2/[E]SGKS-&X]T_P!MOL3M1.@8YG-X_#10E3U=%EQT&!5E
MAZ07<=7:V.Q@'"3<5A33\E1.JI6Z8W9PB>3+6BE^C?H/JP4*GC>'9EK%8S#Y
M#+M/8O$_#5@(D18[SI0#;-E'G'7I0J&YI%)``"5>A(ET7IMGKQ.R6KG=]?@C
MCIRUE6M;6]M8V4?CM.K^A;*YCL(W-X<\BD-UF4429CG_`)<-X1%P.[V7&=KH
M$GWMD#Q(2"0E[$*ZU3'?AG24]"67'Q1#AIRO)KRU_P"HWQ^#R299O+9;(#+F
M,,.Q([49CXT86GS:<,E`SD.DXI,"E^[MMT%%NJ^VR+AX:J%OUOZ>AFF*W%Q6
M<N(T4+6.]SIU^!-5(N,<UB_U.&W&[O9[<J)*W[=U_B2FY.VUQ_/M;;^E[Z]*
MWCOPN>Q_-03RX^)1VI^33'U8*!0#''8OX4S*R>[W/U.4,K9MMV]L5B-MO==W
M^7W7TZV]+UNUY274OJW]2=,?"[/^IS\DOH/JP4(G+X65*GQ,G`F_#R,)IYAK
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MS%N0HDC+C@JX`G;[5($)M21%ZHA)?W2BB=0YC3<8<:Q+^'X_C\2_(&4<!AN,
MD@&U90P:'8"[%-VR[$3=]VJZZ=*WENK6=EI)/!C=**K<PH)*IE0H`H"O-8#D
M&/5YK#Y5AN&^^_+5F?#*28.RGC><%LV7X?\`#WN*HH8D2:_<J61+O)6WY+7;
M1QMX,YEBO7\;*);U4[N>AK3XDL-0.D:97&,9*$41XB!%)MUMUM40VW6'!=9<
M'<A"J@X`DB$BBMK*BI=*U2[JY,9**RA_'41K."S,C(09N9R;4C]-=)^)'A1E
MBMDXXRXP1/=UV69[0>+9L(/7=NTM1Y*I-56_6Y[>PDL5G9.SGAVA1T1KJ^OL
M)VHG01L[!L3<LQ-D;78[4.7!>AN`A@Z$PV"+==;61(VU145ON^FM*Y&JPNM/
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M,MB<@,28^PU$D-26/DQB:8-UP"0`..Z+B$^27[NVW456RI6N1</#92M^I_7T
M(7Q6XN*KAQ&JE:3W.=>OP)."$\(H#/>:?EI?N.L-$PVNJVVMFX^0V&R?FO\`
MW5BT3IL5HG&N_E]Q>LFB)XSB)^)Q[L6;+:F..2I,I'662CBGRWBD&.PG7[V<
M=*R[OQLG5+K7+=6<I1HOEIV$<&-TK#<ZM[1NYZV2U2+%7F\*DRLD]E/UE]J<
M3[<E@!:85AM8]QCM_<!2NWL(D=`)`(>]VVQ'"2NBN=)<,:>/CV=VG5U');EF
M[<7$YF>B--NV.OW*9>TEHKG.L8Y_%_JV"R.*[O8_4(KT7O;=^SO-DWNVW&]M
MU[72MX[\-E;J9/+CXZ.O6FA/&1^2-OD63GPY4?:J"W&ANQC0[I95,Y4E%2U]
M-O\`MKV[I&B:\9^B/**Z?N::[%'_`),DJF5(F-B)[7)YV7.6T<27%CQ0AHR0
MN!\8W#$E>5TA*Y2'+IVT_9]EW5=TZ*L:I^O^A&N-K([3HTE$=4],]KZ"6J18
MK7)>).9>>W+:'%@XVTC829<`Y$QLA(B0F934F*XUMW7'9]PE]R%?IT8LW"H]
MW@]/*&<N?E^-S[?&LOP<J"7P>,<QF*8A.RG9KC>Y3D/F;A$3AJ:HA.DZYL'=
MM!#,B041%(EUJ62_%:8@MBIPU2F1]6"@Q9Q?;SLS*]V_RXL:+V=MMOQG)#F[
M=?7=\FUK:6^NFW?VJO4W\X^Q-8XN[=:2\I^X^K!0B>38B?EL>U%A2VH;C<J-
M*5UYDI`K\1X9`#L%UBUW&ANN[\;IU6Z5Q757+4Z/YZ=I'/C=ZPG&J>T[.>M$
%M4BQ_]D_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>9
<FILENAME>img008.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img008.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D
M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`,
M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8
M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?
M'Q\?'Q\?'Q\?_\``$0@`,@""`P$1``(1`0,1`?_$`'P```,``@,!````````
M```````&!P4(`0(#!`$!`````````````````````!```0,#`P$$!@@#"`,`
M`````@$#!!$%!@`2!R$Q02(346$S%#0(<8$R8G)3%3610E*Q@D15%C87-R5E
M.!$!`````````````````````/_:``P#`0`"$0,1`#\`>\XO<_B3D'_5\J4Y
M*P7+Y(,WR*H$90)C4=`:D-44MR."WXA0>P>_PZ#--<MY=DR-/\=X@[=[,X2[
M;]<WTMT4T%:$K39B3YI7OV^GIH.&>3LZQ_+;'C>=6&*"9&^3%LN]HDDZP+G4
MO*=:>$'$4$(!4NQ>JIZ-!5::`IH"F@*:`IH"F@-`4T!30<:"8<@9-R4_FK.(
MX$[;F93%J<N\]Z<!.K[566&!1%1!5PN]?I[NH9?B?DD<WLDE9D1;;D=G?6#?
M[6:I5F2'\P]57RSHNU5[T5.M*Z!XT!H(1RS,N.69%<()&T.$X%(MDV^,FV+B
M39;C[;CC3A'X4:CQ24S3TK1:]P,$OB[.,;DO2>+\C;@6^29.%C-V`I%M:4ZD
MONBBBN1QW$I;`\/U=-!Q:^.>2KYG%JR7D.[V\XF/$3MHLUF;>%@I!CL\]XG_
M`!U1.Q*KZJ=:A6=`:`T!H#0&@-`:`T`N@0\7*/)Y8SB0K"))A1[3`1]5JJMJ
MR[)5$3M'Q/\`7TT3Z@P4AAO&_F,A/1A16L[M3S<X*K49-J1"!VGH)J@?3UT%
M8T!H-6+WDTEOY<,TR*.`C,RJ_P`P)A$E5%I^0C.P5JJ^%EO:E5Z=V@V.PU9"
MXI:3?GE=''8K3OOYM@R3HN"AB2MMH(CX21.B:#,Z`KH!2044B5$%.JJO1$1-
M`F\;\LXGR"W<BL)N[[4_Y$EMX4%5$E)&W045)"!SRU45[?2B:!SKH"N@*Z`K
MH"N@*Z#BN@GG&,D)F6\C2P=;?#]<;CHZ`T6L>!'`@5>]`*H_37TZ#%YLRDCY
M@N.$:)2<BPKP_(;&BJ#9,BV!FG:@D:[45>].F@J^@YZ:#4/D=^/;N%+SALLT
M2X6C,#C.LMJC2$U*)Z:R:4W;0-LE5-R+14IW:#9SCYY7\"QMXG$=5VUPC5P1
MV(6Z."U0>NVOHT&?T!H$3G2^NV/B/*+@R9-O>Y%':<%50A.421Q(5'JBHKM=
M`N<>VZWVCDR%9()-JMKPJWQI8M4JCHR2)/-1.PB$MZ5ZT*N@KV@Z(\RKRLH8
M^<@H:M53<@JJHA;>VBJB]=!W543MT!H/*/*BR4,H[P/(T9-.*V2&@N-KM,"H
MJT(5Z*G=H.@7"`<YR`$EHIS+8NO1$,5=!LU5`,@1=R"2BM%5.[0>DF0S&C.R
M7BV,L`3CI>@03<2_P3037Y=E;D\=%>FV58&_W2Y706RKN07Y9H&ZM.NP$3IT
MT"ED?(+,+YAKDENM$J_WRU6)FV0+9#3:IN/N^^2#<>)?+`6VMGVDZKT3KH&&
M1S9E=F:9N.7<?7"QX\1(DN[#)9F>["I;4-YAD?,$:]_]N@HO^J\7_P`VA_"^
M_P#MV_A/S^WV?WNS0:[?-GQ_^F0G\YM<E&6+E(B,Y#:S3<W*>90ABOI5"1"`
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ME7E<$=R)11H(=.X=`[8/*N=]YXSF[F2_I5BBQ+!#%%\"G7WE[TU(7%+Z$5$T
M'P\_9>W*N&/\6V^446[Y5,B^^2FZH4:$+Z+O%4_G,VO#U[ET#'S#R:YAUF;M
M]C9_4\SNB$U9K2"*XZNT"(Y!MA0E!M!55ZI7^.@\N`H<:V<06>>\\9.W%IR[
MW.6^:D1O225UUPR+U:"6VS*,C@<FV_F&<@,X3E\MS'VT)HQ<:@(J)`DN(JIM
M\YQK=7N'\2:"J\_Y>YC7&5S6(7_E[N@VJU,HFXW'Y?@5`'O5&]Q)Z]!C>1,N
M7B/A&"+*(=SBPHUFMJ52B2DC[$=\7:C:-D=*=:4T'Q?*S8+E'X^>R6];GKWE
M,MRX/S7_`!/NL]`9WFOB5%VD8_BT%:O%KA7:TS;7.#S(4]AR-);]+;H*!(GU
M+H-"_P#C3E7_`"B^^Q]R^$>_:OR?9_;^YH-H/FOBLO\`"EV,TJ<>1"<:6O82
MR0;KZ_"XN@H]DQJT0;5:8R1&#.V16XT9[RAW"*-B!;>U1W("5ZZ":76??>+^
M0+U>W+=*NN`Y.HSIKL%HWWK=/;`6C(FA6GEOT15*G;^'J"#`^9'`L<O^>9`:
MOW:]768TW:(X-&TBQ(L8`9;<-Q$\H1=-S=2JUJNWLT&#Q3AS,.4L7RG+KW)>
MM3-\?D72QV)K<+#L^A(,AP3W%Y=*MAWK6M:=""@R>?\`"9'":MR99.91,MIV
M@["B+[\4]6O=B16Q7<(JXNY"Z=/O=-`F\4\D3,=P*V\>X'994_D.8ZZ5S]^C
MK&8@N.$M77U7J2-@B;:]R=?Z5!MLG'O,_%Q7`<-;C9@%_!N1/=G/#&./<]I(
M^_M,@\QLR6M-V[N7TJ'WA\OEZ?M<7(YEX!SE=N<S=G+Z^AO1Q-KLA"VBA2.B
M=.B5^KIH&/C#BBZVF[7/+\WFM7G-KON:<D-;UCQ(J]D>-O050?2NU.G3TJH+
M'_!7(@VP<#:REEOC-'E=(!;<2Z%&)TG"A$XBH'EJA4W=/PTZ:"N9'AU@R'%I
M.+W",BV:2P,?R&_!Y8A3RU;I]E6U%%'Z-!,L7X,RR)F]BNV3Y5^OV;$VG`Q^
M.3/EOH;B;4\]?$A;![%W*OA'LT&8YPXIN/(R8Q`;?;:M,&Y>\W@'%)#*/LHO
ME[:>+M'^]7NT%(@P8D"%'@PFA8AQ6P9CL`E!!ML4$!%/0B)30>^@-!/^>?\`
MJN\_MW^'_=_A?B&^W[_]'WJ:!^#[`]G8GV?L]G=ZM!VT$3Y6_P"QL>_V7[1K
M]\_<O;A['U_T?>T%LT&L>9?_`$[;O]I=C/Q?M_B&O:_^P_(^[H-BH7[W<_@^
=QCV'Q?V%^*]7Y?JT&2T!H#0&@-`:`T!H#0&@_]D_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>10
<FILENAME>img009.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 img009.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````/```_^X`#D%D
M;V)E`&3``````?_;`(0`!@0$!`4$!@4%!@D&!08)"P@&!@@+#`H*"PH*#!`,
M#`P,#`P0#`X/$`\.#!,3%!03$QP;&QL<'Q\?'Q\?'Q\?'P$'!P<-#`T8$!`8
M&A41%1H?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?'Q\?
M'Q\?'Q\?'Q\?_\``$0@`=@&0`P$1``(1`0,1`?_$`+(``0`"`P$!`0``````
M```````$!0(#!@$'"`$!``,!`0$```````````````($!0,!!A```00!`@($
M!!`+!@,)`````@`!`P0%$@81!R$Q(A-A,E(405%Q0F)RDK(C,[-T-39V=Y&A
ML8*B0S2T%74(@<%3)$07T=(68Y.$)296)T=G$0$``@$!!@0#"`,`````````
M`0(#!!$A,1(%!F$B,F+P07%1H;'1X4)RLH%2$__:``P#`0`"$0,1`#\`_4Z`
M@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(&OPH(-B[6K
M1ZYS%F])]*S=5K]/@W9+Q$IQBM;TU45W>V.BU1U=5F4O7C\7[I?/:SNO'3=B
MKSQ[ES#H+3ZG/7MUY:T_`#:N+^L8=3KY36=8SZC;%Y\L_*.#6P],K'&%27:F
M(G+49>,2R?DT,4;*\KV1PX]*1M=.;8]@":;LUHCG+_LQU+I7#:T[H<+YJTXR
MM:>T<O,XN<8P!Z<I<7]RM;2]"U6:-M:3$?;.Y4S=3QQPG:MZ^PHF;_,VBD?_
M``XQX"MW3]H3._)>(CV[V?DZS:.%5S2VUBJC"=>,F(?7:B);NC[>P8)YXYK6
M_DH9-7EOQLN(QTBMVJNS4P0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$
M!`0$!`0$&)>*H6$.Q>J5FUSRQQ,WEDJ6?78\,<^2\1#VF.UO3517M\48M051
M*:3RR[(+Y[6=V8J3LQ5Y_'A^K0P]-R7XJ*WN[-2"7=S-"_K6C'C[[4OF]5W)
MJ\T^KDCV[OU:./I58XJ::?O9-4DSRD7H$1$WN5B6M:V^6C_QK7C5MK8^]:Z:
M]4I`\H&X+KATF7+NI6UI\(F4;:FM/5*XJ[,R\@L\I#"#^@1<2_16UINV-5EW
MS%:1[OB6?DZMB^<+2OL6E%\=-(Y>N$.R*VL/9L3Z\FWZ0I7ZMDGA595MKX6%
M]0UV-_*D,C_*M7#VYHL?&NV?=*M?7YK\)7,4$0CI$=(^DMC3Z;%A\M*\JK:U
MK>IL$15IYL8Z!\E#F9H"`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("
M`@("#5J[*Y[3RHES+TJ3<;-@(W\*H:KJNEP3Y[1M\-[K7#:_!07]_5(FTU8#
MLOY3_!C[I?-ZGNZL;L5-WC^2WBZ;DGQ4EW=V:MZAB=ZT/KNY'6?NNTL/4=R:
MO+NBT5_CY?U:=.FX:>:9YD0,3G<@XOYO+(9?KI>R/XUFXM'GS6W5M:?C[4XU
M6##P6=?8V4D$2GFCC'R&<B6SA[5U-O5RU^LJ^7K%:\(6]?95&/25B8I6\#Z1
M_%P6MI>T<4;\EIM'M^)4[=3RSZ5S6PF*@[05AU>4[?\`,MW3]&TF+?7%7_.V
M?[*=\]YXRG]V.@1T]GR5KU]KB][N/R5(-(J-:C(/04@0$!`0$!`0$!`0$!`0
M$!`0$!`0$!`0$!`0$!`0$!`0$!`08$2B/.\_17G,(5G,XVOT3S@!^0[\26=J
M>JZ?!&S)>L3X3M_!.F&]^$;518WK!T14H)+$OIN!:?PK!U/==)\N"LWMX_EQ
M7L?3I_?:(5D]K>>1?L0%7B+Q19M#^Z6)GU'4=5;A:/I&R%JE-+CX[V%?9>2F
M/O+ME@U>@_PA>Z?LJ6G[7U&3?DV8_JA/4J4],+:MLK&@PM.)3-Z1/H_1%;.F
M[1PUG;DM:WT5\W4LEUU5Q5"K^SP!$_KM`K?TO2M-AC92D;?%4G+:>*5W(+1K
MZ7)D,;+SE#NU,>B.E1Y1ZI`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("#'4Z#+7X4&/>#JTEXR!J=!X1>N+Q10:_.JPEW921B6G6/:'Q?*0:8,C3LU
MXYX)1F@D'5$<1:A+VI"H6$2SD;W#36J:W\J0M*P<_5,UK<F'%S_U6(QU_P!D
M`L9FKK<;5OS>,O&"$=+^Z6?EZ;U#4[LV2N/']D;ON>QEBG".9(J[1Q$8<9`>
MQ)Y4G2_XE:T_;&DIYIF;_A]R4ZW)^WRK2.C6KCI@B$'\IA6U@T6##OI2L?2%
M>V2UO59O[GM>,2N[$'NG3ZY0Y1F/H+VM04@0$!`0$!`0$!`0$!`0$!`0$!`0
M$!`0$!`0-?A0-?A0$!`U^%`0.SI)!"ER5.$9BDGCC\W'O)G(A^#C_P`0O8H(
M-G=&#J21QV+<0'+6.[&WC:JT0L1RC['I00X-_;>GN8*I!.TI[BAEM8PA'LE'
M`+&[O^:Z"HQW-G"W\A@:E6O*;9R]D*$9R?JSQW2;EZO!D%9<YNV0PD]^"@PR
MP;F;;FB23CJ%IVB*7\#H*G,\T=R1;9WA?B&"*Q@-P1XJL3"_36>>('8O#P-!
MGN3<.\IMR;]P^-EF-L?C<=+B8(VTZ993;OG'U>E!T<NU-R7MXY.W-<DAPU_`
MQT(P$NU%;<]12:/*9G=!:[:V)2PU?&O-*5N_CL<&**U(7%I81X.3D*#H:6/K
M4:D=6K",->$=,4,8Z1%!O&-0Y4>5X49:EY_S2;?6+H"`@("`@("`@("`@("`
M@("`@("`@("`@:@0$#7X4!`(D$::U7C'X208_6]HM/:00[VY,)2@MSV[D4<%
M+2-TM7Q92=D=2"!E-_;:QPYGSBTSG@8AL9*$>T0!(W$>""NR?-#!TKDU5XYI
MI8\,^?9A'LE58N'#VR"-CN9U?(;AV[B8J1B&X,;)E8YB(?@Q'IT/^!!3[9YI
MY?-0;(L/6CA;<DUZ.V#]0>:DXCI]P@I*O,?=5O;FV,B5D8IKV[FQ5K2/9DJ=
M\0Z?4X"@BY_=VY&P^2+SXP*OO.M2B(7_`-,\GQ?X60;L]E,FU_G'#YU(,5.M
M1\U'5\7KKMQT^V00<C+/)E^:6LR)GVG5,M1$7;>DY?WH->1U/?VMZ?\`M_>X
M^'_+"@V;69FS7)5_3PUYF;_PPH(FQ:=F;);!LQPD<%?<&XRG-NH->IF<OP(.
MNH\K<UD,!DJ-Z0:4A;NESL)_&=Y7:;O1;L^4@[&MRVVW%!F*TT)6*V;O_P`5
MN!(79:?4Q,P^H0,@Z:.G`,Y3#$(S2"(R2".DB$?%$D&_2Z#)`U=I!62[DP44
MI12Y*K%('QD931ZA_209_P`:Q+30P^=P=[,)'#'W@ZC$?&(?*0;ZU^I:A[VK
M,-B/5IUQEJ'5[84$>;/X&&4H9LA5AFC[)1R31B0_FD2"12R%"Y'WE2Q'9C;K
M.$AD']%!)U`@("`@("`@C%>JC+YMWT?G'^#J'5[E!E/:AKPE--(,<0^-(1:1
M_20;(R$AU"0D)=K4/KD&:`@:_"@:@0-?A0$!`+Q$$0LECV*'_,1CYP7=U^T/
MPA>2*"MGWCMJ#NM>0B?O;HXL-)?ZLOU7JH*S*\T=JXZGF;<LLA!@+(4\@,8Z
MB&65V9F9!79SFMC\;#NQXZDL\FU(:TLPF_9F\['6'#\*"#E>:=N*]EJ%:JP%
M1VY_'H92(2X2$+DP:?SD$2MS%W%/N/`TN\CCK9/;!9BQ&T8\?.7BUL0EZ2"#
ML[?VZ,K%L"6[<$BS@Y)\GI`0:1JX$\?$6\E!SV*WAN>[@]B6K.0D>>YN:Q7L
MDS^/"):6`O8]:"%F+UT\;D]<YGW?,,H@U.1:(_(]3V*#W=G%\%SE\ELK09N)
M%_BQH).]F_\`-N<'\HH>\!![N+ZP3_=P:"=L[Z\\M?LM8_O05_+CZ/Y3?.,M
M\M(@B8C2VRMEZO1WZWR\B#=G_H'+?;ZM\HZ"SSWTISM^;X_]W0;3Q>1O;DYD
M5JM<I)KNUZD%=F'2QR257'@/X4'3TN6V2NV=KV[Q]Q7I;:EPN0K%\:TEB(`=
MA]1!TF(Y;[?QT>W)'C*2YMBL5/'SN3NVF8&`W)G\;T4'1T\70HP]Q2KQUXB,
MI.[C'2.LRU2%^<@F=A`0$!`01,E<CITK%J;XFO&4DFGQB$1U:10?@;*YW9F4
MS-RU)@\J=B]9D)W\^?I>0^ANF(G_``N@Z*W?AK<Q<W=QQRQ8[:.&,<:$AZCB
ME"N,8"1-XQ><2OTH/T3_`$W8H\/R<QD]GB$EMI[TA&[OQ"0W("=G];H9!^;>
M79;*WES&W#D^8.0>KC;(SVXR>9X-4\DS:1%V]B3]"#[-:WYM;E-6P6"V!C#S
MD&ZSDMU3DL$[NY&,(Z7)G?M.W0@Z'`<^Y;5?>$6<PKXK)[/@::U6[X91-WXC
MI8F;H?4[(+[DWS>Q/,C"2V881I96H3C=Q^ICT,_BR`[LW9+J05&<Y[U\;2E:
M+%G8RUG-3X+#46D9O.):QC&<Q$^G0+.;,S^F@DU-\\V7IYB&[LL6RM`8"J`%
M@7AL#*7;'O=7C!X'0<SL3GUS`WI8F_@VS(YJ=6P,.0G"P/`-;\'?M..IV;R4
M':<Z.:,VP,#1FJ5VMY+*6&J4@-V&,"X<7D-WZV9!JY3<P=P;CO;BQ&;K1->P
M%@(3N5G8X)2-G<@%QU-J#3P=!\1_J9')[1YP87>%"65@M!!9Z'=@[VJ3"0>E
MV@8>/JH.BWKOBAS$NS6K=^2CRGVZ,<^7LCQCDR%]Q<HZT!,VHGZ>D?0;B_I(
M+^#G!S)+;#[HPFR&_P"D*P.4)2SCYQ)6B?AWFAGU]##ULR"UR7]1F$CY8U=[
MXV@5D[%Z/&EC3-@D"8F<CXNW'BVD>A!]%W-N*/`[2R6?LPN0XZK);D@8O&(`
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M`,DP=6KHZ4#=WT-S8^T%'WZ";O#JYP?,L/\`(@@D97ZP[B^[X/DF0;<7];]H
M_80OW=!IY=_LO*?VF8^3)!4;;^K7+G[5V?E'09Y?Z.RWWCH)&[?H/G-_-J'R
MH().^/I?F_\`RBA[P$#</UAL_=S)_<@G[+^O?+/[+3_WH*_EK^P\I_G&6^4D
M0>;:PV6O;,VD]2K+-YIO62S.XCQTP!.>HR]B@[27E3F+^/R-:U9CK%/N2+.1
M2-\)JAA/4X(.QK[#PD>6W#D)1*P^YFB'(0R=H&&"+NF$4'0PUX86X1QB.D=(
MZ1T]D?%%!O0$!`0$!`0$'$<Y=P!M_EQG,CYP].1J[P0V&9R,))W[H'%FZNDD
M'XPP6]+U/-8^Y=W59DK5IXYIQ$)2(A`M3BS/T=*#3D=RX9\;NH:\YVLGN:]%
M(!,!`,=<9CF-BXOXQ$0H/UMO"V6R_P"GB2(R[JQ4PT-*)QZ^^DC&)OQN@^#_
M`-/5;D\.`R<V_)*,EVW9CCHUK3.\@B#/Q<7;Q=1%^)!(YBU<E=YUS5=D!%"V
MP\6,]&$F^#C&F#2R"#%QX\"DZ$&O$7\=E.3>0MTRGM;TWIFZ^(SMB=V(BD*1
M[`M&S>L<6;CX4%WS$V5FN2N\H-_[-!SV[*309"AQ=QCU=!1R>PD=N(.@U#LK
M"[^Y>8L)-P5<3O2F5C-EYP;`Q19*3OV8R]#J9V]5!TG*OF!NZ?D5O#(;@E*S
M'BH+-?%Y(^DY7*-QX:G\?29,@Z3^DS!2X[E8-Z9^!9BY+;'AUZ0X1]/]L;H/
MFW-S<UGFEN#.[9&>MAJ^T1DL8\+3Z)KE@'T&PD7BZFZ69!9?T_;VS^YQPVT,
M8=?!#@9//<],+-WV1C8V[&A^G43=$A(-W]:64J_P_;>*TL]PI9K+EZ+1\&#A
M_:3H.>YQ[3L;>Y9\M\2PN&`8QES4H,[#YU88#)Y']-AU<$'V;F;S&V?M'EJ=
M3'V(+LMNEYAA*%=VE[QC#NP+@/4P@2#X"VS;VU=N<N,/ND7J4LWN`\GDHY>(
MC#%PKPB$O'J+0Q$_@=!]QYY[CQ^:V]5V)@;,=W-;GLP5QBK.TKA5$V.2633X
MK"+-_8@^=7.5'^Y^1W_=J:8+6(N08O;L[D[`[XZ-X3B]K(PB[/Z""GV-F=\[
MNW)6PN5AD'/<O\1E>X,N/?26B#N8`+CZX2<6;U$'<?TJ9G;N)Y>9@[]N*MDX
MKTLV2CG(0D=@!G#CJZ?30=QR0YJ93F+%G;UBC'4HT;;0TC!W<I`?B7`N/6[,
MS(.3QGU\H_8(_?N@C\N>OE)\PR7OI$%7M7ZM\G_Y]?\`W@T"C\1!]Y,'Y4&.
M[/H3FQ]H:?OT$_>77S@^98?Y$$&[*_6'<7W?!\DR#;B_K?M'["%^[H-/+O\`
M9>4_M,Q\F2"HVW]6N7/VKL_*.@SR_P!'9;[QT&_=WT%SF_FU#Y4$$K?'%\KS
M@9NO^%8[JZ_%!!/R&!RV2W*X4ZA2C:V#YK!(X]@IC\4-2#J-K<N\U6S&S<U;
M(86PN%DQURN73(\LCNW`7\'%!TFU.6N"V]B\/0X%<DP13R4;<O08E9,C/V/H
MH.IK5:]6/NZ\8QQZB+2(Z>T1(-Z`@("`@("`@("`@K,]@,/GJ,F.S%.*_1D<
M7.O.S$+N)=?!^I!SG^RW*C_VMCO^Y'_@@-R9Y5,8E'MB@)B[%&30L[,[=+.Z
M#HLU@<+G<<6-S%2&[2-Q=ZLXL0NX^*[,Z#GXN3?*V*49HMKX\3B=C!V@%WXB
M7%G;BR"WJ;.VQ2S5K-U,;!#E[HN%N[&`M),Q=;%Q;@_'3TH(=+EQL6@0'2P5
M.%X++6XGCC%G&PWZT>+>,WI(+O*8NCE*,^/R%<+=*R#QSUI&UQF#]+L;.@Y7
M(\G>6V3LP6;>!KE+4B""/2V@"ACZ``F%^T+-Y2#HCVW@3P18(\=7?"O'W3X\
M8V:'N^O3W?5Q02,3B,9B:,.-Q=6*I3K-PAK1LP`#>!F04E[EML'*9?\`C60P
M5*WDW?M6Y(A,C<?1?BW!T$BCL+9F/S1YRCAJM7+2.3E=CB$)>,GC/JX<&099
M_8^T=PSU[6<Q-7(3UFTUY+$;2.`D7'@+N@G9+"XG)XV3&Y&G%;Q\H,)5I@8X
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ML(7[N@T\N_V7E/[3,?)D@J-MDW_37+OI%O\`U79T>Z=!8'A,QE:.;CQM.2S)
M!S!.S*(#Q(81?I/\U!VTO*C)9.+?U/(6!JUMSWZ]JE/&6LVB@<2[0^JR#N(M
MD;?#)Y3)RU6L6\Q%'!D6F^$CE"`6$&[LNSZ""]CBCCC&.,1",>R`CV18?8Z4
M&Q`0$!`0$!`0$!`0$!`0$!`T>!`0-(("`@("`@("`@("`@("`@("`@^`XSZ^
M4?L$?OW01^7/7RD^89+WTB"KVK]6^3_\^O\`[P:!1^(@^\F#\J#'=OT)S8^T
M-/W[H)^[O_N+YEB/D00;,H7#/[@?_P#/@^29!8;?Q.1N;JV?-#6E*L^RFKO8
M8?@N].!A9B/^U!TFQ.6&7H8G99Y24:US;87&L5(^VYO;8F;A(W#Q4'6;?Y>[
M:P>,J8^O5::.C9EN5#L:9"BEEX\3#\*#HXH(8M7=B,>HM1Z69M1>42#=H\"`
M@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(/@.,^OE'[!
M'[]T$;ESU\I/F&4]\:"LVK]6N4/\^O?+&@QJ$+5X.):>/,F+\J"SR>VL]FJ7
M-"AC:4DMJSG:DD$9MHU@#])`Y]:#O2Y5'D;V\BR=O10W5#2C$8-+2@U6/@6I
MW]D@ZVELG;E:R]WS5I;A4@QLMB3M/)5#AI`A\7]%!<Q5Z\$(00QC'#$+#'&/
M9$6'Q184&Y!B(_\`,@R0$!`0$!`0-'@0-'@0-'@0-'@0-'@0>Z60>H"`@("`
M@("`@("`@("`@("`@("`@("`@(/-+(&ED'P#&CQW]2'RMA'[]T&WEGALM-2Y
M6WHJAG4HT<BUJ9^@0>4BT:D%_M/E'<K[?V=5REL8KFUK]F\00]L)6FE(Q'5Z
MCH.QQ'+K;.,CGC&OYQYQD'RX^<?"=W<?J,?:H.G$1\E!D?HH"`@("`@("`@(
M"!H\"#)`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`01KUZ&E4FN3=
MF&`"D,O8B@XW`1<OH\SCAIS#-FVPPM6.5C:9\7K\8V<1Z-?E(.PI^;>;Q^:Z
M?-_U?=Z=.GV.E!)+UJ#TNI!X@("`@("`@("`@("#T>I!Z@("`@("`@("`@("
J`@("`@("`@("`@("`@("`@("`@(*W.-CWQTG\0+32_U'7IT^NU:4'__9
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>11
<FILENAME>kfg.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 kfg.jpg
M_]C_X``02D9)1@`!`@$`2`!(``#_X0M=17AI9@``34T`*@````@`!P$2``,`
M```!``$```$:``4````!````8@$;``4````!````:@$H``,````!``(```$Q
M``(````;````<@$R``(````4````C8=I``0````!````I````-````!(````
M`0```$@````!061O8F4@4&AO=&]S:&]P($-3(%=I;F1O=W,`,C`P-CHP-SHP
M-2`R,SHU,#HU-P```````Z`!``,````!__\``*`"``0````!````^*`#``0`
M```!````/P`````````&`0,``P````$`!@```1H`!0````$```$>`1L`!0``
M``$```$F`2@``P````$``@```@$`!`````$```$N`@(`!`````$```HG````
M`````$@````!````2`````'_V/_@`!!*1DE&``$"`0!(`$@``/_M``Q!9&]B
M95]#30`"_^X`#D%D;V)E`&2``````?_;`(0`#`@("`D(#`D)#!$+"@L1%0\,
M#`\5&!,3%1,3&!$,#`P,#`P1#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,
M#`$-"PL-#@T0#@X0%`X.#A04#@X.#A01#`P,#`P1$0P,#`P,#!$,#`P,#`P,
M#`P,#`P,#`P,#`P,#`P,#`P,#`P,_\``$0@`*0"@`P$B``(1`0,1`?_=``0`
M"O_$`3\```$%`0$!`0$!``````````,``0($!08'"`D*"P$``04!`0$!`0$`
M`````````0`"`P0%!@<("0H+$``!!`$#`@0"!0<&"`4###,!``(1`P0A$C$%
M05%A$R)Q@3(&%)&AL4(C)!52P6(S-'*"T4,')9)3\.'Q8W,U%J*R@R9$DU1D
M1<*C=#87TE7B9?*SA,/3=>/S1B>4I(6TE<34Y/2EM<75Y?569G:&EJ:VQM;F
M]C='5V=WAY>GM\?7Y_<1``("`0($!`,$!08'!P8%-0$``A$#(3$2!$%187$B
M$P4R@9$4H;%"(\%2T?`S)&+A<H*20U,58W,T\24&%J*R@P<F-<+21)-4HQ=D
M154V=&7B\K.$P]-UX_-&E*2%M)7$U.3TI;7%U>7U5F9VAI:FML;6YO8G-T=7
M9W>'EZ>WQ__:``P#`0`"$0,1`#\`]527-_67K'7.C]1Q'86.W.Q,]KL?T2"U
MU-]8LROM+34++LOU<1E_ZE77ZK_LC/LWZ:[TTV!U[`P\-G4^I]8&<_J+VU4U
M45.#&O:7'[+A]/I;?G^LWU=N3]I]7)_F_5]'^:24]*DL'.^LY)PV]#KHZF[.
MIOR*";_2;8W&-3;<?&>*[_5S'>M_,O\`2]/TK?7LK]-4NC_6;I_3K<[I/4<F
MW]5RK/LE]]61[\>TFZK?DWML]3T+_M>#5=ZOZ:K#]2M)3IV=>OR,V_!Z+B#.
MMPW!F7?;9Z&-6\C?]F^TMJR;+LMGZ/U*J,:RNGU/UBZFS]&M:LO=6UUC=CR`
M7-!F#'N;N_.7%_5WZY?5_IG1L7#SLFP9YMLKN9Z-]CWY+[K77_S=5GJ6VWN?
M8]E;OSUL=9^L%)Z)5D=)S*A?U.ZG#P+S#P++[68SWBEWT[L-C[;GX]GY]'IW
M)*=Y)<WT;/Z1AYGV-EF>YUMKL)F;FOMLJR<C'#OM(JLM>^NK(:]EU7\SAU9'
MH658?K58_P"C)UCZPO\`3MQ>E!YL^TT8-G4`UCJ*;;[:\:UK?4L;Z^3BLL^B
MRF^BO*].G)_[45)*>@27,Y_1.D]&P;L]G4\GIM]+0^S/NR;;]SF@LK=EXN5;
M;1E^I_H6U>K9_-8OH_HT_3\S*JZS@9.76['/7\!K\C&=N'HY>,UEKF[;'?H_
M5Q\FVNUOI_\`:&I)3TJ2R^@9^1F8^2S*=NRL/,R,:T[=FC+'/Q3M_EX-N+9_
M;6HDI222&^^FNRNJRQK++B14QQ`<X@;G"MI^GM;[DE)$DED=3S<W&Z_T:BMQ
M&%FG)JR&[00;&U?:L:7_`$V>W'R?HI*==)8M/UNZ+;7A?I'MOZ@SU<?$%;[;
MS7)'JOQ\5N0^JKV_SUGZ):]MU5+0^Y[:VES6!SR&C<]PJJ9+OS[+7LKK_?>D
MIFD@9F=A8%/KYV15BTS'J7/;6V3^;OL+6]EG'JEG4>H48?2[&G%;57F9>:PM
M</3L)^R8M`.[WYOI6OMNV_H,1G^GRL>^E*?_T/0^O]-NZETU].,YE>94^O(P
M[;!+6WT/;D4;_:_;6]]?I7;&_P`S98L[K'0LX=6KZYTH5&W'V6V8?T?M-C1;
MC/WV._1UY#<#)OIQ;_\`2^C7E6?9:ET:22GBS]7NI=8S\[*J:>DX.0:K&XN7
M0TV-RZ]_J]1PW],S,:S&R-NQOVW[1;=E_I*[/U6G'6WT[HV=A=1IRKLPYOZF
M<;+NM`;98^NWU\)_I5-;1MJKR,VMW^%_FOYS](ME))3RF7]6<RSJ&2^FK'MQ
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M(:/L^'DX./[_`%'_`-*J9]B]_P"K?9M_&P:<;(R\AA)?FV-MMG@%M56*T-_L
M8[4E/G#&]-P^I=0%F(S!HMN%F#T_-MR*[\9[&5MRLKI^)TZC*_G7UL^S7X&=
M^BHK]+&]&K]"K'2OJQUW(-.4ZF_'ZDW(==7UJ[TZGNJ%CW,NS*/4NZCD778W
MIX[^E6MPL/[/^BLMWUKTA))3Q_7!];^D]'ZMF_:\;*KLQ[WN:/5QW8S@S97=
M@/W9KG[F-];[);95Z63_`#&5Z:CU3I&1@6XV1GX#_K-C#"9AY#V,:_+JLJ>^
MQF7C>M;ZGZQZ_P"E=7=]JWXN+<_)LL_2+;^MY8/JIUC>)'V'(TB=?3?M_P"D
MM9)3QO3_`/G_`(F+32W&%K:<E]X.3>RRY^%^EV],R;27_P"4_=4_&RF7?9?Y
MO[5=_.UV\]15U)C[JQTG*O\`K'C9[,VG-</U@XC!#*,K/W?9VOLP*/LOH>ME
M8=_VC^;MR_M'I>J))*?.,;/>['RNF8.%E-:WJ=N6YV"'TVY%%[OM.VYH=A=2
MP\BK%S*/0OOJ^PVOPL?$LRO35-UGUDS^CV_6#(PV6YM#:*++[PRV_#NQ;C3G
M9.'TYM%S&>K7MR;JW>C?7?\`I_TE'V/T_3Q10+W9`K8+WM%;K=HWEC2YS*W6
M?2V,<]^UB(DIX`].?GV9]=5]?4KZL3$R^EL]=V2UM)R<BW+QL3+RGNMO?E?8
M*Z[<RY_T[*:/T.)3337U'U9Z4>G85SGM<RW-R+<I[+'.>]K7G;CUVV6%]CKV
M8K*/M.ZV[]:]?]+8M;:V=T#=$3WA.DI__]'U5))))2DDDDE*22224I))))2D
MDDDE*5?,RSBL8\46Y&YP86TM#BV?SW@N;[%8224\]EMZG]8/\GW8-O3^D60<
MNVZQ@NN8TM?]DJIQ+;'4TY7T+[+K/4^S^O1Z%;[/470I))*4DDDDI22222E)
M)))*?__9_^T0!E!H;W1O<VAO<"`S+C``.$))300E```````0````````````
M`````````#A"24T#[0``````$`!(`````0`!`$@````!``$X0DE-!"8`````
M``X`````````````/X```#A"24T$#0``````!````!XX0DE-!!D```````0`
M```>.$))30/S```````)```````````!`#A"24T$"@```````0``.$))32<0
M```````*``$``````````CA"24T#]0``````2``O9F8``0!L9F8`!@``````
M`0`O9F8``0"AF9H`!@```````0`R`````0!:````!@```````0`U`````0`M
M````!@```````3A"24T#^```````<```____________________________
M_P/H`````/____________________________\#Z`````#_____________
M________________`^@`````_____________________________P/H```X
M0DE-!`@``````!`````!```"0````D``````.$))300>```````$`````#A"
M24T$&@`````#1P````8``````````````#\```#X````"0!S`&D`9P!N`&$`
M=`!U`'(`90````$``````````````````````````0``````````````^```
M`#\``````````````````````0`````````````````````````0`````0``
M`````&YU;&P````"````!F)O=6YD<T]B:F,````!````````4F-T,0````0`
M````5&]P(&QO;F<``````````$QE9G1L;VYG``````````!"=&]M;&]N9P``
M`#\`````4F=H=&QO;F<```#X````!G-L:6-E<U9L3',````!3V)J8P````$`
M``````5S;&EC90```!(````'<VQI8V5)1&QO;F<`````````!V=R;W5P241L
M;VYG``````````9O<FEG:6YE;G5M````#$53;&EC94]R:6=I;@````UA=71O
M1V5N97)A=&5D`````%1Y<&5E;G5M````"D53;&EC951Y<&4`````26UG(```
M``9B;W5N9'-/8FIC`````0```````%)C=#$````$`````%1O<"!L;VYG````
M``````!,969T;&]N9P``````````0G1O;6QO;F<````_`````%)G:'1L;VYG
M````^`````-U<FQ415A4`````0```````&YU;&Q415A4`````0```````$US
M9V5415A4`````0``````!F%L=%1A9U1%6%0````!```````.8V5L;%1E>'1)
M<TA434QB;V]L`0````AC96QL5&5X=%1%6%0````!```````):&]R>D%L:6=N
M96YU;0````]%4VQI8V5(;W)Z06QI9VX````'9&5F875L=`````EV97)T06QI
M9VYE;G5M````#T53;&EC959E<G1!;&EG;@````=D969A=6QT````"V)G0V]L
M;W)4>7!E96YU;0```!%%4VQI8V5"1T-O;&]R5'EP90````!.;VYE````"71O
M<$]U='-E=&QO;F<`````````"FQE9G1/=71S971L;VYG``````````QB;W1T
M;VU/=71S971L;VYG``````````MR:6=H=$]U='-E=&QO;F<``````#A"24T$
M*```````#`````$_\````````#A"24T$$0```````0$`.$))3004```````$
M`````3A"24T$#``````*0P````$```"@````*0```>```$S@```*)P`8``'_
MV/_@`!!*1DE&``$"`0!(`$@``/_M``Q!9&]B95]#30`"_^X`#D%D;V)E`&2`
M`````?_;`(0`#`@("`D(#`D)#!$+"@L1%0\,#`\5&!,3%1,3&!$,#`P,#`P1
M#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`$-"PL-#@T0#@X0%`X.#A04
M#@X.#A01#`P,#`P1$0P,#`P,#!$,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,
M#`P,_\``$0@`*0"@`P$B``(1`0,1`?_=``0`"O_$`3\```$%`0$!`0$!````
M``````,``0($!08'"`D*"P$``04!`0$!`0$``````````0`"`P0%!@<("0H+
M$``!!`$#`@0"!0<&"`4###,!``(1`P0A$C$%05%A$R)Q@3(&%)&AL4(C)!52
MP6(S-'*"T4,')9)3\.'Q8W,U%J*R@R9$DU1D1<*C=#87TE7B9?*SA,/3=>/S
M1B>4I(6TE<34Y/2EM<75Y?569G:&EJ:VQM;F]C='5V=WAY>GM\?7Y_<1``("
M`0($!`,$!08'!P8%-0$``A$#(3$2!$%187$B$P4R@9$4H;%"(\%2T?`S)&+A
M<H*20U,58W,T\24&%J*R@P<F-<+21)-4HQ=D154V=&7B\K.$P]-UX_-&E*2%
MM)7$U.3TI;7%U>7U5F9VAI:FML;6YO8G-T=79W>'EZ>WQ__:``P#`0`"$0,1
M`#\`]527-_67K'7.C]1Q'86.W.Q,]KL?T2"UU-]8LROM+34++LOU<1E_ZE77
MZK_LC/LWZ:[TTV!U[`P\-G4^I]8&<_J+VU4U45.#&O:7'[+A]/I;?G^LWU=N
M3]I]7)_F_5]'^:24]*DL'.^LY)PV]#KHZF[.IOR*";_2;8W&-3;<?&>*[_5S
M'>M_,O\`2]/TK?7LK]-4NC_6;I_3K<[I/4<FW]5RK/LE]]61[\>TFZK?DWML
M]3T+_M>#5=ZOZ:K#]2M)3IV=>OR,V_!Z+B#.MPW!F7?;9Z&-6\C?]F^TMJR;
M+LMGZ/U*J,:RNGU/UBZFS]&M:LO=6UUC=CR`7-!F#'N;N_.7%_5WZY?5_IG1
ML7#SLFP9YMLKN9Z-]CWY+[K77_S=5GJ6VWN?8]E;OSUL=9^L%)Z)5D=)S*A?
MU.ZG#P+S#P++[68SWBEWT[L-C[;GX]GY]'IW)*=Y)<WT;/Z1AYGV-EF>YUMK
ML)F;FOMLJR<C'#OM(JLM>^NK(:]EU7\SAU9'H658?K58_P"C)UCZPO\`3MQ>
ME!YL^TT8-G4`UCJ*;;[:\:UK?4L;Z^3BLL^BRF^BO*].G)_[45)*>@27,Y_1
M.D]&P;L]G4\GIM]+0^S/NR;;]SF@LK=EXN5;;1E^I_H6U>K9_-8OH_HT_3\S
M*JZS@9.76['/7\!K\C&=N'HY>,UEKF[;'?H_5Q\FVNUOI_\`:&I)3TJ2R^@9
M^1F8^2S*=NRL/,R,:T[=FC+'/Q3M_EX-N+9_;6HDI222&^^FNRNJRQK++B14
MQQ`<X@;G"MI^GM;[DE)$DED=3S<W&Z_T:BMQ&%FG)JR&[00;&U?:L:7_`$V>
MW'R?HI*==)8M/UNZ+;7A?I'MOZ@SU<?$%;[;S7)'JOQ\5N0^JKV_SUGZ):]M
MU5+0^Y[:VES6!SR&C<]PJJ9+OS[+7LKK_?>DIFD@9F=A8%/KYV15BTS'J7/;
M6V3^;OL+6]EG'JEG4>H48?2[&G%;57F9>:PM</3L)^R8M`.[WYOI6OMNV_H,
M1G^GRL>^E*?_T/0^O]-NZETU].,YE>94^O(P[;!+6WT/;D4;_:_;6]]?I7;&
M_P`S98L[K'0LX=6KZYTH5&W'V6V8?T?M-C1;C/WV._1UY#<#)OIQ;_\`2^C7
ME6?9:ET:22GBS]7NI=8S\[*J:>DX.0:K&XN70TV-RZ]_J]1PW],S,:S&R-NQ
MOVW[1;=E_I*[/U6G'6WT[HV=A=1IRKLPYOZF<;+NM`;98^NWU\)_I5-;1MJK
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MGJW3[.L59/0+79>1DV5U=1QZ:['U/9-=?VJ_(:/L^'DX./[_`%'_`-*J9]B]
M_P"K?9M_&P:<;(R\AA)?FV-MMG@%M56*T-_L8[4E/G#&]-P^I=0%F(S!HMN%
MF#T_-MR*[\9[&5MRLKI^)TZC*_G7UL^S7X&=^BHK]+&]&K]"K'2OJQUW(-.4
MZF_'ZDW(==7UJ[TZGNJ%CW,NS*/4NZCD778WIX[^E6MPL/[/^BLMWUKTA))3
MQ_7!];^D]'ZMF_:\;*KLQ[WN:/5QW8S@S97=@/W9KG[F-];[);95Z63_`#&5
MZ:CU3I&1@6XV1GX#_K-C#"9AY#V,:_+JLJ>^QF7C>M;ZGZQZ_P"E=7=]JWXN
M+<_)LL_2+;^MY8/JIUC>)'V'(TB=?3?M_P"DM9)3QO3_`/G_`(F+32W&%K:<
ME]X.3>RRY^%^EV],R;27_P"4_=4_&RF7?9?YO[5=_.UV\]15U)C[JQTG*O\`
MK'C9[,VG-</U@XC!#*,K/W?9VOLP*/LOH>ME8=_VC^;MR_M'I>J))*?.,;/>
M['RNF8.%E-:WJ=N6YV"'TVY%%[OM.VYH=A=2P\BK%S*/0OOJ^PVOPL?$LRO3
M5-UGUDS^CV_6#(PV6YM#:*++[PRV_#NQ;C3G9.'TYM%S&>K7MR;JW>C?7?\`
MI_TE'V/T_3Q10+W9`K8+WM%;K=HWEC2YS*W6?2V,<]^UB(DIX`].?GV9]=5]
M?4KZL3$R^EL]=V2UM)R<BW+QL3+RGNMO?E?8*Z[<RY_T[*:/T.)3337U'U9Z
M4>G85SGM<RW-R+<I[+'.>]K7G;CUVV6%]CKV8K*/M.ZV[]:]?]+8M;:V=T#=
M$3WA.DI__]'U5))))2DDDDE*22224I))))2DDDDE*5?,RSBL8\46Y&YP86TM
M#BV?SW@N;[%8224\]EMZG]8/\GW8-O3^D60<NVZQ@NN8TM?]DJIQ+;'4TY7T
M+[+K/4^S^O1Z%;[/470I))*4DDDDI22222E))))*?__9`#A"24T$(0``````
M4P````$!````#P!!`&0`;P!B`&4`(`!0`&@`;P!T`&\`<P!H`&\`<````!(`
M00!D`&\`8@!E`"``4`!H`&\`=`!O`',`:`!O`'``(`!#`%,````!`#A"24T$
M!@``````!P`(`````0$`_^$8`FAT='`Z+R]N<RYA9&]B92YC;VTO>&%P+S$N
M,"\`/#]X<&%C:V5T(&)E9VEN/2?ON[\G(&ED/2=7-4TP37!#96AI2'IR95-Z
M3E1C>FMC.60G/SX*/'@Z>&UP;65T82!X;6QN<SIX/2=A9&]B93IN<SIM971A
M+R<@>#IX;7!T:STG6$U0('1O;VQK:70@,RXP+3(X+"!F<F%M97=O<FL@,2XV
M)SX*/')D9CI21$8@>&UL;G,Z<F1F/2=H='1P.B\O=W=W+G<S+F]R9R\Q.3DY
M+S`R+S(R+7)D9BUS>6YT87@M;G,C)R!X;6QN<SII6#TG:'1T<#HO+VYS+F%D
M;V)E+F-O;2]I6"\Q+C`O)SX*"B`\<F1F.D1E<V-R:7!T:6]N(')D9CIA8F]U
M=#TG=75I9#IF8C<V9#$V,RTP8S4R+3$Q9&(M.60U,2UE.3EA.#)D-V,P9#0G
M"B`@>&UL;G,Z97AI9CTG:'1T<#HO+VYS+F%D;V)E+F-O;2]E>&EF+S$N,"\G
M/@H@(#QE>&EF.D-O;&]R4W!A8V4^-#(Y-#DV-S(Y-3PO97AI9CI#;VQO<E-P
M86-E/@H@(#QE>&EF.E!I>&5L6$1I;65N<VEO;CXR-#@\+V5X:68Z4&EX96Q8
M1&EM96YS:6]N/@H@(#QE>&EF.E!I>&5L641I;65N<VEO;CXV,SPO97AI9CI0
M:7AE;%E$:6UE;G-I;VX^"B`\+W)D9CI$97-C<FEP=&EO;CX*"B`\<F1F.D1E
M<V-R:7!T:6]N(')D9CIA8F]U=#TG=75I9#IF8C<V9#$V,RTP8S4R+3$Q9&(M
M.60U,2UE.3EA.#)D-V,P9#0G"B`@>&UL;G,Z<&1F/2=H='1P.B\O;G,N861O
M8F4N8V]M+W!D9B\Q+C,O)SX*(#PO<F1F.D1E<V-R:7!T:6]N/@H*(#QR9&8Z
M1&5S8W)I<'1I;VX@<F1F.F%B;W5T/2=U=6ED.F9B-S9D,38S+3!C-3(M,3%D
M8BTY9#4Q+64Y.6$X,F0W8S!D-"<*("!X;6QN<SIP:&]T;W-H;W`])VAT='`Z
M+R]N<RYA9&]B92YC;VTO<&AO=&]S:&]P+S$N,"\G/@H@(#QP:&]T;W-H;W`Z
M2&ES=&]R>3X\+W!H;W1O<VAO<#I(:7-T;W)Y/@H@/"]R9&8Z1&5S8W)I<'1I
M;VX^"@H@/')D9CI$97-C<FEP=&EO;B!R9&8Z86)O=70])W5U:60Z9F(W-F0Q
M-C,M,&,U,BTQ,61B+3ED-3$M93DY83@R9#=C,&0T)PH@('AM;&YS.G1I9F8]
M)VAT='`Z+R]N<RYA9&]B92YC;VTO=&EF9B\Q+C`O)SX*("`\=&EF9CI/<FEE
M;G1A=&EO;CXQ/"]T:69F.D]R:65N=&%T:6]N/@H@(#QT:69F.EA297-O;'5T
M:6]N/C<R+S$\+W1I9F8Z6%)E<V]L=71I;VX^"B`@/'1I9F8Z65)E<V]L=71I
M;VX^-S(O,3PO=&EF9CI94F5S;VQU=&EO;CX*("`\=&EF9CI297-O;'5T:6]N
M56YI=#XR/"]T:69F.E)E<V]L=71I;VY5;FET/@H@/"]R9&8Z1&5S8W)I<'1I
M;VX^"@H@/')D9CI$97-C<FEP=&EO;B!R9&8Z86)O=70])W5U:60Z9F(W-F0Q
M-C,M,&,U,BTQ,61B+3ED-3$M93DY83@R9#=C,&0T)PH@('AM;&YS.GAA<#TG
M:'1T<#HO+VYS+F%D;V)E+F-O;2]X87`O,2XP+R<^"B`@/'AA<#I#<F5A=&5$
M871E/C(P,#8M,#8M,C=4,C,Z-#4Z,C$K,#4Z,S`\+WAA<#I#<F5A=&5$871E
M/@H@(#QX87`Z36]D:69Y1&%T93XR,#`V+3`W+3`U5#(S.C4P.C4W*S`U.C,P
M/"]X87`Z36]D:69Y1&%T93X*("`\>&%P.DUE=&%D871A1&%T93XR,#`V+3`W
M+3`U5#(S.C4P.C4W*S`U.C,P/"]X87`Z365T861A=&%$871E/@H@(#QX87`Z
M0W)E871O<E1O;VP^061O8F4@4&AO=&]S:&]P($-3(%=I;F1O=W,\+WAA<#I#
M<F5A=&]R5&]O;#X*(#PO<F1F.D1E<V-R:7!T:6]N/@H*(#QR9&8Z1&5S8W)I
M<'1I;VX@<F1F.F%B;W5T/2=U=6ED.F9B-S9D,38S+3!C-3(M,3%D8BTY9#4Q
M+64Y.6$X,F0W8S!D-"<*("!X;6QN<SIX87!-33TG:'1T<#HO+VYS+F%D;V)E
M+F-O;2]X87`O,2XP+VUM+R<^"B`@/'AA<$U-.D1O8W5M96YT240^861O8F4Z
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M+W)D9CI21$8^"CPO>#IX;7!M971A/@H@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`*("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`*("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M(`H@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@"B`@("`@("`@("`@("`@("`@("`@("`@("`@("`@("`@
M("`@("`@("`@("`@("`@("`@("`@("`*/#]X<&%C:V5T(&5N9#TG=R<_/O_N
M``Y!9&]B90!D0`````'_VP"$``$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0$!`0$"`@("`@("`@("`@,#`P,#`P,#`P,!`0$!`0$!
M`0$!`0("`0("`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#
M`P,#`P,#`P,#`P,#`__``!$(`#\`^`,!$0`"$0$#$0'_W0`$`!__Q`&B````
M!@(#`0`````````````'"`8%!`D#"@(!``L!```&`P$!`0````````````8%
M!`,'`@@!"0`*"Q```@$#!`$#`P(#`P,"!@EU`0(#!!$%$@8A!Q,B``@Q%$$R
M(Q4)44(6820S%U)Q@1ABD25#H;'P)C1R"AG!T34GX5,V@O&2HD14<T5&-T=C
M*%565QJRPM+B\F2#=).$9:.SP]/C*3AF\W4J.3I(24I865IG:&EJ=G=X>7J%
MAH>(B8J4E9:7F)F:I*6FIZBIJK2UMK>XN;K$Q<;'R,G*U-76U]C9VN3EYN?H
MZ>KT]?;W^/GZ$0`"`0,"!`0#!00$!`8&!6T!`@,1!"$2!3$&`"(305$',F$4
M<0A"@2.1%5*A8A8S";$DP=%#<O`7X8(T)9)3&&-$\:*R)C495#9%9"<*<X.3
M1G3"TN+R565U5C>$A:.SP]/C\RD:E*2TQ-3D])6EM<75Y?4H1U=F.':&EJ:V
MQM;F]F=WAY>GM\?7Y_=(6&AXB)BHN,C8Z/@Y25EI>8F9J;G)V>GY*CI*6FIZ
MBIJJNLK:ZOK_V@`,`P$``A$#$0`_`-_CW[KW7O?NO=>]^Z]U[W[KW7O?NO=>
M]^Z]UQ9U16=V5$12SNQ"JBJ-3,S$@*JCDD_0>_=>Z(3B_P":)\`,]W51_'S;
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MQQ111J7DDDD<A4C10222``/?NO=!9T[WET_\A-HU&_NC^Q]I]J;(IMS[HV;)
MNS9.7I\]MY]S;+S53M_=&+I<M1-)15LN&S-'+!))`\D3,ET=EL??NO="M[]U
M[HOWRB^3/5/P]Z/WA\A^\,CF<-U=L*HVM%NO,X+;^3W+4X>FW7N_!;,HLM64
M&*@FGI\)C\IN&"6OJY-,%%1K)-(P1#[]U[H?HY8YHXYH9$EBF1)(I8W5XY8W
M4.DD;J2KHZ&X()!'/OW7NJ*?EE0[T_F._/W(_P`M<YO=NT_A#\=NE]H=T?/:
MKV+N7([1W#WMO'M_*5Z]%_%*LW;MZ6BW/M?861VSM;([DW2N.JZ2LR^.:"C,
MT$;EIO=>ZN3ZTZAZLZ8Z^VOU/U+UWLWKCK39-#1X[:6Q-F;=Q>W]K;?I:"5)
MZ1<9AL;2P45-+'5()C*$,KSWE9C(2Q]U[H1O?NO=5_=M_P`S+XK=4=U9CXXT
MN5[-[F[YVGB*;<?875GQPZ9[-[[W-U7MNMH9<E1YSM23K;;6=PO7M/6T<6NF
MILI5T]?5B2,P4\HD2_NO='2V!OO:G:.QMG]D[%RG\=V7O[;.#WCM/,_8Y'%G
M*;=W)C:?+X>O;&9BCQ^7QTE305B.U/54\%3"24EC1U91[KW2O]^Z]U7;\B_Y
MGGQJ^/?9&8Z,QN.[F^2OR,V]M^EW7N/XZ_$7J'=?R`[8VEMJL59:/+[]H]JP
M+M3K:&OIY%FI(MQY;$U%=%(C4L<PDCU>Z]TZ=$_S,/BKWIOW;O34F=WYT5\@
M]U8>;/X#XY_*3K#>_P`=N[<UB*>"*>HK]M[-[,P^$&]:2!7<--@ZG)0_L36<
MB*0K[KW0T;J^4>P=E_*OJ/XD;DQ>YL9O?O+JCM+M+K3==31X^+8>Y'Z>R^S:
M'>W7^/RLF23)5'8-!A=ZT^:%%'2/'_"*>>=I5,>D^Z]T8^:IIZ8PBHJ((#43
MI34XFECB,]1(&:.GAULOEG=4)"+=B`;#CW[KW6?W[KW7O?NO=>]^Z]U[W[KW
M7O?NO=>]^Z]U[W[KW7O?NO=)7:&]]F=@8F?/;%W7MW>6$ILWN';=1F-KYK'9
M[%P[AVEG,AMG=.#>OQE14TJY7;FY,554%;`6\E+64\D,@61&4>Z]TJO?NO=>
M]^Z]U[W[KW7O?NO=>]^Z]TPY_=&V]JQ8R?<VX,+MZ'-9W$;7P\N;R=%BX\KN
M3<%8F/P6`QK5L\"UN:S-=(L-+31ZIIY#I16/'OW7NO_1VK?YP/QQW[WU\-MP
M[PZ+9*'Y3?$[=FV/E]\6LVL.0FJ8>W>C)I]Q_P!UEBQ,M-DLAC^S]DMF-KU5
M$DJQU<67TR74"WNO=:V7QO\`DD_SIV/T'E?Y\_R7^2W773'R@Q.+WKTYM+9O
M^C#I3^5KWMBMP5-17X?K+?G?/0\^0[$AWUM@H*/-[6[%W+MD09.E:D=*J4$2
M>Z]ULO\`R,^?_P#+J_E88+I7I3>VX-L]52;^6FQ'1GQXZ&ZQS&\-VYK%U$U3
M!1UFS^H>H-N9;*PX#(9>%J2"K2C2"LR#^*-I)=>GW7NGG?/\QCK'=/P!^27S
M5^(%=BOD#D>D>G.T]ZTO6[4FY\5NG'=C=>[2RN=;K/M+8*8A.R=@;IH:^A5,
MCB:_'4F1BA!:T<;+./=>ZKPZ[W'\J<S\=]W;Z_F+?(G8'S0_EX_)K^7=N/?O
M:>=Z<^.$>`&S=Z]K9/:F#V[U7TKC>H<AN;L?MO";LZY[`R<*5$](V5BK<325
M,4E*]2\4?NO=!5_*D_G+_&CJ3X>]7_&;YL=I]M]:_(/XUY+??QUW-FNZ/CQ\
MCMLG<^"Z;KY_]'^Z-P[ERO7.1Q.W=RY7I*NVU7Y/%YK(T^:HJNM5:B*\T,DO
MNO=,?4W\WO\`EY_'7^99_,5WMV!WHU%UE\H]@_"3MGIW>^S.MNVNU<#OV?97
M6&\.J^QI;];["W9G=MYG;=7B,/0UE!D*>EA@=%TVJ9*B,>Z]T8C;_P#PJ!_E
M*[E[GK>IL;V5VW#MS%Y.@PV:^0&7Z2WK@.A-N9+)01FGBW;N3.4^.W?LRF7(
ML]%+59?`T-)!4Q2-)*D"F;W[KW5FWS>^8?7WQL^`W?\`\Q,1V1LI-M[4Z#W9
MO_JK?4.7P><VINW=68VG52=01;<K!D%PVZAO7=M?C(,=%!.R9%JJ-49@X/OW
M7NJO_B+OS%_RU/A?_+ZZ-Z?Z&W=\O_F?\[=K-WYOZ@V=NS:VV-Q]H;WSVU]L
M]J?)3Y'=O=M=FY.GI:;:^U,IV)0T--4U\DD]0:K'8ZEB0LD:^Z]U:U\5?FOU
MO\J,OVWL&BVGV+TWWKT#N#&;:[N^/O<^%Q>WNS]@SY^BER.U-R+'@<YN;:^[
M^NM\T--/-@MQX3)9#$Y2.GE\<PDCDC7W7N@6RO\`,`W;V'V!W5L;X=_';(_(
MO`_'3);KV5W/W=N#L3$]0=+;?[@VOCUK,IU'LG/Y/`;GS7;&\=JN'@W(<10C
M&8"K\='45OW;R0P^Z]T'W\D+8>"H/Y=G0??57!C,SW5\Q-I4/RH^1?:`IJEM
MS]H=L]QO5[TRN2W+F,CY,K70[7I\VF&Q=,[FDQV.HHZ>D1(5%_=>Z5?\X#;?
MP\R?PG[,W%\OGH,/0[/H6S'1^\\-456+[NVK\AHQY>GJGXW9S;]/4[ZH>ZZS
M?,%%'B8<)'+4UDEXIX9J0U"'W7NJ_?FIB^_L!_*3^#O\P#Y%XQ,+\Y_Y=E'\
M:/EIV)-40P8G<U9)!C]L[0^5O6&2=:.IH<3E^TNJMRY>CRU*81019N**QA2"
M.:+W7NC3_P`[^HJ,5\).NOECM>J:?_9+_E;\2?F8E3042YU:C8NQ.U,%A.Q:
MZ.&CDFCJZ&DZFW]F:V5HQ,'@@8I8D2+[KW5RU!74N4HJ/)4$RU-#D*6GKJ*I
M34$GI*N):BFG0,%<+-#(&%P#;Z^_=>ZF>_=>Z][]U[KWOW7NO>_=>ZA8_)8[
M+4L==BJ^BR=#*TR15F/JH*VED>GFDIZA8ZBFDDA=H*B)HW`)*NI4V((]^Z]U
M-]^Z]U[W[KW6M;_+)[\QWQ#^!_\`.$R$NVJ>2N_E_?.+^9EN@=<#-3"AEV]@
MZW+=][$PN.^PI,M7[=VWN/&9Y*:&5::<*WFG"N=:CW7NK-.V_P":O\)/C/U]
MTGN?Y0]Z;-ZEWOW?L'9&^-L]0XZ/<O9O:M;!O'!4N523#]9]:[>W3V1E=OT=
M5)+3?Q48A*$R0L&D5O2/=>Z.'T=W%@^^^L=N=K;;VIVALO!;I7(2XO!=P]:;
MOZA[`BI:')U>-CK<OU]OS&87=F"I\I]H:FC^\I('J:.6*95T2(3[KW2XK]X;
M1Q>Y,!LS)[IVYCMX;KI,S7[6VI7YO&4FY-RT&W$HY-PUN`P5151Y3,TF!CR-
M.U;)3Q2)2K/&92H=;^Z]T_RRQ0123SRQPPPQO+--*ZQQ111J7DEDD<A$CC0$
MLQ(``N??NO=%4VU\[/A;O7MK)]#[-^5GQ_W?W'AMKYG>>6ZWVMVOLO<6Z\?M
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MY[<71>R_G?\`'[J;MCJBERO8.7@R%9N+KCX]=M5%3L"CW1D:E(,3BM]PT]3-
M`U,7G]U[H\?\ZJA[&^%W9'Q\_F'_``PZ)CR7<VZNW=C]3_(W-;'[$Q&W:SY&
M[5S]7A-G=7]!]@]!Y?<&V<+\C\EV/69>?%X;,T;U.[]F3TU-4TD51CQ51Q>Z
M]T5[8NX/YDWQJWY28S^4O\`OFMM7HG/[@3-;P^%WSVQGQXVK\8.K:O=VYGDW
M7FN@NYH?DE6]U];T2RRSY*3;E%%N?;]//7.])04\,0I??NO=6[?&#%Y+I/\`
MFK_/;J>KK*B'!?*3I;XT_.?"[5IT6KVYMWL>@H\[\8.]FP>8$T%7-'F#UAM"
MLE-714LE3+.[Q#2LBK[KW2%_F99"/XI_+;^7I_,<BIXH]H[;[,J?@G\F\G4?
MQ*+&X'H7Y=9C`4FS>Q<_DJ6I>BQ.'ZO[XVM@]1GI)$G.?96EATHX]U[JG?97
M57\N+X.=H_,KH_\`F*;C[;^$O:=9\CNT^T.IODYU;W+\FND8/G-\<NY-[;P[
M;V3%59/IO=51A>XNQ^HLMO/([7R>*KJ;(YRCCI<>L%UJ&B3W7N@.[7_EU]9[
M_P#Y7'\T+Y"=9_'GO?K_`.*_@Z^S_P`).G.UMY=J[R[-QO0/3W8^S>S/E5WU
MU?L#MO(Y#(='2?*^GVS59.AI,ECFS5,N->OF9:'))11^Z]TH=A8KY1;8Z4^`
MWSBZ8[UWIUOB?@AB>U/Y4WR;[.'3F,[\VOM?X>OG=O[AZ7^:_6O1\M5BH,KB
M\QL*/8>3W5G*>JFDBQ`I:[^'Y"AQM13U/NO='>^+GS*ZOZI_F8?%?I3XX_(#
M9O\`,WW'_,`ZIWUN/Y1?,/<'9FW=Q=WX!>F89\UUSLS9FT.O:S!]0]']2[(Q
M&YLOEY-E0X#$2U$<M95K-5Y;]NL]U[H^_P#PGRP,+?RA?CQ197%M"FY=R?*?
M(95)Z62BGS<&XOE9WE*,K4RA8*FL;,XNHBD6J+%IH71@Y&D^_=>Z>_Y0N8V]
MTC\>>Z/@#O\`R>#P6?\`Y<G<&]^B:N+.5,F&ES'QUW9D*OL?XU]IY3^.FE9L
M1O?JW=L6/DR/II*O,83(K$2(R3[KW6O9\:.N.D.^OF+W7V3\0>U>F_C]VA\6
M_D_N+X__`![V]+TAW3_,WEV'L78F2R%+!\AN[>X^X^Z]S]:]#]6=FQ8N:/;F
M1V?7X"GV]CI&@I*V>LEJ(3[KW5AW2G\U;<W\P;X(_P`VKJ;N3:&UMT)\=OAS
M\BL9N[Y'=%X+<FW>GM[5M1L/NK9V>V!7;:[!KMPQ;$[CQ5-M%,JM!0;AW7A,
MCBLE35T5;3Q214[^Z]T#VVOY;&VOE!_(;VU\A:+Y&_(GKGY.]S?R^J/?'9'9
M^\/D_P!O[AZG[*DR?5-/7Y+8O;'4&_MX[CZ3I^LZW&42XRC7'X''S[?005E%
M(E53(Q]U[I,_#?Y7]%?(_P"&_27R$[W_`)PO:_4'S#S^S:-]@]+?#WL/.[NP
M/QO@VMMJHVQL_KS/?"O;&%[=J.ZLA78[:*YC/G?.'R^1S>0JJB+&ST5/]JJ>
MZ]T%?2._?GQ_,-^0/RRV-V9O?YUY_OKH;?>R=BX#"?'WY#9#^5/\:<!\8L[U
M>$V5W_O[J3MJE[#[ZK,Y\D<A)7YVHB&P,X^'C\:4=73Q""F'NO=&V^&7\PWY
M5_$+JCO/XV=U-W5_,+V;TYF7V/TA_,>^*_5^>^7O5'7]=F=@X]L#TUW_`#;&
MH=K]E]J[FZ.W6$BS6>PN-S%37TM;!%D'H*QA`ONO=&GZI_GL[5ZPZ(S^"_F;
M;+K_`(,_-#8G4&:WQ1[,[7VWF=B=9?)4XG:N:SF&W7\>,SN>I19I-U_PN!:K
M9^7K*3<NW\I7)BZA)9T,A]U[HFNS?F#\^/E3_(1^47R-^0.7[!PASU7TENS#
M=M[)ZIR'0'8N6^+6Y\AT#NSY:2=>[3V[DJ_-3;2ZTVMG=]X+;F[Z0+7;FP>,
M%?3QRRM'43^Z]T+78'QVZ0ZL^`W8GS__`)%/R(Q?PQRL72DG9\>RL7NW:O87
MQH[HVYMZ&KR5#MWL#J;L'.[^V5UQV[N;^%/CZ#<&*?%;A@RDTE%E5FFDJ(H?
M=>Z%$?\`"@OK]?Y770_\Q"#9.T<WN:L[DZIZ>^5WQVQN_<73=J]29?,;QDV+
MVS1[&V/-6U6Y-R;PV_6K%E\)@J\4576[?J4JZEH$21E]U[HLOS]^:E-W!_-'
M^$GP=[;[_P`IC?Y</S+BZA^0?6?873&^JSJC#]E8V'K;O?;5'U5EN_NN=Q;>
MW?6[7[`[XCV-6(E'DJ5Z@Y"GI%EC+1B3W7ND?U%L'#?%/^=!\R_Y5_6.YMZ[
MN^+?S_\`ACG][;RH?D7N7>O:.9PO?N-ZPW'@(.L^J^R\Y697/;JQT'0=?0R5
MV,W%5UF43!T$)^]?[>G$_NO=*W^5IO'K[8_\A/NCY3?#U'[$_F&[$^.G<^3[
MIWCV%$_;OR+Q/R>ZUV/7;?DVUN/^^$E9O#^[.%I=DT,NU]MR2+BSBXZ=8H'>
M6?R>Z]UDV!_-;^3NUZ+Y(?"O:7R2Z]^2_?\`NC^7C0?/K^7=\ONW=L=>=34.
M_=L[TPM1DZOK/MZ@P,N'Z5EWUU^5GEP^:_W$8.L^U-/EJ>)J:=IO=>ZKCR'S
MD^'G6O:G\NC</PP[W[I[U^3WR5HM_P`>4[W^7OR,WUWY2_"/OS=V+Z]V+W5V
M-VWT;A:K)U&-WIANJ=Z;G%7A<5_".NJZJQ6,JJFGK,?CH:W&^Z]U9+M;=_;G
M\Q'Y8]`_`SY4=W9+Y"_"M_\`9B._,7V#A.N,U\9,W\^MA]/[<Z*Q>V*?M/9^
MU<GB<=D^@-J=K]UY?'T]3AH\9A-_S[75Y:.2F@>6J]U[HA&^_C;2OMS?VS>B
M-U;-Z3[&[4_G.?.7X2;!ZTVATELW:.\,9O3OC<%1U;FMXQ]HT$>/W!MGX[=/
M_P`N96J:7:&W:3'0Y;*ST-14UTB04M,/=>ZWGME;-VQUULW:77VR<+2;<V9L
M7;.!V;M';V/\@H,#M?;&+I,)@,-1"5Y9128O%444$09F;1&+DGGW[KW7_]/?
MX]^Z]U`7%8Q<G)FEQU`N9FH(<7+EEI*<9.7&4]1/5P8Z2O\`']V]!!5U4LJ0
MES&LDCL!J8D^Z]TFNQ.N=A]N;%W9UCVCL[;G8/7>^L%D-L[QV5N[$46>VUN7
M`92!J:OQ.8Q&1AGHZZCJ8F(*R*;'D6(!]^Z]U71T5_)K^!'QU[7V3V[UWUUO
MZKR?5=7ELGTYLKL3O+N7MGJ?I7-YFFAH*O<G4O6'9F^-U;0V-N:+'QM!39"C
MIDJZ.&5U@DCN+>Z]U:7[]U[J+]G2_>&O^UI_OC3BC^]\$7W?V@D\_P!J:G1Y
M?MA,2^C5IU<VN??NO=!IW7TAU1\C>L]R=.=W['PW8W66[QBAN/:&>6I.-R3X
M+-X[<F&F:2BJ*2MIZG%Y[$4M7!+#+')'-`C`@CW[KW0B5^(Q.5-(<IB\?DOL
M*N.NH?OZ*FK#15T1)BK:7[B*0T]5$3Z9$TN+\'W[KW7>5Q>.SF+R6%S%%39+
M$Y>@K,7E,=61K/25^.KZ>2DK:*JA>Z34]532LCJ>&5B#[]U[HEOP(^`W3G\N
MSJG>?3'1N7W[E=C[L[;W=VI1TO8.Y&W17[3@W%0X'!X/KW;N2EIJ>K&QNO\`
M:FUL?B<-#5/4UD5!2HLU1,X+GW7NN'S$^!O5ORSZTQ.V*/+YCH'M/K_>=)VC
MT?\`(;IFDQ&WNT>E^T:*DJ,8VZ]NUJTB4F5H<_@:VIQ6=Q5:)*#-XFJEIJA?
M\V\?NO=5L?&ON'Y`]D]5[6^&_P#*+V]LS:?QD^)^&I?C;G?YC7RJP62W9M;>
M.Z.JH:W8.\HOC=T?LFNV74]\;KP^YL2\^5W1E<MMW:391*F*"/(A@X]U[H#/
MFQ_*@RW6&0V1_,/WG/O?^:9V]U+%$OS+Z3[ZVYMC-;:^3/QUQU!5&?&=(?'C
M9^V:/JC;G8?Q^R-95;EV/A&QM7_$YYZ^"JK*FOJ8*D>Z]T?_`'+\$_Y0_P#-
MOZ:ZE[KJNC^H>Y^NY]FIB>N=[];UN=ZPS6$V\L/B_N%FJKJG.;,S$#[%R7DC
M;;.:\L>`RL<JFD@J!(#[KW5>G3?\IWXEXOY+_P`R3^5EN+K#LG%?"SN_8OQ!
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M+'3%!#&BD\#W[KW1??G'M`[T^'?RHP]%MBDW7N2I^-W?-%M3%SXH96LJ-P9+
MJS=-'C:3&0QTM96BMKZR6.)!3HTS,P"@FP]^Z]T!W\J*AI=R?RGOY>V,W'14
M.7Q^=^"7QJQV:QE;0TDF/R5!D>D-I4M?CZ['"!:*6EJJ69HIH3'XV!92"#[]
MU[JOC%_\):_Y/V([HJ^VZ3IGL$X'(9N3<&0Z#E[9W0_0-=D-594425FSPRY^
MIQ6'R%9]Q1X]LP<?3LB1K!]N#"?=>ZMAQ7\O7X(8/L79O;V'^&_QDQO:?7F(
MP>"V-V+1](]=0[SVIBML8B#`;;I<%N--OC*X\[?P=*E%12)*):6E!BB948J?
M=>ZJL^5__"=#X?\`;F/J<Q\:&@^,/851EMT+)0YK&[P[T^.LFQ.QS7S]I=<X
MWXV[E[,VWM#KS";JSU9#N"CJMF5>V*_!;HQE!DZ&6*6E1??NO=<MG?R`=L[,
MV=MG?T'SE^6VYOY@.QLQ@-^;!^<>_-UTV^:_9?96&V#CNL\C-C>D-R-7;"S7
M6^\MAX3'X'.8;,S9/*Y+!XZFI7S`:/S'W7NBN=-_R3-X;"^86^=KY_9G8^*P
MV4W[N_O[;_\`-2^.?>&'^)/<%-ANUL''N+?WQJRW3W4,C4F_ZI/D>^2S./CW
M!AJK;F-V=E321U,DL243>Z]TL:K_`(3"_%_9/RV^+GR3ZJSU/V%M;JS?>\LM
MWETG\N<7)W+U_P!D[9WMF\ANB:786V=N?W%V1UWGMJ[JS=?E,;0)AIMN2Y*H
M2HJ:)S%(E1[KW1V_G#_)YV'W-O7XF_(+X9T_1GQ`^3GPY[IC[<V-N["](8N+
M:'8^#DQ3TVX.H>R\;UWDM@9:;:6\:BCHX*BN66JJ<?1-5BGA9JAP?=>Z&7,?
M';Y7;L^8?\N[Y5[OH>A*;<'4G5?RQZC^6&/V/D]T38>FV_W1C.O]Q;$EZAS>
MYL'1;GW(,-OSJS&05,.2I:!)*:MJZA1"P2)O=>Z,GMCX1?'#9_R4WU\K]O['
MGH.W.QFQ^1W1;<6?FV'/O/'X"':)[5Q_6<N1?8F([@R6RZ:/"5NZJ:@BSM7A
MU-')4M!),DGNO=&S]^Z]U__4W^/?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7
MO?NO=>]^Z]U[W[KW7O?NO=)#?^R\1V/L3>W7FX/-_`=^;2W)LS-_;K3-/_"=
MT86MP>2,"UM/5T3S?95SZ1-%+$6_6C+=??NO=4#_`!T[D[%_DG=0;`^'7RJZ
M'WUG?AGTIFMQ[>ZV_F&=0[<GW=U?M[HBL_O%NS![@^56Q-HQ9S?O5/8^`W+D
MH,3G\K_"QM3)&K_BD-;&4J*8>Z]U:\W\P_X`#%?Q]_F[\1QBTQ3YP5K?(KJ$
MA<1Y%@DK@G][O/X?N66$V6_FM';7Z??NO=4[]!]Y?&M?YL@VS_*V[3W1WAL_
MY%2=N]H_S$MJ=?Y[.;_^'G7FZLQM:MKMC_)';'9,E%N+96U^Y]U=B[)BV_78
MC;U;-C<_2Y>2:IBBJ*"%C[KW6PCCNK=@8GLO='<.-VS0T?9>]-J;4V/NG=<4
ME8*W-;6V1D-R93:N*JZ=JEL?IQ%;N[(,DR0K.XG"2.Z1Q*GNO="![]U[KWOW
M7NO>_=>Z][]U[H'OD+N>@V1T'WCO/*0551C-I=/]E[HR-/0I%)6ST&`V7F\K
M5PT:3RT\#U4M/2,(P\B(7(#,H-_?NO=%#_D_"H'\JW^7>*K$'!S#X<?'R^--
M8*\Q1GK7;W@J#4AFU"O@TU`6_P"V)=']GW[KW5COOW7NO>_=>Z][]U[KWOW7
MNO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO_]7?X]^Z]U[W[KW7O?NO=>]^
MZ]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW4>JI*:NIJFAK:>"MHJ
MRGFI:NCJX8ZBEJJ6HC:&HIJF"97BG@GA=E=&!5U-B+$W]U[HN-/\,/AY24ZT
M=+\3_C534D==+DXZ6#HOJ^*G3)3W\^02&/:RQK737]<H'D;\GW[KW1A\?C,;
MB*2&@Q./HL704X*P46.I(**DA4\D14U,D4,:D_T`Y]^Z]U/]^Z]U[W[KW7O?
MNO=>]^Z]U[W[KW50/\V7Y:MM#JG)_!OX^28;L3Y\?-;:F<Z@Z)Z<BIJG-R[<
MVWOF)=I=@=]]GQ4%'D*/9G5'4NSLM7YBHK\N(J6NFH?MH5J#YE3W7NK`?BMT
M+AOBS\:.@?C;M[)U.<PW1'3W7G4]#G*T2K5YN+8FU<7MQ\S41S3U3P39:;'M
M4&,R.(_)I#$*/?NO=#[[]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWO
MW7NO>_=>Z][]U[K_UM_CW[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O
M?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=>]^Z]U[W[KW7O?NO=1JN%*
MFEJ:>226*.H@FADEAF,$\22QM&TD,R$-#*BL2K`@J1?Z^_=>ZKEWI\`:[=&U
M-P;?[$_F$?/^NV!D9UR.Z\>G;_3G7(J-L45#!!D]M5._NM>A]A]A[>VM7XZB
M85T]!G*'(,'ED^\1Y'D/NO=!M_+[^.?\J+X^=K]D83X6;_Z3[%^4U-UYMK:G
MR`W+0?(?"=Z_);-[;V[FIJRDS_<Q;>>X=ST.1RV?SL1KJ^:CH%K72A@>\5)0
MQ0>Z]U;9[]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][]U[KWOW7NO>_=>Z][
)]U[KWOW7NO_9
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>12
<FILENAME>magic.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 magic.jpg
M_]C_X``02D9)1@`!``$`E@"6``#__@`?3$5!1"!496-H;F]L;V=I97,@26YC
M+B!6,2XP,0#_VP"$``0"`P,#`@0#`P,$!`0$!@H&!@4%!@P)"0<*#PT/#PX-
M#@X0$A<4$!$6$0X.%!P5%A@9&AL:$!0='QT:'Q<:&AD!!`0$!@4&#`8&#!D1
M#A$9&1D9&1D9&1D9&1D9&1D9&1D9&1D9&1D9&1D9&1D9&1D9&1D9&1D9&1D9
M&1D9&1D9&?_$`:(```$%`0$!`0$!```````````!`@,$!08'"`D*"P$``P$!
M`0$!`0$!`0````````$"`P0%!@<("0H+$``"`0,#`@0#!04$!````7T!`@,`
M!!$%$B$Q008346$'(G$4,H&1H0@C0K'!%5+1\"0S8G*""0H6%Q@9&B4F)R@I
M*C0U-C<X.3I#1$5&1TA)2E-455976%E:8V1E9F=H:6IS='5V=WAY>H.$A8:'
MB(F*DI.4E9:7F)F:HJ.DI::GJ*FJLK.TM;:WN+FZPL/$Q<;'R,G*TM/4U=;7
MV-G:X>+CY.7FY^CIZO'R\_3U]O?X^?H1``(!`@0$`P0'!00$``$"=P`!`@,1
M!`4A,08205$'87$3(C*!"!1"D:&QP0DC,U+P%6)RT0H6)#3A)?$7&!D:)B<H
M*2HU-C<X.3I#1$5&1TA)2E-455976%E:8V1E9F=H:6IS='5V=WAY>H*#A(6&
MAXB)BI*3E)66EYB9FJ*CI*6FIZBIJK*SM+6VM[BYNL+#Q,7&Q\C)RM+3U-76
MU]C9VN+CY.7FY^CIZO+S]/7V]_CY^O_``!$(`#H`GP,!$0`"$0$#$0'_V@`,
M`P$``A$#$0`_`/OZ@!&(52S$`#DD]J`/BGX^?M*^,I?BJ3X#UY+'P_IER;6!
M5@21=0D4D,[D@G82,+CMSCFOL\%DE!4;5XWFU=ZO1:?CW_,\BMCFYM4^BO\`
MUWWV_4^G_AY\3M`\2?!6+XC3SK96,5J\]\KGFV>,'S4/N"#CN>/6OF<3@JE'
M$/#I7=]/.^QZ4*L7!3N?*UC^T]X]@^*H\47]TQ\,/<%9-#$*_N[4M@,IQN\P
M#YB2?7BOIWDN'=%T8+W[:._7\K,\>ECY2K6;_P`O3_)]7Y.Q]L:-?V>JZ3:Z
MGITZ3VEY$L\,J='1AD$?4&OC9Q<).,MT>XFFKHLU(SQ/]M;XNWOPS\'6&F^'
MIXXO$&OS>5;RLH?[/$I&^3:>IY`&?4GM7M9+ET<74E*I\,5=^?9'+BJSIQ]W
M??\`KY]_,Y+]B3XW:[XG\2WO@7QOJHU"^*M<:=>R(J/(%`+Q-M`!(!#`]QGT
MKJSG+:5&G&O0C9;-??9ZOY?UKA@<4ZJ2E_7]6Z_C<^F:^;/1/+/VF/C1IGPK
MTF&U@MUU'Q#J"EK2P+;55,X,LA'*H#^)/`]O2R[+I8N5WI%;O]%YG+BL2L/"
M_7^OZ_X%VOCK7/B1\7O'_B8VQ\0^)M2NY/G_`+,T#?%#$,'`V1D'UY)R>,U]
M?#!X3#TK\L4N\M6_O_I'E*MB*T7*&WGK?Y+3\/U(=0U'XP>"9UO+FX\?>&U;
M`$T[3)`I]P25P21_G-.G#"8A<JY)VZ=?\_Z]"4\1AW[S_.[_`,_Q_(]O_9\_
M:GNSJEKX>^)QMWAN=JP:];@(`3P/.0<`<CYQQR,CGCQ<=D,6G/"Z6WB_T?\`
MF=F&S%<MJE[K^M?^&^6ESJOV_?B%XD\(>%?#=AX6UJ;2O[=N9!->VI_>;$52
M%1NVXL.1Z>F:QR'`4ZSJ3JQOR='YWW]+'3C:DH4^:'J:/[!?CCQ%XR^&NJQ>
M(]4FU2?1M0-K'>7!S*Z%%;#'N021GO6&>X6G0K1]G&R:3M]XL%6G4C[_`)/[
M_P#AK_,X7]IK]IK4X-3O?"_PTFA@CM&,-SKS!7^<'#"%3\I"\@N??'3)[,MR
M6-E4Q*UZ1_S]>B^\PQ.8*$N2&O\`6EFO\ONW/#M,N/B[XRMGUBP;X@Z^DN3]
MKB:>18SZ+@A01_LBO;J?5</+V<^2/E_7ZG%[/$S=^WJ[_/6_I?Y&CX3^*_Q<
M\`:\(UUW7$F@QOT?Q'YLD93//#_,/JI]/:LZV`PM>-Y15G]J/]?H*&+JX=VG
MM_5M.GIH?9G[.OQ:T/XL>$7U'3XFL]0LF$=]82$%H6(R&4C[R-U#5\AF&7U,
M#44)NZ>S_KKW1[="LJB\ST*N`W/"OVY?B<WA#P(GA+1;KR]<\1*4+(?FMK7I
M))[%ON#W)]*]O),%[6I[:HO=C^+Z+Y;LXL=B/8T]/Z_K\KGS)\)O@YXK\=_#
M77O%6D_NH_#Z*ME;(.-1E3F9`3R`JY`]6(KZ3%9A1P]>-*I]K=OHGL_\SRJ6
M#]I"51:W^_OT\M?P.3M/$FO0^!K_`,+VFJ&WT#5)TO+NT=>LJ=`>>%R`6'<K
M^72Z=-5%.4;S6B?E_6W]7YHUI07LM?EU\_7M\NQV%Y\(O%-K\`8/BU(KQV\D
MV9--=3OCLR<+<?7=DD?W2IKE6-HO$O!K?HUU?;^NIT/+Y*E?^O\`ANGX['M'
M_!/GXEAK>;X8:O<D&W7[3HS2Y!:+K)#SW4_,!UP3GI7CY_A-L5'KH_7H_G_P
MQWY;B.:/(]]?Z^?^9]0W4T-M;27%Q*D44*EWD<X"J!DDGL`*^:2;=D>H?G1\
M>O&]Y\3OB_>Z[II6:.[N%TS1XI.%$*N54GIMW'<YR>,CTK[_``.$CA**I3TL
MN:7K;]-$?-XB7MZUI7MOY^2_+YMF?J5KXB^%OQ6,7]I0S:MX8O(KJ&XL\-'.
MFT$8QU#@L",]R/:M;T\32]U6C--._3_AM"6OJU5.*5GYZ;][=-.GXGZ&_#?Q
M;H_C7P9I_B31KF.2WO[=)]@<%HB1RK#L0<@^XKX'$X>>&JNE-:H^CIU%-71^
M?WC_`%C5_BI\?]3:RN4DOM<U1-.L5()$$0<QIG'&`H9OS/?%?>T:,,'AHJ2]
MV*;?GUT_!?U<\*M%UZT546G_``UO/LGYWVU/O;X2>`/#GPZ\(P:#X>LTC5%'
MGW+*/-N7[N[=222?IG`KX3%8JIB9N=1_\#T/;HTE2BHHZ.\MK>[M9+6[@BG@
ME&UXI5#*P]"#P17/%N+NMS1I-69\H?M"?LNZJNO_`-J?"JPLY=/OFQ<:-/<"
M%;9CU:-FXV'NO;MGI7U&7YU!KEQ<FFMI6O?U\^S/'QF7R;4Z._K_`)_\.O/I
MA_MI:%J?A3X2?";P[K.HK<7^F1RVTUPN6#,$C&T9Y(_AS^-=N2U8UY8FI"-D
M[.WW_P##F^.BU0LU?3^ON,GX,^,;KP5^R!\2M4M)RM]=:HEA;RQ'F-I(D7(/
M8JN[\158C"K$9A0@UHHW?R;_`%.?"OEIVCI=+?U=_OU*O[&OPRTWXA_$FX.M
M6RW&@^'8EFN+9SE;B9S^[1AW7AF/K2S3'2PE).'QRV\DOZM_P#'+L/[5N<_Z
M_KY;=F?=EK!#:VR6]M#'##$H5(XU"JH'0`#H*^);;=V?0'&_''X7>&/BAX5D
MTK7+5([I%S::E&@\^T?J"K=<9ZKT-=N`S"K@JG-#;JNC,:U"-1>?]?AY'`?L
MF_`G7/A9XEUC7/$'B"RU">^@2TABL8V5=BL6W.6_B)/0<"N_-<UIXNE&E2BU
M9MZLYL+@OJ\W*+T?3^OZU^_V/Q?KNF>&/"]_X@UFY6WL--A:>:0]E'IZD]`/
M4UXU*E.K-4X*[9V5)J$7)]#\]]5G\4_&[XZ)*D>W4?$L_DPQY)-A;#!Q[*B!
MF)_O8ZYK[VG&E@,,UTAJ^S>WXNWR/`;^LUFEJD_EV_R^2;/LOQ[K7AWX`?L_
M10Z;"-FFPK8Z=;<;KFX;@$^I)R['ZU\A1IU,RQ;<NKN_)=>_R/:JRCAZ3<?Z
M>_\`P3X`NG>=;DW`9YKMW>XF1<)YLF3@L!@$Y.!Z#Z5]TKW4ULK6[V7E^9\W
M*4IS]MV^^R\OS/NG]DCQ[8_$_P"#+:!KL%O)J.D0C3-2M&`*3Q%,*X']UTX(
M]0:^+S;"_5,0JE-Z/5?UY,^@PU55Z5GK_E_6GR/E+XN^$M=^"_QC-EI4DL+Z
M;.-2T*[;)$D0.5!.><9,9!KZC"XB&-H^TFM):27G_6IY%>+PV(YD].OSZ_A\
MVGT9[;^T;\=[+Q%^S5I,/A^7[/JGC-6M[N!&^>RC3`N%/<9.$!(Y#&O&P&5.
MCC).HO=AJO/MZ]ST,3BTJ%^K_K^NZU1\^_#GX:?$/QUHD]UX7\,C4+6SE^S2
MS0W*P('`#;5W$$X!&<=.E>WB<9AL-->TG9O7:_WGF4\'*H_:4[V\[/[[M?U8
MN^(O@U\3_!?ABZUK7/!SV>D66'FF2[24Q*2!G:"3C)R<=/YQ',L-BJBA3G>3
M\K%U\#6E[[3O\OT?]>ATW[#=O(_[2VG_`&+5_P"SXQ;7$MQ`),+??+M\L+T)
M!^8^FW-<^=3_`-B:FKZJWE_2T1ME<JG-9_TOZ>GE<XCX?7$GP[^/-K>:Q"D,
M7AKQ!MNR$_>;%=E=CC.<*V?P->A7<<1AN6F[\T-/7I^*)YEAZT5KM^5MO6WS
MT/THMIHKBWCN+>5)8I5#I(ARK*1D$'N,5^<M-.S/?/C3]L:\^-$'QMO4T[_A
M,5T/RH_[._L-)#"5Q\Q.P?>W'G//X8KZW**>!>&O/EYKZ\VGI8\S$JO.?+'3
MYO;3M_2_/R%_&/Q&LM3$,WCGQ59W$.?,@FO72:)OE."IY&`>0?45ZGU7"\MU
M2B_-+3^NQY<L55IMWO=/O*W7S\OS/1_VG/$VJ>,/@%\(/$>M20R:A>_:O/D8
M8#LI5-V/[QVY^IK'+<+'"UL51ALN6WS39ZF,;>'U?]?UN8/A;3+V^_8Q\>30
M6\9_LWQ';7DB8R#&$49P/]X$_C52JQAF-*.OO0M^+.2C%2I)WVM^/,OPN>C?
M\$XO$-GI_C7Q/X8N9%CN=7BAO+7/&_R@RNH]3\P./2O,X@ISG1IU%M&Z?SZF
MV55ER^S_`*_KMZ,^O:^4/8*VKW]EI6EW&I:C=16MI:QF6::5MJHH&22:J$7.
M2C'=BE)13D]D<K\*OBMX"^(\EW%X/U^*_EL2/.A*-&ZJ20&VL`2IP>:ZL5E^
M(PB3K1M<SIUH3;4>GZGSY_P4-^($]QKUI\-[.5HK*TC6_P!3.<"5CGRHS_L@
M98]LXSTKW<AP:C!XEK5Z1_5_H>;F6)E%>RAU_/\`JWWZ;'7_`+`_PR;0?",G
MQ!UF`KJGB&,"TC=,&WM,Y7\7SN/MBN;/<:I36'IOW8[^;ZF^7X;V4+_UZ_/\
MDCQ']M'X@WWC;XQ7.E6ZR'2/"UR;&&$/L_?#_73'UYPH'H.G->QE&%CA\,I-
MZS5_ET1Y^/KJ<VKVT?GU_"[7X(P?#_C_`$;3/@?JWP\N/`+WL^K2M<RZS]M5
M'6<?ZJ1%QD!!@`9]?6MIX:<L3'$1JI):<MGMU3]>IG#$TU2Y++\?\OO[W?<J
M_`GQQ>?#3XG:7XGCE=[<E;/4HQTGMW8`_+_>#88?2JQ>'6+HRH[=5Y-?\`SP
M>)=.>FV]OS_#\;'V!^V%\,(_B9\*WETZ'?K>C(]UI^!S,"N'B/?#+^.0*^4R
M?'?5*ZO\+T?Z/Y,]_%4?:1]W=?U_7G:^A\)Z?;S:A=V\6FV[SW]_(EO;P\EF
MD8A0N,\<XR!Z>U?:/W;J;M%:OT_K8^9A3E*:I=/Z_I7[GZ.?`[P/9?#KX7:3
MX3LPA-E"#<2J/];,W,C_`(L3CVP.U?`X[%RQ5>5:77\CZRG#DBD='K6GV>K:
M/=:7J$*S6E["T$T;=&1@01^1KFA)PDI1W132:LS\YO&>G:[\%OC!-96;.+_P
MO?+=6,[Y*RP<NA;_`&63<A'U%?H="<,=24Y;35GZ[/\`'4^?G3E0Q-T]_P#@
M?\!OY]CV/]J[X6W7BG3[3XU>"-,EN;;7+"*YU?3(U#2@>6"LJKWPORL!Z9P>
M<>/E>.C2?U&J[.+?++IOM_D=>)POMH*K#?1KY_UVWU.&^"/[1'C?X?:7_8D"
M6WB32(03%:7LI26U'&$609..O##CFNS&Y10Q#YY>Y+NEH_.W^3.6AC94$HS5
MEZ?BOZ?DCJ?'O[6WC;5=(EM-`T"P\-;UVM?3S_:)$S_<&`H/3D^O%<N&R&A3
MDG.3F^R5OO-*N92FN6GU[;_>U^C/!&DGN-1^VW,5W*]UYDOV^YS_`*2Q8;V#
M'[_/4]N/6O;E#DA962[+I_EZ'FUHS4.:;WZ??_P?76^IZ?\`&")_^&5/@N3`
MS`->GGY<?O,@_ES[XK&A-?6\79_R?E8]K&32H:/O_7Z>1ZU_P3KTVPUKX3^-
M]*OK59+*]U-K>:)CD,IA4-^>2?:O`XAE*G7I26ZBOS?Y#P-.].TM4TOU/$/C
M+\./%/P7\?0,T]U!96T_G:-XAM04``/",W19`."#P1ZU[F$QE/&TVX:M_%%_
MG;JOR.*M3J8:IS4]WT[^?^?;T/2?"'[7GC33],CM]>\*:;KCJF%O+6X^SL_^
MTRD%>?\`9P*\NOD%"<FZ4^7R:O\`K?[S>&:I*TEKYZ?DGL<%\;_CEXT^)EO%
MI6K_`&;2M(DD4KH]AN<W#Y&T2-UDP2/E`QD`UWX/*Z.&ES44W)=7T].WJ<U;
M&5*ZY8=.NR_KY_*]CWC]A3X-ZIX-ANO&_B6"6QO]4@$%KITF=\$.XL6DSSO8
MGIV`]37A9WF4<0U1IZJ+W[O;3R7XGIX&A.G%RF]_Z_I?\,O3_B%\%_ASXW\:
MV?BKQ)H"W>I6:JH?S6590IRH=0<-CW^E>=0S+$X>DZ-*5HO^M.QTU:$:GQ;'
M>1(D42Q1(J(@"JJC``'0`5Q-MN[-4DE9'E/Q"_9P^%?C'Q3=>(=3TF[@U"]D
M$T\EE=O$)''\14<;O<#K]37K8?.\7AX*G&5TNZOIV]#&6'A*7,S#?]DKX1.K
M*\.NLKG+`ZB^#]>/85LN(L6M5;[A+"THNZ6Q=T']EOX1Z7K=OJ9TS4;V2U=9
M$BO;UY(RRG(RO\6.>#QS43S_`!<H.":5^RLPCA:<?A5CV>O%.@X'2/@Q\.M+
M^*+_`!`LM!6/669I%;S&,4<C<-(L><!B._Y8KT)YGB9T/J\I>[^/I<P6&IQE
MS)?U_7XZ[G?5YYN%`'!_%KX.?#[XDZE9:AXMT3[5=6(V1S1RM$S)G.QBI&Y<
MYX/J?6NW"9CB,(FJ,K)F-2C&;N_Z_K_ACMM-M+73]/@L+*!(+:UC6***,85$
M48``]`!7&VV[LV//_B'\"?A7XTOGOM;\)6HO)/OW-J6@=O<["`3[D9KOP^:8
MO#KEIS:7W_F8RH0ETMZ:?U\S(\,?LR_!W1;Y+S_A&GU&=&W!]1N'FY[9!.#^
M(K:KG>,J*W/9=EH3'#4X[+Y=/NV.L^(WPK\`^.M,L=/\2>'+6X@TT_Z*L68O
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MS%II01QD,Y.T_3%<N)S3%8C2I-V[;+4J&'A!WMKY_P!:?([RN`V/+OVA_%>N
M:#J_A^'0M0-I%:R'5=5PJG?9QR11LAR#@$SYR,?<H`R],\?ZM?\`Q7U/7&UA
M+7PA8Z.TMG;.N([EVG$4,S$*7_>.DH0*#E=I`):@#3T+XI:MJ6E26EOHEJ^N
M'61HD*L\L5LTGD>>SMO02*$3=E=N20`.O``^T\>7^J0:4FJZ>=.D;6KN"1K"
M^)0PV:.TDF=H+(SIMV<<$9H`ZOX:ZSKWB#1(];U33;*PLM1B2YL8HIVDF$3#
M(\WY0H8J5.%)QDCG&:`.(U'Q7J?A/QYXCO/%][K!:U@FOM)T^U:+[%>6:[$4
M#C<LRR.H;<0/G!&1T`+VO>/O%>D^'O%D5_I&CPZWH.F1ZG"L%T\D#+)Y@5&)
M0,'!C;M@Y4\4`9OAR_\`B3X?UK2O#TSV%_\`9-%EU75WN;R::6:4D*H5F3Y0
M6#$*,`<@<`9`);?XTFZF1+'0EG%SI\;696?_`(^M08PYMDX^ZOGIN?MA^/E-
M`&K!\2W_`.%H6/AOR+.YL+YIX!=VWG?NY8(R\I+-&(V4,K(0K$@XSW``,Q/B
MIXB_X1C1=1F\-VL%SXI9GTR!7FG\N!5+&6;RXRW*E,*H/W^3P:`.M'BVXC^#
ML_C/4M+FTN>#3I+R6RG!#1LJD[>0#R1QD`X(X%`'%>"]=\8>&_AQ:ZKKEIXC
MO_$6I3V=@MAK<]M'$\\I4.T?D@[$&7/S<X3I0!:UOQUXXN-#M[31]/T:#6SX
MD&AR%IG>%U4"5W3Y,XV!U.1Q@D9XH`N:-\3-5U+XA'1[7PY))IEOJ$FEW%VJ
M3922-&,DV[R_+$0=2F"^[/..U`$6F_$3Q;J&@Z%?V_AG3(YO%-X8-+MY;YLB
M$)+(9Y2$X&R-6"KDX;KF@";3?B)X@U6'0;'2=`L)-5U2>^AN2]V1;VZVLGEO
M*K!=SJS;0.`?F]J`(?\`A.-3M2M_I]EYEGK&OSZ?]MU"Z<VUJL;"%<;4)02.
MA"C[NX\GY@*`)?#OQ-U76?&DEC8>%KB?2OM-U9I.D<P</`'!D9B@B",Z%``Y
M.2">X`!T?PF\27WBGPI_:FHVUI:7'FM%):0.Y>U=<!HI0ZJ1(IR#Q@]1P:`-
M'7_"_A_6S=G5M)MKLWUF=/G,JY\RW)R8S_LDG-`%>\\%^%;JTN[6?0[1HKV"
M&VF4*5S'#DQ*"/N["21C&#S0!C^)?AUIDWA/^P?#]GI-C;O=_;)4N[5YPTF,
M>8")%82<#YMW/(.<F@#0\#>!M"\,>'-'TJWMUN&T2"6&"XE4;OWIW2G`X&X\
MX_"@#1\)>&]$\,64EGH5BME;RR&0PH[%%/3Y020H]A@#TH`SM*^'G@O3FU%K
M7P_:YU:)H+HREI/,C8DLGS$X4DYVC`S0!+I?@7PEIVAW6CVNB6XL[YE>Y20L
MYG*XV[V8EFQ@8!/`&*`+]UH&CW'B.+7IK%&U&&!K5;C<0?*)R5(!P1DGKG&3
MCK0!2TCP1X2TI=(73]`LK<:`)!I^Q/\`CV\S[^WW;N:`(K/P#X.M-7GU2WT"
MUCN[CS@THSD"7_6A1G"ACR=N,GGK0!9UGPAX<U31;+2KW2XVM=-"BT6-VC:W
M"KM&QE(9?EXX/(H`M:QH.D:KX8E\.ZC8I<Z9/"+>2VD)*M'C&T\Y[4`4=$\%
M>%](L;:SL-(BCAL[O[="KN\GES;2F\%B2#M)'H,T`27_`(/\-7EI';7&DPF.
M*^;4TVEE*W))+2`@@@DLV?4$CI0`D/@_PW#KUWK,.EI%>7RL+AHW=5EW`!B4
M!V[B``6QD^M`&7XD^'.@:WJ.AB]MT_LO0+:6"UT^,%!&S!%5U=2"I5$*C'9C
M0!N:/X;T'2I;233=*MK5K"U-E;F-<>5"2"4'L2H)]<4`4I?`WA.0Z=OT6$II
M+F6UBW-Y<;%]^[9G:QW?,"0<'D4`.A\%>&(+[4+N#2Q#+JBNMSY4LB*^_ESM
M#85B>2P`)/.:`+WAC0M)\.Z4--T6QCM+8.TA12269CEF9CDLQ[DDF@#1H`*`
B"@`H`*`"@`H`*`"@`H`*`"@`H`*`"@`H`*`"@`H`*`/_V3\_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>13
<FILENAME>exhibit_4-3.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>



<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P ALIGN="Right"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 4.3</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<p ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>Magic Software
Enterprises Ltd. </B><BR>2007 INCENTIVE
COMPENSATION PLAN </FONT> </p>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Magic  Software  Enterprises  Ltd.,
 an Israeli  corporation,  has  adopted the "Magic  Software  Enterprises  Ltd.  2007
Incentive  Compensation  Plan" for the benefit of employees,  Non-Employee  Directors,
 officers and  Consultants  of the Company and any Subsidiaries and Affiliates thereof,
as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE I. <BR>ESTABLISHMENT;
PURPOSES; AND DURATION </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1 <U>Establishment of the Plan</U>.
The Company hereby establishes this Plan, as set forth in this document. The Plan permits
the grant of Stock Options, Restricted Stock, Restricted Stock Units, and Performance
Awards. The Plan was adopted by the Board of Directors on August 7, 2007 and shall become
effective immediately following such Adoption Date, <I>provided that the Plan is approved
by the holders of a majority of the outstanding Shares of the Company within twelve (12)
months following such Effective Date</I>. If the Plan is not so approved by the Company&#146;s
shareholders, the Plan shall not become effective, shall terminate immediately, and any
Awards previously granted thereunder shall thereupon be automatically canceled, expired,
and deemed to have been null and void. The Plan shall remain in effect as provided in
Article XI below.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.2. <U>Purposes
of the Plan</U>. The purposes of the Plan are: (i) to provide           incentives to
Non-Employee Directors, officers, Employees and Consultants of the           Company, its
Subsidiaries and its Affiliates, whose substantial contributions           are essential
to the continued growth and success of the business of the           Company; (ii) to
strengthen the Participants&#146; commitment to the Company;           (iii) to attract
and retain competent and dedicated individuals whose efforts           will result in the
long-term growth and profitability of the Company; and (iv)           to align the
interests of such Participants with the interests of the           shareholders of the
Company.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE II <BR>DEFINITIONS </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Wherever used in the Plan,
capitalized terms shall have the meanings set forth below: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.1. <U>&#147;Affiliate&#148;</U> means
any entity other than the Company and any           Subsidiary that is affiliated with
the Company through stock or equity ownership           or otherwise, and is designated
as an Affiliate for the purposes of the Plan by           the Committee.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.2. &#147;<U>Adoption
Date</U>&#148; means August 7, 2007 &#150; the date the Plan           was adopted by the
Board of Directors of the Company.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.3. <U>&#147;Award&#148;</U> means,
individually or collectively, a grant under the           Plan of Stock Options,
Restricted Stocks, Restricted Stock Units, or Performance           Awards.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.4. &#147;<U>Award
Agreement</U>&#148; means either:  </FONT></P>

<p align=center>
<font size=2>1</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a
written agreement entered into by the Company and a Participant setting forth
          the terms and provisions applicable to such Award, or  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a
written or electronic statement issued by the Company to a Participant, and
          approved by the participant&#146;s electronic signature, setting forth the
terms           and provisions applicable to such Award.  </FONT></P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.5.    &#147;<U>Beneficial
Ownership</U>&#148; (including correlative terms) shall have           the meaning
ascribed to such term in Rule 13d-3 promulgated under the Exchange           Act.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.6.  &#147;<U>Board</U>&#148; or
&#147;<U>Board of Directors</U>&#148; means the           Board of Directors of Magic
Software Enterprises Ltd<B>.</B>, or its successor           company, as the case may be.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.7.    &#147;<U>Cause</U>&#148; means
Termination due to (i)&nbsp;breach of the           Participant&#146;s duty of loyalty
towards the Company, or (ii)&nbsp;breach of           the Participant&#146;s duty of care
towards the Company, or (iii)&nbsp;the           commission any flagrant criminal offense
by the Participant, or (iv)&nbsp;the           commission of any act of fraud,
embezzlement or dishonesty towards the Company           by the Participant, or (v)&nbsp;any
unauthorized use or disclosure by the           Participant of confidential information
or trade secrets of the Company, or (vi)           any other intentional misconduct by
the Participant (by act or omission)           adversely affecting the business or
affairs of the Company in a material manner,           or (vii) any act or omission by
the Participant which would allow for the           Termination of the Participant&#146;s
employment without severance pay,           according to any applicable law.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.8.  <U>&#147;Company&#148;</U> means
Magic Software Enterprises Ltd<B>.</B>, an           Israeli corporation, and its
Subsidiaries and Affiliates &#150; unless the           context implies otherwise.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.9.       &#147;<U>Corporate
Transaction</U>&#148; means the occurrence, in a single           transaction or in a
series of related transactions, of any one or more of the           following events:  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp; (i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
sale or other disposition of all or substantially all, as determined by the
          Board in its discretion, of the consolidated assets of the Company and its
          Subsidiaries;  </FONT></P></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
sale or other disposition of at least eighty percent (80%) of the outstanding
          securities of the Company;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
merger, consolidation or similar transaction following which the Company is           not
the surviving corporation; or  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iv) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
merger, consolidation or similar transaction following which the Company is           the
surviving corporation but the Ordinary Shares of the Company outstanding
          immediately preceding the merger, consolidation or similar transaction are
          converted or exchanged by virtue of the merger, consolidation or similar
          transaction into other property, whether in the form of securities, cash or
          otherwise.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whether
a transaction is a &#147;Corporate Transaction&#148; as defined above, shall be finally
and conclusively determined by the Committee in its absolute discretion. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.10.  &#147;<U>Committee</U>&#148; means
the Option Committee of the Board of           Directors or a subcommittee thereof, or
such other committee designated by the           Board to administer the Plan.  </FONT></P>

<p align=center>
<font size=2>2</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.11.           &#147;<U>Consultant</U>&#148; means
an independent contractor who performs           services for the Company or a Subsidiary
or Affiliate in a capacity other than           as an Employee or Director.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.12.  &#147;<U>Director</U>&#148; means
any individual who is a member of the Board of           Directors of the Company or one
of its Subsidiaries or Affiliates.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.13  &#147;<U>Disability&#148;</U>
means the inability to engage in any substantial gainful occupation for which the
Participant is suited by education, training or experience, by reason of any medically
determinable physical or mental impairment that is expected to result in such
person&#146;s death or to continue for a period of <B>six (6)</B> consecutive months or
more. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.14.
          &#147;<U>Effective Date</U>&#148; means the date immediately following the
          Adoption Date, in which the plan shall become immediately effective, subject to
          the terms provided in Article I above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.15.  &#147;<U>Employee</U>&#148; means
any person designated as an employee of the           Company on the payroll records
thereof (including an individual who is serving           as a director or an office
holder).  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.16.      &#147;<U>Exchange
Act</U>&#148; means the Securities Exchange Act of 1934, as           may be amended from
time to time, including the rules and regulations           promulgated thereunder, and
any successor provisions, rules and regulations           thereto.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.17.       &#147;<U>Fair
Market Value</U>&#148; means (a) if the Shares are traded on an           established
securities market, the closing price of the Shares as reported by           such market
for the last trading day before the relevant date, or (b) if the           Shares are not
traded on an established securities market, the value of the           Shares as
determined by the Committee by the reasonable application of a           reasonable
valuation method consistently applied, as the Committee deems           appropriate.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.18.   &#147;<U>Insider</U>&#148; means
an individual who is, on the relevant date, an           officer, director or ten percent
(10%) Beneficial Owner of any class of the           Company&#146;s equity securities
that is registered pursuant to Section 12 of           the Exchange Act, as determined by
the Committee in accordance with Section 16           of the Exchange Act.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.19.     &#147;<U>Non-Employee
Director</U>&#148; means a Director who is not an           Employee.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.20.    &#147;<U>Notice</U>&#148; means
notice provided by a Participant to the Company           in a manner prescribed by the
Committee.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.21.     &#147;<U>Option</U>&#148; or
&#147;<U>Stock Option</U>&#148; means a Stock           Option, as described in Article
VI.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.22.         &#147;<U>Option
Price</U>&#148; means the price at which a Share may be           purchased by a
Participant pursuant to an Option.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.23.     &#147;<U>Participants</U>&#148; mean
Non-Employee Directors, officers,           Employees, Consultants and any other eligible
individuals, who hold one or more           outstanding Awards (as set forth in Article
V).  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.24.       &#147;<U>Performance
Award</U>&#148; means an Award which vesting or waiver of           restrictions, as the
case may be, is subject to certain performance conditions.  </FONT></P>

<p align=center>
<font size=2>3</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.25.  &#147;<U>Period
of Restriction</U>&#148; means the period during which Shares of           Restricted
Stock are subject to substantial risk of forfeiture and to           limitations on its
transfer, as provided in Article VII, or Restricted Stock           Units are subject to
a vesting period, as the case may be.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.26.       &#147;<U>Person</U>&#148; means
&#147;person&#148; as such term is used for           purposes of Section 13(d) or 14(d)
of the Exchange Act, including any           individual, corporation, limited liability
company, partnership, trust,           unincorporated organization, government or any
agency or political subdivision           thereof, or any other entity or any group of
persons.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2.27 "<U>Plan</U>" means the "Magic
Software Enterprises Ltd. 2007 Incentive Compensation Plan". </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.28.         &#147;<U>Prior
Option Plans</U>&#148; means the Company&#146;s 1991 Stock Option           Plan and 2000
Stock Option Plan.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.29.           &#147;<U>Restricted
Stock</U>&#148; or &#147;<U>RS</U>&#148; means an Award           granted to a
Participant pursuant to Article VII.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.30.          &#147;<U>Restricted
Stock Unit</U>&#148; or &#147;<U>RSU</U>&#148; means an           Award granted to a
Participant pursuant to Article VII.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.31.        &#147;<U>Rule
16b-3</U>&#148; means Rule 16b-3 under the Exchange Act, or any           successor rule,
as may be amended from time to time.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.32.  &#147;<U>Sale</U>&#148; means
the sale of all or substantially all of the issued and outstanding share capital of Magic
Software Enterprises Ltd<B>.</B> Whether &#147;all or substantially all of the issued and
outstanding share capital of Magic Software Enterprises Ltd<B>.</B>&#148; is to be sold,
shall be finally and conclusively determined by the Board in its absolute discretion.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.33.           &#147;<U>Shar</U>e&#148; means
an Ordinary Share of Magic Software Enterprises           Ltd<B>.</B>, par value NIS 0.10
per share, (subject to adjustments as set forth           in Article X below).  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.34.           &#147;<U>Subsidiary</U>&#148; means
any present or future corporation, which is,           or would be, a &#147;subsidiary
corporation&#148; of the Company as determined           by the Committee.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.35.      &#147;<U>Successor
Entity Award</U>&#148; means securities of any successor           entity, as provided in
Section Article X below.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.36.      &#147;<U>Termination</U>&#148; means
the time when a Participant ceases to be           employed by, or to provide services
to, the Company, any Affiliate or           Subsidiary, as applicable, for any reason,
with or without Cause, including a           Termination by resignation, discharge,
death, Disability or retirement, but           excluding (a) a Termination where there is
a simultaneous reemployment (or           commencement of service) or continuing
employment (or service) of a Participant           by the Company, Affiliate or any
Subsidiary, and (b) at the discretion of the           Committee, a Termination of an
Employee that is immediately followed by the           Participant&#146;s service as a
Non-Employee Director.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.37. <U>&#147;Termination
Date&#148;</U> means (i) the date on which the           employee-employer relationship
between the Participant and the Company ceases to           exist, or (ii) if the
Participant is a contractor or Consultant &#150; the date           on which the
consulting or contractor agreement between the Participant and the           Company
expires, or the date on which either of the parties to such agreement           sends the
other notice of its intention to terminate said agreement, or (iii) if           the
Participant is a Director &#150; the date on which the Participant ceases to
          serve as a director of the Company.  </FONT></P>

<p align=center>
<font size=2>4</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.38.    &#147;<U>Voting
Securities</U>&#148; shall mean, with respect to any Person that           is a
corporation, all outstanding voting securities of such Person entitled to           vote
generally in the election of the board of directors of such Person.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE III. <BR>ADMINISTRATION </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1. <U>General</U>.
The Committee shall have exclusive authority to operate, manage           and administer
the Plan in accordance with its terms and conditions.           Notwithstanding the
foregoing, in its absolute discretion, the Board may at any           time and from time
to time exercise any and all rights, duties and           responsibilities of the
Committee under the Plan, including establishing           procedures to be followed by
the Committee. In addition, if and to the extent           that a Committee is not
established, or does not or cannot function, the Board           may take any action
under the Plan that would otherwise be the responsibility of           the Committee,
subject to the limitations of any applicable law (in such event           the term
Committee shall mean the Board, wherever used).  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without
derogating from the powers of the Committee, the Board shall have the power and authority
to change, in respect of certain participants, the definition of the terms defined in
Article II above, including without limitation, the definition of the terms &#145;Corporate
Transaction&#146; and &#145;Cause&#146;.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2. <U>Committee</U>.
The members of the Committee shall be appointed from time to           time by, and shall
serve at the discretion of, the Board of Directors.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.3. <U>Authority
of the Committee</U>. The Committee shall have full discretionary           authority to
grant or, when so restricted by applicable law, <I>recommend the           Board to grant,</I> pursuant
to the terms of the Plan, Awards to those           individuals who are eligible to
receive Awards under the Plan. Except as limited           by law or by the Articles of
Association of the Company, and subject to the           provisions herein, the Committee
shall have full power, in accordance with the           other terms and provisions of the
Plan, to:  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;select
Employees, Non-Employee Directors and Consultants who may receive Awards           under
the Plan and become Participants;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;determine
eligibility for participation in the Plan and decide all questions           concerning
eligibility for, and the amount of, Awards under the Plan;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;determine
the sizes and types of Awards;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;determine
the terms and conditions of Awards, including the Option Prices of           Options, the
terms under which the Awards shall vest and becomes exercisable,           including in
connection with performance conditions, etc;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;grant
Awards as an alternative to, or as the form of payment for, grants or           rights
earned or payable under, other bonus or compensation plans, arrangements           or
policies of the Company or a Subsidiary or Affiliate;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(f) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;grant
substitute Awards on such terms and conditions as the Committee may           prescribe;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>5</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(g) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;;make
all determinations under the Plan concerning Termination of any           Participant&#146;s
employment or service with the Company or a Subsidiary or           Affiliate, including
whether such Termination occurs by reason of Cause,           Disability, retirement or
in connection with a Corporate Transaction, if           applicable, and whether a leave
constitutes a Termination;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(h) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;construe
and interpret the Plan and any agreement or instrument entered into           under the
Plan, including any Award Agreement;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;establish
and administer any performance goals in connection with any Awards,           including
performance criteria and applicable performance periods if applicable,
          determine the extent to which any performance goals and/or other terms and
          conditions of an Award are met (or are not met);  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(j) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;establish,
adopt, amend, waive and/or rescind rules, regulations, procedures,           guidelines,
forms and/or instruments for the Plan&#146;s operation or           administration;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(k) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;make
all valuation determinations relating to Awards and the payment or           settlement
thereof;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(l) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;waive
restrictions and limitations, or accelerate the vesting or exercisability           of
any Award;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(m) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;offer
to buy-out an Award previously granted, based on such terms and conditions           as
the Committee shall establish with, and communicate to, the Participant at           the
time such offer is made;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(n) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;determine
whether, and to what extent, and under what circumstances, Awards may           be
settled in cash, Shares or other property or canceled or suspended; and  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(o) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;exercise
all such other authorities, take all such other actions and make all           such other
determinations as it deems necessary or advisable for the proper           operation
and/or administration of the Plan.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4.
          <U>Award Agreements</U>. The Committee shall, subject to applicable laws and
          rules, determine the date an Award is granted, provided, however, that such date
          shall not be prior to the date such grant is approved by the Board. Each Award
          shall be evidenced by an Award Agreement; however, two or more Awards granted to
          a single Participant may be combined in a single Award Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.5.
          <U>Discretionary Authority; Decisions Binding</U>. The Committee shall have full
          discretionary authority in all matters related to the discharge of its
          responsibilities and the exercise of its authority under the Plan. To the extent
          permitted by applicable law, all determinations, decisions, actions and
          interpretations made by the Committee with respect to the Plan and any Award
          Agreement, and all related orders and resolutions of the Committee shall be
          final, conclusive and binding on all Participants, the Company and its
          shareholders, any Subsidiary or Affiliate and all persons having or claiming to
          have any right or interest in or under the Plan and/or any Award Agreement. </FONT></P>

<p align=center>
<font size=2>6</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE IV.<BR>SHARES SUBJECT
TO THE PLAN </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.1. <U>Number
of Shares Available for Grants</U>. The Shares subject to the Plan may be
either authorized and unissued shares or previously issued shares acquired by
the Company, or any Subsidiary. Subject to adjustment as provided in Article X,
the total number of Shares that may be delivered pursuant to Awards under the
Plan and under the Company&#146;s Prior Option Plans shall not exceed 2,775,000 Shares
in the aggregate. The Company shall reserve at all times sufficient number of
Shares for the purposes of granting Awards under the plan. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.2.   If any Awards shall expire,
terminate, cancel or be forfeited, as the case may be, without having been fully
exercised or satisfied by the issuance of Shares &#150; then the Shares subject to such
Award shall be available again for delivery in connection with future Awards under the
Plan.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE V.<BR>ELIGIBILITY
AND PARTICIPATION </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.1.  <U>Eligibility</U>.
Employees, Directors, Non-Employee Directors and Consultants           shall be eligible
to become Participants and receive Awards in accordance with           the terms and
conditions of the Plan.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.2.  <U>Actual
Participation</U>. Subject to the provisions of the Plan and to any           applicable
law, the Committee may, from time to time, select Participants from           all
eligible Employees, Directors, Non-Employee Directors, and Consultants, and
          shall determine the nature and amount of each Award (as further detailed in
          Article III above).  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE VI.<BR>STOCK OPTIONS </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.1. <U>Grant of Options</U>.
Subject to the terms and provisions of the Plan,           Options may be granted to
Participants, in such number, and upon such terms, and           at any time, and from
time to time, as shall be determined by the Committee. The           Committee may grant
an Option or provide for the grant of an Option, either from           time to time in
the discretion of the Committee or, automatically upon the           occurrence of
specified events, including the achievement of performance goals,           the
satisfaction of an event or condition within the control of the recipient of
          the Option, or within the control of others.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.2.  <U>Award
Agreement</U>. Each Option grant shall be evidenced by an Award           Agreement that
shall specify the Option Price, the maximum duration of the           Option, the number
of Shares to which the Option pertains, the conditions upon           which the Option
shall become exercisable and such other provisions as the           Committee shall
determine, which are not inconsistent with the terms of the           Plan.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.3  <U>Option
Price</U>. The Option Price for each Option shall be determined by the
          Committee and set forth in the Award Agreement. Unless determined otherwise by
          the Board, the Option Price shall be equal to, or higher than, the Fair Market
          Value of the Company&#146;s shares.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.4.  <U>Duration
of Options</U>. Each Option granted to a Participant shall expire at           such time
as the Committee shall determine at the time of grant and set forth in           the
Award Agreement; provided, however, that no Option shall be exercisable           later
than the <B>tenth (10th)</B> anniversary of its date of           grant.  </FONT></P>


<p align=center>
<font size=2>7</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.5.  <U>Exercise
of Options</U>. Options shall be exercisable at such times and be           subject to
such restrictions and conditions as the Committee shall in each           instance
determine and set forth in the Award Agreement, which need not be the           same for
each grant or for each Option or Participant.  Unless determined           otherwise by
the Committee, the vesting period pursuant to which such Options           shall vest,
shall be such that all Options shall be fully vested on the first           business day
following the passing of four <B>(4) </B>years from their date of           grant, such
that <B>25%</B> of the Awards shall vest on each of the first,           second, third,
and fourth anniversaries of their date of grant.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.6. <U>Payment</U>. Options shall
be exercised by the delivery of a written notice           of exercise to the Company, in
a form specified or accepted by the Committee, or           by complying with any
alternative exercise procedures that may be authorized by           the Committee,
setting forth the number of Shares with respect to which the           Option is to be
exercised, accompanied by full payment of the aggregate Option           Price for such
Shares, which shall include applicable taxes, if any, in           accordance with
Article XII. The Option Price upon exercise of any Option shall           be payable to
the Company in full either: (a) in cash or its equivalent; or (b)           by any other
method approved or accepted by the Committee in its sole           discretion, including,
if the Committee so determines, (x) a cashless           (broker-assisted) exercise that
complies with all applicable laws, or (y)           withholding of Shares otherwise
deliverable to the Participant pursuant to the           Option, having an aggregate Fair
Market Value at the time of exercise, equal to           the total Option Price, and (z)
a &#147;net exercise&#148;, that complies with           all applicable laws.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.7.  <U>Rights as a Shareholder</U>.
No Participant or other person shall become the           owner of any Shares subject to
an Option, nor have any rights to dividends or           other rights of a shareholder
with respect to any such Shares, until the           Participant has actually received
such Shares following exercise of his or her           Option in accordance with the
provisions of the Plan and the applicable Award           Agreement.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.8.  <U>Termination
of Employment or Service.</U><I> Except as otherwise provided in           the Award
Agreement and/or determined by the Committee</I>, an Option shall           cease to
become exercisable upon Termination of the Participant thereof.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8.1
<U>Employees</U>. Notwithstanding the foregoing and <I>unless determined otherwise by the
Committee</I>, in the event of Termination, all Options theretofore granted to such
Participant when such Participant was an Employee of the Company, shall terminate as
follows:  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
such Options that are not vested on the Termination Date shall terminate
          immediately.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Participant&#146;s Termination is by reason of such Participant&#146;s
          death or Disability, such Options (to the extent vested at the Terminations
          date) shall be exercisable by the Participant or the Participant&#146;s
          guardian, legal representative, estate or other person to whom the
          Participant&#146;s rights are transferred by will or by laws of descent or
          distribution, at any time until the lapse of <B>twelve (12)</B> months from the
          Termination Date (but in no event after the expiration date of such Options),
          and shall thereafter terminate.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;           If
the Participant&#146;s Termination is due to any reason other than those           stated
in Sections 6.8.1(b), and 10.1(d) herein, such Options (to the extent           vested on
the Terminations date) shall be exercisable at any time until the           lapse of <B>three
(3) months</B> from the Termination Date (but in no event           after the expiration
date of such Options), and shall thereafter terminate; <U>provided</U>, <U>however</U>,
that if the Participant dies within such           period, such Options (to the extent
vested on the Termination Date) shall be           exercisable by the Participant&#146;s
legal representative, estate or other           person to whom the Participant &#145;s
rights are transferred by will or by laws           of descent or distribution at any
time until the lapse of <B>twelve (12)           months</B> from the Termination Date
(but in no event after the expiration date           of such Options), and shall
thereafter terminate.  </FONT></P></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>8</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the aforesaid, if the Participant&#146;s Termination is for           Cause, all the
Options whether vested or not shall <I>ipso facto</I> expire           immediately and be
of no legal effect.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whether
a Termination is by reason of &#147;Disability&#148; for the purposes of
          paragraph&nbsp;6.8.1(b) hereof, or is a Termination other than by reason of
such           Disability, or is for Cause as set forth in paragraph&nbsp;6.8.1(d)
hereof,           shall be finally and conclusively determined by the Committee in its
absolute           discretion.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(f) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the aforesaid, under no circumstances shall any Option be           exercisable after the
specified expiration of the term of such Option.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8.2
<U>Directors, Consultants and Contractors</U>. In the event that a Participant, who is a
director, consultant or contractor of the Company, ceases, for any reason, to serve as
such, the provisions of Sections 6.8.1(a), 6.8.1(b), 6.8.1(c), 6.8.1(d), 6.8.1(e) and
6.8.1(f) above shall apply, <I>mutatis mutandis</I>.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8.3
Notwithstanding the foregoing provisions of this Section&nbsp;6.8, the Committee shall
have the discretion, exercisable either at the time an Option is granted or thereafter,
to:  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Extend
the period of time for which the Option is to remain exercisable           following the
Termination Date to such greater period of time, as the Committee           shall deem
appropriate, but in no event beyond the specified expiration of the           term of the
Option; and/or  </FONT></P></TD>
</TR>
</TABLE>
<BR>













<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permit
the Option to be exercised, during the applicable exercise period           following the
Termination Date, not only with respect to the number of Shares           for which such
Option is exercisable at the Termination Date but also with           respect to one or
more additional installments in which the Participant would           have vested under
the Option had the Participant continued in the employ or           service of the
Company.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE VII.<BR>RESTRICTED
STOCK AND RESTRICTED STOCK UNITS </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.1. <U>Awards of Restricted Stock
and Restricted Stock Units</U>. Subject to the           terms and provisions of the
Plan, the Committee, at any time and from time to           time, may grant Shares of
Restricted Stock and/or Restricted Stock Units to           Participants in such amounts,
as the Committee shall determine. Subject to the           terms and conditions of this
Article VII and the Award Agreement, upon delivery           of Shares of Restricted
Stock to a Participant, or creation of a book entry           evidencing a Participant&#146;s
ownership of Shares of Restricted Stock,           pursuant to Section 7.6, the
Participant shall have all of the rights of a           shareholder with respect to such
Shares, subject to the terms and restrictions           set forth in this Article VII or
the applicable Award Agreement or as determined           by the Committee. Restricted
Stock Units shall be similar to Restricted Stock,           except no Shares are actually
awarded to a Participant who is granted Restricted           Stock Units on the date of
grant, and such Participant shall have no rights of a           shareholder with respect
to such Restricted Stock Units.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.2.  <U>Award
Agreement</U>. Each Restricted Stock and/or Restricted Stock Unit Award           shall
be evidenced by an Award Agreement that shall specify the Period of
          Restriction, the number of Shares of Restricted Stock or the number of
          Restricted Stock Units granted, and such other terms and provisions as the
          Committee shall determine in accordance with the Plan. Unless determined
          otherwise by the Board, the Restricted Stock and/or Restricted Stock Unit Award
          shall not be purchased for less than the Share&#146;s par value.  </FONT></P>

<p align=center>
<font size=2>9</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.3. <U>Non-Transferability of
Restricted Stock/Restricted Stock Unit</U>. Except as           provided in this Article
VII, Restricted Stock and Restricted Stock Units may           not be sold, transferred,
pledged, assigned, encumbered, alienated, hypothecated           or otherwise disposed of
until the end of the applicable Period of Restriction           established by the
Committee and specified in the Restricted Stock Award           Agreement/Restricted
Stock Unit Award Agreement.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.4.  <U>Period
of Restriction and Other Restrictions</U>. The Period of Restriction           shall
lapse based on continuing service or employment, as the case may be, as a
          Non-Employee Director, Employee, Director or Consultant, of the Company, the
          achievement of performance goals, the satisfaction of other conditions or
          restrictions or upon the occurrence of other events, in each case, as
determined           by the Committee, at its discretion, and stated in the Award
Agreement.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.5. <U>Delivery
of Shares, Payment of Restricted Stocks/Restricted Stock Units</U>.           Subject to
Section 14.5, after the last day of the Period of Restriction           applicable to a
Participant&#146;s Shares of Restricted Stock/Restricted Stock           Units, and after
all conditions and restrictions applicable to such Shares of           Restricted
Stock/Restricted Stock Units have been satisfied or lapsed (including
          satisfaction of any applicable tax withholding obligations), pursuant to the
          applicable Award Agreement, such Shares of Restricted Stock shall become freely
          transferable by such Participant, and, such Restricted Stock Units shall be
          settled by an automatic delivery of Shares.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.6. <U>Certificates
of Restricted Stock Awards</U>. Each Participant who receives an           Award of
Shares of Restricted Stock shall be issued a stock certificate or           certificates
evidencing the Shares covered by such Award registered in the name           of such
Participant, or on his behalf, as applicable. Such certificate(s) may           contain
appropriate legends or other limitations, as required under any           applicable law,
pursuant to the conclusive determination and consideration of           the Secretary of
the Company.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.7. <U>Voting
Rights of Restricted Stocks</U>. Unless otherwise determined by the           Committee
and set forth in a Participant&#146;s Award Agreement, to the extent           permitted
or required by law, as determined by the Committee, Participants           holding Shares
of Restricted Stock may be granted the right to exercise full           voting rights
with respect to those Shares during the Period of Restriction. A           Participant
shall have no voting rights with respect to any Restricted Stock           Units.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.8. <U>Dividends
and Other Distributions</U>. During the Period of Restriction,           Participants
holding Shares of Restricted Stock shall be credited with any cash           dividends
paid with respect to such Shares while they are so held, unless           determined
otherwise by the Committee and set forth in the Award Agreement. The           Committee
may apply any restrictions to such dividends that the Committee deems
          appropriate. Except as set forth in the Award Agreement, in the event of any
          shares or securities are received as a stock-dividend of Shares of Restricted
          Stock, any new or additional Shares or securities shall be subject to the same
          terms and conditions, including the Period of Restriction, as relate to the
          original Shares of Restricted Stock.  </FONT></P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.9. <U>Termination
of Employment or Service</U>. Except as otherwise provided in           this Section 7.9,
during the Period of Restriction, any Shares of Restricted           Stock held by a
Participant shall be forfeited and revert to the Company and, in           the case of
RSUs, any RSUs held by a Participant shall expire, upon the           Participant&#146;s
Termination or the failure to meet or satisfy any applicable           performance goals
or other terms, conditions and restrictions to the extent set           forth in the
applicable Award Agreement. Each applicable Award Agreement in           connection with
RS/RSU, shall set forth the extent to which, if at all, the           Period of
Restrictions shall continue to be counted, following such           participant&#146;s
Termination of employment or service. Such provisions shall           be determined in
the sole discretion of the Committee, shall be included in the           applicable Award
Agreement, need not be uniform among all such Awards issued           pursuant to the
Plan, and may reflect distinctions based on the reasons for, or           circumstances
of, such Termination.  </FONT></P>

<p align=center>
<font size=2>10</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE VIII.<BR>TRANSFERABILITY
OF AWARDS; BENEFICIARY DESIGNATION </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1  Unless determined otherwise by
the Committee, no Award shall be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated by the Participant to whom granted, otherwise than by will or
the laws of descent and distribution, and an Options may be exercised and/or a RSU may
vest, and/or restrictions pursuant to a RS may be waived, during the lifetime of the
Participant, only by such Participant or by such Participant&#146;s guardian or legal
representative. The terms of such Award shall be binding upon the beneficiaries,
executors, administrators, heirs and successors of such Participant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.2  <U>Underwriter&#146;s
Lock-up</U>. The Participant&#146;s rights to sell Shares may be subject to certain
limitations (including a lock-up period), as will be requested by the Company or its
underwriters, from time to time, or upon a specific occurrence, and the Participant
unconditionally agrees and accepts any such limitations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE IX.<BR>RIGHTS  OF
PARTICIPANTS </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.1. <U>Rights or Claims</U>. No
individual shall have any rights or claims under the           Plan except in accordance
with the provisions of the Plan and any applicable           Award Agreement. Without
limiting the generality of the foregoing, nothing           contained in the Plan or in
any Award Agreement shall be deemed to:  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Give
any Employee, Director, or Non-Employee Director or Consultant the right to           be
retained in the service of the Company, or provide service to the Company, as
          the case may be, an Affiliate and/or a Subsidiary, whether in any particular
          position, at any particular rate of compensation, for any particular period of
          time or otherwise;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restrict
in any way the right of the Company, an Affiliate and/or a Subsidiary           to
terminate, change or modify any Employee&#146;s employment or any           Non-Employee
Director&#146;s service as a Director at any time with or without           Cause.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.2. <U>Adoption of the Plan</U>.
The adoption of the Plan shall not be deemed to           give any Employee, Non-Employee
Director or Consultant or any other individual           any right to be selected as a
Participant or to be granted an Award, or, having           been so selected, to be
selected to receive a future Award.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.3.  <U>Vesting</U>.
Notwithstanding any other provision of the Plan, unless           determined otherwise by
the Committee, a Participant&#146;s right or entitlement           to exercise or
otherwise vest in any Award not exercisable or vested at the time           of grant
shall only result from continued services as a Non-Employee Director or
          Consultant or continued employment as an Employee, as the case may be, with the
          Company or any Subsidiary or Affiliate, or satisfaction of any other
performance           goals or other conditions or restrictions applicable, by its terms,
to such           Award.  </FONT></P>

<p align=center>
<font size=2>11</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.4.  <U>No
Effects on Benefits</U>. Payments and other compensation received by a
          Participant under an Award are not part of such Participant&#146;s normal or
          expected compensation or salary for any purpose, including calculating
          termination, indemnity, severance, resignation, redundancy, end of service
          payments, bonuses, long-service awards, pension or retirement benefits or
          similar payments under any laws, plans, contracts, arrangements or otherwise.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE X. <BR>ADJUSTMENTS </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.1. <U>Adjustments in Authorized
Shares</U>. In the event of any reclassification,           recapitalization, merger or
consolidation, reorganization, stock dividend or           other distribution in
securities of the Company, stock split or reverse stock           split, combination or
exchange of shares, repurchase of shares, or other like           change in corporate
structure, that proportionally apply to all shares of the           Company, the
Committee, shall substitute or adjust, as applicable, the number,           class and
kind of securities which may be delivered under Section 4.1; the           number, class
and kind, and/or price (such as the Option Price of Options) of           securities
subject to outstanding Awards; and other value determinations           applicable to
outstanding Awards, as determined by the Committee, in order to           prevent
dilution or enlargement of Participants&#146; rights under the Plan;           provided,
however, that the number of Shares subject to any Award shall always           be a whole
number. The Committee shall also make appropriate adjustments and
          modifications, as determined by the Committee, in the terms of any outstanding
          Awards to reflect such changes in the Company&#146;s share capital, including
          modifications of performance goals and changes in the length of performance
          periods, if applicable. All determinations of the Committee as to adjustments
or           changes, if any, under this Section 10.1 shall be conclusive and binding on
the           Participants.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.2. <U>Liquidation</U>. Unless
otherwise provided by the Board, in the event of the           proposed dissolution or
liquidation of the Company, all outstanding Awards will           terminate immediately
prior to the consummation of such proposed action. In such           case, the Committee
may declare that any Award shall terminate as of a date           fixed by the Committee
and give each Participant (1) the right to exercise his           Option, including any
Option that would not otherwise be exercisable, or (2) the           right to have
his/her RSU vested, including any RSU that would not otherwise be           vested and/or
the restrictions pursuant to his RS waived.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.3. <U>Corporate Transaction</U>.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of a Corporate Transaction, immediately prior to the effective date
          of such Corporate Transaction, each Award may, among other things, at the sole
          and absolute discretion of the Committee, either:  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Be
substituted for a Successor Entity Award such that the Participant may           exercise
the Successor Entity Award or have it vested, as the case may be, for           such
number and class of securities of the successor entity which would have           been
issuable to the Participant in consummation of such Corporate Transaction,           had
the Option been exercised or the RSU have been vested, immediately prior to           the
effective date of such Corporate Transaction, given the exchange ratio or
          consideration paid in the Corporate Transaction, the vesting of the Awards and
          such other terms and factors that the Committee determines to be relevant for
          purposes of calculating the number of Successor Entity Awards granted to each
          Participant ; or  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>12</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Be
assumed by any successor entity such that the Participant may exercise the
          Option or have his/her RSU vest, for such number and class of securities of the
          successor entity which would have been issuable to the Participant in
          consummation of such Corporate Transaction, had the Option been exercised or
the           RSU been vested immediately prior to the effective date of such Corporate
          Transaction, given the exchange ratio or consideration paid in the Corporate
          Transaction, the vesting of the Awards and such other terms and factors that
the           Committee determines to be relevant for this purpose.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of a clause (i) or clause (ii) action, (1) appropriate adjustments shall be
made to the Option Price per Share to reflect such action; and/or (2) the Participant
shall pay the aggregate par value of each additional Share issued to him/her in respect
of his/her RSU, if applicable.  </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Immediately
following the consummation of the Corporate Transaction, <I>all           outstanding
Awards shall terminate and cease to be outstanding, except to the           extent
assumed by a successor entity</I>.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the foregoing, and without derogating from the power of the           Committee pursuant
to the provisions of this Plan, the Committee shall have full           authority and
sole discretion to determine that any of the provisions of           Sections 10.4(a)(i)
or 10.4(a)(ii) above shall apply in the event of a Corporate           Transaction in
which the consideration received by the shareholders of the           Company is not
solely comprised of securities of a successor entity, or in which           such
consideration is solely cash or assets other than securities of a successor
          entity.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.4. <U>Sale</U>.
Subject to any applicable law, to the provisions of the Articles of           Association
of the Company, and to the Board&#146;s sole and absolute           discretion, in the
event of Sale, each Participant shall be obligated to           participate in the Sale
and sell his or her Shares and/or Awards in the Company, <U>provided</U>, <U>however</U>,
that each such Share or Award shall be sold at           a price equal to that of any
other Ordinary Share sold under the Sale (and,           unless determined otherwise by
the Board, (1) in respect of Options, minus the           applicable Option Price; and
(2) in respect of RSUs, minus the par value of the           Share), while accounting for
changes in such price due to the respective terms           of any such Award, and
subject to the absolute discretion of the Board.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.5.  <U>No
Limitation on Corporate Actions</U>. The existence of the Plan and any           Awards
granted hereunder shall not affect in any way the right or power of the
          Company, any Subsidiary or any Affiliate to make or authorize any adjustment,
          recapitalization, reorganization or other change in its capital structure or
          business structure, any merger or consolidation, any issuance of debt,
preferred           or prior preference stock ahead of or affecting the Shares,
additional shares of           capital stock or other securities or subscription rights
thereto, any           dissolution or liquidation, any sale or transfer of all or part of
its assets or           business or any other corporate act or proceeding.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE XI.<BR>TERM AND
AMENDMENT, MODIFICATION, AND TERMINATION </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11.1 <U>Duration of the Plan</U>. The
Plan shall commence on the Effective Date and terminate upon the earliest of (i)&nbsp;the
expiration of the ten (10) year period measured from the Effective Date, or
(ii)&nbsp;the termination of all outstanding Awards in connection with a Corporate
Transaction, or (iii) in connection with, and as a result of, any other relevant event,
including the Plan&#146;s termination by the Board. All Awards outstanding at the time of
a clauses (i) and/or (iii) termination event shall continue to have full force and effect
in accordance with the provisions of the Plan and the documents evidencing such Awards. </FONT> </P>

<p align=center>
<font size=2>13</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.2  <U>Amendments</U>. Subject to
applicable laws and regulations, the Board in its discretion may, at any time and from
time to time, amend, alter, extend or terminate the Plan, as it deems advisable, including
without limitation, change the vesting and exercise periods.<B> </B>In addition, in the
event the Committee wishes to grant Awards to non-Israeli Participants, <I>the Committee
may adopt, as part of this Plan and based on it, sub-plans, in order to comply with all
relevant and applicable laws and regulations of the country of residence of such
Participants.</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.3  <U>Amendments that impair
Participant&#146;s Rights.</U> In addition, no such amendment, alteration, suspension or
termination of the Plan or any Award theretofore granted, including any Award Agreement,
shall be made which would materially impair the previously accrued rights of a Participant
under any outstanding Award without the written consent of such Participant, provided,
however, that the Board may amend or alter the Plan and the Committee may amend or alter
any Award, including any Agreement, either retroactively or prospectively, <I>without the
consent of the applicable Participant</I>, (1) so as to preserve or come within any
exemptions from liability under Section 16(b) of the Exchange Act, pursuant to the rules
and releases promulgated by the SEC (including Rule 16b-3), or (2) if the Board or the
Committee determines in its discretion that such amendment or alteration either (I) is
required or advisable for the Company, the Plan or the Award to satisfy, comply with or
meet the requirements of any law, regulation, rule or accounting standard or (II) is not
reasonably likely to significantly diminish the benefits provided under such Award, or
that such diminishment has been or will be adequately compensated. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE XII.<BR>TAX WITHHOLDING
AND OTHER TAX MATTERS </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.1. <U>Tax Withholding</U>. The
Company and/or any Subsidiary or Affiliate are           authorized to withhold from any
Award granted or payment due under the Plan the           amount of all taxes due in
respect of such Award or payment and take any such           other actions as may be
necessary or appropriate, as determined by the           Committee, to satisfy all
obligations for the payment of such taxes. The           recipient of any payment or
distribution under the Plan shall make arrangements           satisfactory to the
Company, as determined in the Committee&#146;s discretion,           for the satisfaction
of any tax obligations that arise by reason of any such           payment or
distribution. The Company shall not be required to make any payment           or
distribution under or relating to the Plan or any Award until such           obligations
are satisfied or such arrangements are made, as determined by the           Committee in
its discretion.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE XIII.<BR>LIMITS OF
LIABILITY; INDEMNIFICATION </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13.1. <U>Limits of Liability</U>.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of the Company, any Subsidiary, any Affiliate, any member of the Board or           the
Committee or any other person participating in any determination of any
          question under the Plan, or in the interpretation, administration or
application           of the Plan, shall have any liability, in the absence of bad faith,
to any party           for any action taken or not taken in connection with the Plan,
except as may           expressly be provided by statute.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to any applicable law, each member of the Committee, while serving as           such,
shall be considered to be acting in his or her capacity as a Director.           Members
of the Board of Directors and members of the Committee acting under the           Plan
shall be fully protected in relying in good faith upon the advice of           counsel
and shall incur no liability in the performance of their duties.  </FONT></P></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>14</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall not be liable towards a Participant or any other person as to:
          (i) the non-issuance of Shares as to which the Company has been unable to
obtain           from any regulatory body having relevant jurisdiction, the authority
deemed by           the Committee or the Company&#146;s counsel to be necessary to the
lawful           issuance and sale of any Shares hereunder, and (ii) any tax consequence
          expected, but not realized, by any Participant or other person due to the
          receipt, exercise or settlement of any Option or other Award.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13.2. <U>Indemnification</U>.
Subject to the requirements of applicable law, each           individual who is or shall
have been a member of the Committee or of the Board,           or an officer of the
Company to whom authority was delegated in accordance with           Article III, shall
be indemnified and held harmless by the Company against and           from any loss,
cost, liability, or expense (including counsel fees) that may be           imposed upon
or reasonably incurred by him or her in connection with or           resulting from any
claim, action, suit, or proceeding to which he or she may be           a party or in
which he or she may be involved by reason of any action taken or           failure to act
under the Plan and against and from any and all amounts paid by           him or her in
settlement thereof.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE XIV. <BR>MISCELLANEOUS </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.1. <U>Participant&#146;s
reimbursement</U>. If the Company is required to prepare           an accounting
restatement (1) due to the material noncompliance of the Company,           as a result
of misconduct, with any financial reporting requirement under the           securities
laws, if a Participant knowingly or with gross negligence engaged in           such
misconduct, or knowingly or with gross negligence failed to prevent such
          misconduct, or if a Participant is one of the individuals subject to automatic
          forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, <I>the
          Participant shall reimburse the Company </I>the amount of any payment in
          settlement of an Award earned or accrued during the twelve (12) month period
          following the first public issuance or filing with the SEC (whichever just
          occurred) of the financial document embodying such financial reporting
          requirement, and (2) the Committee may in its discretion provide that if the
          amount earned under any Participant&#146;s Award is reduced by such
restatement,           such Participant shall reimburse the Company the amount of any
such reduction           previously paid in settlement of such Award.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.2. <U>Severability</U>. In the
event any provision of the Plan shall be held           illegal or invalid for any
reason, the illegality or invalidity shall not affect           the remaining parts of
the Plan, and the Plan shall be construed and enforced as           if the illegal or
invalid provision had not been included.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.3. <U>No Effect on Other Plans</U>.
Neither the adoption of the Plan nor anything           contained herein shall affect any
other compensation or incentive plans or           arrangements of the Company or any
Subsidiary or Affiliate, or prevent or limit           the right of the Company or any
Subsidiary or Affiliate to establish any other           forms of incentives or
compensation for their directors, officers, eligible           employees or consultants
or grant or assume awards or other rights otherwise           than under the Plan.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.4. <U>Section 16 of Exchange Act</U>.
Unless otherwise stated in the Award           Agreement, notwithstanding any other
provision of the Plan, any Award granted to           an Insider shall be subject to any
additional limitations set forth in any           applicable exemptive rule under Section
16 of the Exchange Act (including Rule           16b-3) that are requirements for the
application of such exemptive rule, and the           Plan and the Award Agreement shall
be deemed amended to the extent necessary to           conform to such limitations.  </FONT></P>

<p align=center>
<font size=2>15</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.5. <U>Requirements of Law;
Limitations on Awards</U>.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
granting of Awards and the issuance of Shares under the Plan shall be           subject
to all applicable laws, rules, and regulations, and to such approvals by           any
governmental agencies or national securities exchanges as may be required.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may require each person receiving Shares in connection with any           Award
under the Plan to represent and agree with the Company in writing that           such
person is acquiring such Shares for investment without a view to the
          distribution thereof, and/or provide such other representations and agreements
          as the Committee may prescribe. Any such restrictions shall be set forth in the
          applicable Award Agreement, and/or the certificates evidencing such shares may
          include any legend that the Committee deems appropriate to reflect any such
          restrictions.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.6. <U>Governing Law</U>. The Plan
and, except as provided below or in an applicable           sub-plan, each Award
Agreement to a Participant shall be governed by the laws of           the State of
Israel, excluding any conflicts or choice of law rule or principle           that might
otherwise refer construction or interpretation of the Plan to the           substantive
law of another jurisdiction. Unless otherwise provided in the Award           Agreement,
Participants are deemed to submit to the exclusive jurisdiction and           venue of
the courts in Tel-Aviv, Israel, to resolve any and all issues that may           arise
out of or relate to the Plan or any related Award Agreement.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.7. <U>No Fractional Shares</U>.
No fractional Shares shall be issued upon the           exercise or payment of an Option
or other Award and any such fractions shall be           rounded to the nearest whole
number.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.8. <U>Participants</U>.
Notwithstanding any provision of the Plan to the contrary,           in order to comply
with the laws or practices of countries in which the Company,           any Affiliate,
and/or any Subsidiary operates or has Employees, Director,           Non-Employee
Directors or Consultants, the Committee, in its sole discretion,           shall have the
power and authority to: (a) Determine which Affiliates and           Subsidiaries shall
be covered by the Plan; (b) Determine which Employees,           Non-Employee Directors
and/or Consultants are eligible to participate in the           Plan; (c) Establish
sub-plans and adopt or modify exercise procedures and other           terms and
procedures, to the extent such actions may be necessary or advisable.           Any
sub-plans and modifications to Plan terms and procedures established under           this
Section 14. 8 by the Committee shall be attached to the Plan as appendices;           and
(d) Take any action, before or after an Award is made, that the Committee,           in
its discretion, deems advisable to obtain approval or comply with any           necessary
local government regulatory exemptions or approvals. <I>Notwithstanding the above, the
Committee may not take any actions hereunder,           and no Awards shall be granted,
that would violate any applicable law.</I> </FONT></P>

<p align=center>
<font size=2>16</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">

</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>14
<FILENAME>exhibit_4-4.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 4.4</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>STOCK PURCHASE
AGREEMENT</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DATED AS OF DECEMBER
30, 2007 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BY AND AMONG </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ADVANCED ANSWERS ON
DEMAND HOLDING, INC. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAGIC SOFTWARE
ENTERPRISES LTD. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAGIC SOFTWARE ENTERPRISES,
INC. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>and </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AOD HOLDINGS, INC. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORTISSIMO CAPITAL
FUND GP LP </FONT></H1>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>TABLE OF CONTENTS  </U></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH WIDTH=12%><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH WIDTH=80%><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH WIDTH=8%><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT" WIDTH="12%"><FONT FACE="Times New Roman" SIZE=2>ARTICLE I</FONT></TD>
     <TD ALIGN="LEFT" WIDTH="80%"><FONT FACE="Times New Roman" SIZE=2>TERMS OF PURCHASE</FONT></TD>
     <TD ALIGN="CENTER" WIDTH="8%"><FONT FACE="Times New Roman" SIZE=2>5</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 1.1.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Purchase of Shares</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>5</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 1.2.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Purchase Price, Payment and Escrow Agreement</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>6</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 1.3.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>License Agreement</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>9</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>ARTICLE II</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>9</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.1.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Organization and Qualification</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>9</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.2.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Authorization</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>10</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.3.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>No Violation</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>10</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.4.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Capitalization</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>10</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.5.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Subsidiaries and Equity Interests</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>11</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.6.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Consents and Approvals</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>11</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.7.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Financial Statements</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>11</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.8.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Absence of Undisclosed Changes</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>12</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.9.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Litigation</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>12</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.10.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Title to Properties</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>12</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.11.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Material Contracts</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>13</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.12.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Taxes</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>13</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.13.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Compliance with Applicable Law</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>14</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.14.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Brokers' Fees and Commissions</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>14</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.15.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Intellectual Property</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>14</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.16.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Employees; Labor Relations</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>15</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.18.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Environmental Matters</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>16</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.19.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Customers and Suppliers</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>17</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.20.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Transactions with Affiliates</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>17</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.21.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Disclaimer of Warranties</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>17</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.22</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Insurance</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 2.23</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Bank Accounts; Debt and Loan Facilities</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD></TR>
</TABLE>
<BR>


<p align=center>
<font size=2>2</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH WIDTH=12%><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH WIDTH=80%><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH WIDTH=8%><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT" WIDTH="12%"><FONT FACE="Times New Roman" SIZE=2>ARTICLE III</FONT></TD>
     <TD ALIGN="LEFT" WIDTH="80%"><FONT FACE="Times New Roman" SIZE=2>REPRESENTATIONS AND WARRANTIES OF THE SELLERS</FONT></TD>
     <TD ALIGN="CENTER" WIDTH="8%"><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 3.1.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ownership of Shares of Common Stock</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 3.2.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Organization and Authority</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>19</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 3.3.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>No Conflicts</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>19</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 3.4.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Brokers' Fees and Commissions</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>19</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 3.5.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Disclaimer of Warranties</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>19</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>ARTICLE IV</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>REPRESENTATIONS AND WARRANTIES OF PURCHASER</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>19</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 4.1.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Organization and Qualification</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>20</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 4.2.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Authorization</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>20</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 4.3.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>No Violation</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>20</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 4.4.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Consents and Approvals</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>20</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 4.5.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Brokers' Fees and Commissions</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>21</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 4.6.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Experience</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>21</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 4.7.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Receipt of Information</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>21</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 4.8.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Financing</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>21</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT" VALIGN="TOP"><FONT FACE="Times New Roman" SIZE=2>SECTION 4.9</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Conduct of Business of the Company Following the Closing and Prior to the Receipt by Sellers of the Entire Purchase Price</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>21</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>ARTICLE V</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>COVENANTS</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>23</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.1.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>[Intentionally Left Blank]</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>23</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.2.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Access to Information; Confidentiality</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>23</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD></TD>
     <TD></TD>
     <TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.3.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>All Reasonable Efforts</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>23</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.4.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Public Announcements</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>24</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.5.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>No Solicitation of Employees</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>24</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.6.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Company Closing Status</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>24</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.7</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>License Agreement</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>25</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.8</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Assistance To Purchaser</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>25</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.9</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Post Closing Assistance of Company Employees and Access to Certain Information</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>25</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.10</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Non-Compete</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>25</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 5.11</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Errors and Omissions Insurance Policy</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>26</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>ARTICLE VI</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>CLOSING</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>26</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 6.1</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Closing</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>26</FONT></TD></TR>
</TABLE>
<BR>


<p align=center>
<font size=2>3</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>



<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH WIDTH=12%><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH WIDTH=80%><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH WIDTH=8%><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT" WIDTH="12%"><FONT FACE="Times New Roman" SIZE=2>ARTICLE VII</FONT></TD>
     <TD ALIGN="LEFT" WIDTH="80%"><FONT FACE="Times New Roman" SIZE=2>INDEMNIFICATION</FONT></TD>
     <TD ALIGN="CENTER" WIDTH="8%"><FONT FACE="Times New Roman" SIZE=2>27</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 7.1.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Survival of Representations and Warranties</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>27</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 7.2.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Indemnification by the Sellers</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>28</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 7.3.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Indemnification Procedure</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>28</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 7.4.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Limitations on Indemnification Under Section 7.2</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>29</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>ARTICLE VIII</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>32</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT colspan=2><FONT FACE="Times New Roman" SIZE=2>DISPUTE RESOLUTION</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>32</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 8.2.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Governing Law and Venue</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>32</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT colspan=2><FONT FACE="Times New Roman" SIZE=2>MISCELLANEOUS PROVISIONS</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>33</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.1.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Amendment and Modification</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>33</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.2.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Waiver of Compliance; Consents</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>33</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.3.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Validity</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>33</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.4.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Expenses</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>33</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.5.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Parties in Interest</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>33</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.6.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Notices</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>34</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.7.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Counterparts</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>35</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.8.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Transfer Taxes</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>35</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.9.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Headings</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>35</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.10.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Certain Definitions</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>36</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.11.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Entire Agreement</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>38</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.12.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Assignment</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>38</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.13.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Incorporation of Exhibits and Schedules</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>39</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SECTION 9.14.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Facsimiles</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>39</FONT></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>4</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>STOCK PURCHASE
AGREEMENT</U> </FONT> </H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This STOCK PURCHASE AGREEMENT (this
&#147;<U>Agreement</U>&#148;), dated December 30, 2007, by and among AOD Holdings, Inc., a
Delaware corporation having its registered office at, c/o Fortissimo (the
&#147;<U>SPC</U>&#148;) and Fortissimo Capital Fund GP LP, a limited partnership, on
behalf of the several parallel limited partnerships (Fortissimo Capital Fund, LP;
Fortissimo Capital Fund (Israel), LP and Fortissimo Capital Fund (Israel-DP), LP) in which
it serves as the General Partner (&#147;<U>Fortissimo</U>&#148;), having its registered
office at 14 Hamelacha St. Park Afek, Rosh Ha&#146;ayin 48091, Israel (the SPC and
Fortissimo shall be referred to herein, jointly and severally, as the
&#147;<U>Purchaser</U>&#148; or &#147;<U>Purchasers</U>&#148;), Advanced Answers On Demand
Holding, Inc., a Florida corporation having its registered office at 8100 N. University
Drive, 3<SUP>rd</SUP> Floor, Tamarac 33321, Florida, USA (the &#147;<U>Company</U>&#148;),
Magic Software Enterprises Ltd. an Israeli company having its registered office at 2
Haplada St., Or Yehuda 60218, Israel (&#147;<U>Magic Ltd.</U>&#148;) and Magic Software
Enterprises, Inc. a Californian corporation having its registered office at 23046 Avenida
de la Carlota, Suite 300, Laguna Hills CA 926653 (&#147;<U>Magic Inc.</U>&#148; each of
Magic Ltd. and Magic Inc. a &#147;<U>Seller</U>&#148; and collectively, the
&#147;<U>Sellers</U>&#148;). </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>RECITALS</U>: </FONT> </H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Sellers own of record and beneficially all of the issued and outstanding share
capital of the Company, consisting of 100,000 shares of common stock, US$1.00 par value
each (the &#147;<U>Purchased Shares</U>&#148;); and  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Purchaser desires to acquire from the Sellers, and the Sellers desire to sell to the
Purchaser the Purchased Shares, on the terms and conditions set forth herein (the &#147;<U>Share
Purchase</U>&#148;); and  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the respective boards of directors of the Sellers and the Purchaser&#146;s partnership
bodies have determined the Share Purchase desirable and in the best interests of their
respective corporations and partnership and have approved the Share Purchase pursuant to
this Agreement (as defined below) and all the other transactions contemplated hereby.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW
THEREFORE, in consideration of the covenants, promises and representations set forth
herein, and for other good and valuable consideration, the receipt and adequacy of which
are conclusively acknowledged, the parties hereto, intending to be legally bound, agree
as follows:  </FONT></P>


<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE I </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>TERMS OF PURCHASE </U></FONT></P>



<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 1.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Purchase of Shares.</U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the terms and subject to the conditions of this Agreement, the Purchaser agrees to
purchase from the Sellers, and the Sellers agree to sell, transfer, assign and deliver to
the Purchaser (as hereinafter defined), all of the Purchased Shares, all as further
provided for herein. </FONT></P>

<p align=center>
<font size=2>5</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 1.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Purchase Price, Payment and Escrow Agreement.</U> </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Purchase
Price</U>. The aggregate purchase price to be paid by the Purchaser           for the
Purchased Shares shall be seventeen million US dollars (US$17,000,000)           (the
&#147;<U>Purchase Price</U>&#148;).  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchase Price shall be paid in two irrevocable installments as follows: (i) one million
US dollars (US$1,000,000) shall be paid by the Purchaser to the Sellers at the Closing (&#147;<U>Initial
Payment</U>&#148;); (ii) sixteen million US dollars (US$16,000,000) shall be paid by the
Purchasers to the Escrow Agent on or prior to January 31, 2008 (the &#147;<U>Final
Installment Payment Date</U>&#148; and &#147;<U>Final Installment</U>&#148;,
respectively).  </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the avoidance of any doubt, notwithstanding anything to the contrary in this Agreement or
any other transaction document, it is clarified and agreed that the Purchaser&#146;s
obligation to pay the Purchase Price (including the Final Installment) (such obligation
without any set off rights) is final, unconditional and irrevocable obligation and shall
not be subject to the fulfillment of any further conditions whatsoever, nor shall it be
subject to the occurrence of any event other than the passage of time up to the Final
Installment Payment Date, nor shall it be affected by any events, circumstances or
occurrences arising between the Closing and the Final Installment Payment Date (including
without limitation any such event, circumstances or occurrence concerning the business of
the Company or the Purchaser).  </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
notwithstanding anything to the contrary in this Agreement or any other transaction
document, it is hereby clarified and agreed that notwithstanding any breach or alleged
breach of this Agreement, the Purchaser will remain obligated to transfer the Purchase
Price (including the Final Installment) (such obligation without any set-off rights) to
the Sellers (directly or through the Escrow Agent, as defined below) on the Final
Installment Payment Date; <I>provided</I>, <I>however</I>, that the foregoing shall not
limit the right of the Purchaser, if any, following the transfer of the Purchase Price
(including the Final Installment) (such obligation without any set-off rights) to the
Sellers (directly or through the Escrow Agent, as defined below), to bring a claim
against the Seller under Section 7 below (Indemnification).  </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is agreed between the Purchaser and Sellers that the Purchaser shall not be entitled to
any remedy (including interim remedies) and/or indemnity and/or damages under or in
connection with this Agreement (or any related transaction document) (under law or
equity) unless (and subject to) all of the Purchase Price was fully paid to Sellers
(directly or through the Escrow Agent). The Purchaser&#146;s entitlement to bring a claim
or suit under this Agreement shall be effective only upon full payment of the Purchase
Price to Sellers (directly or through the Escrow Agent).  </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the Closing, the Sellers shall transfer to the Escrow Agent the Purchased Shares by
executing stock powers duly transferring the Purchased Shares to the name of the Escrow
Agent. At the Closing the Sellers shall deposit with the Escrow Agent stock certificates
representing the Purchased Shares registered in the name of the Escrow Agent, accompanied
by two forms of stock powers with respect to the transfer of the Purchased Shares from
the Escrow Agent: (i) one form transferring the Purchased Shares to the Sellers in the
amounts set forth in such forms, and (ii) one form transferring the Purchased Shares to
SPC (collectively, the &#147;<U>Escrowed Shares</U>&#148;); all in accordance with the
Escrow Agreement attached hereto as <B><U>Schedule 1.2</U></B><U></U>.  </FONT>
</TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>6</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such
Escrowed Shares will be released to the Purchaser in accordance with the provisions of
the Escrow Agreement upon the receipt by the Sellers of the full Purchase Price.  </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to Section 4.9 below, during the period between the Closing and the receipt by Sellers of
the entire Purchase Price (the &#147;<U>Escrow Period</U>&#148;), the Escrow Agent shall
follow the instructions of the Purchaser as to the voting of the Escrowed Shares (as more
fully set forth in the Escrow Agreement).  </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Consequences
of Non-Payment of the Final Installment</U>. In the event that           for any reason
whatsoever the Final Installment is not paid in full by the           Purchaser to the
Sellers (directly or through the Escrow Agent) on or prior to           the Final
Installment Payment Date, then such non payment shall constitute a           material
breach of this Agreement by the Purchaser and the following shall be           the sole
and exclusive consequences of such non payment by Purchaser (for           avoidance of
doubt, any receipt of the Final Installment by the Escrow Agent in           accordance
with the instructions designated in writing by the Escrow Agent under           the
Escrow Agreement shall be considered payment; except that, payment           accompanied
by or followed by a claim by Purchaser to the Escrow Agent not to           transfer or
that prevents such transfer of the Final Installment to the Sellers,           shall be
considered non payment of such Final Installment by Purchaser):  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Escrow Agent shall immediately transfer the Escrowed Shares to the Sellers           as
described below; and Purchaser shall have no right of any kind or type in           such
Escrowed Shares or in the Company. For avoidance of any doubt, it is agreed
          that even in the event of any dispute of any kind or type between the Purchaser
          and Sellers, the Escrowed Shares will be transferred immediately to the Sellers
          in case of any non payment of the Final Installment on the Final Installment
          Date.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Purchaser shall have no claim or demand of any kind or type whatsoever           against
the Sellers or their affiliates under or in connection with this           Agreement or
any other related transaction document (including for any breach or           alleged
breach of this Agreement or any other related transaction document) and           the
Purchaser shall be deemed to have irrevocably waived and forever released           the
Sellers and their affiliates from any such claims or demands, including any
          claim of set-off. Without limitation of the above, the Purchaser, be deemed to
          have waived, any right to pursue specific performance of this Agreement. It is
          agreed that in the event the Sellers bring a claim for specific performance and
          win such a suit and actually receive the full Purchase Price, then from such
          date onwards the Purchaser may bring a claim for indemnity under Section 7 of
          this Agreement (including with respect to Purchaser&#146;s Notice of Claim
          delivered to Sellers within the applicable Survival Period ).  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
anything to the contrary in this Agreement or any other           transaction document
and regardless of Sellers decision as described in           subsection (iv) below, the
amount of one million US dollars (US$1,000,000) paid           by the Purchasers at the
Closing (Initial Payment), shall remain with the           Sellers and be considered
liquidated damages (&#147;<U>Liquidated           Damages</U>&#148;).  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>7</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Purchaser
acknowledges that the damages resulting from the breach of this Agreement as referred to
in this Section are uncertain and incapable of accurate calculation and that the
Liquidated Damages payable pursuant to this Section are a reasonable forecast of the
actual damages which may be incurred by the Sellers under such circumstances, and that no
proof of any such actual damage is required, that the Liquidated Damages payable pursuant
this Section constitutes liquidated damages and not a penalty, and further that, without
these agreements, Sellers would not enter into this Agreement. Such payment shall not
release the Purchaser from complying with its obligations pursuant to this Agreement
should the Sellers decide to pursue specific performance, and further, payment of the
Liquidated Damages shall not be an exclusive remedy of Sellers and shall not prevent the
Sellers from seeking any additional remedies to which they may be entitled pursuant to
this Agreement and/or any law under any such circumstances, but only to the extent Sellers&#146; actual
damages, expenses and costs exceed the Liquidated Damages amount.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iv) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without
derogating from the above, Sellers, in accordance with Sellers sole           discretion,
shall be entitled to decide whether they (x) wish to pursue specific
          performance of the Share Purchase contemplated by this Agreement, in addition
to           a claim for any other damages, expenses and costs which they may seek remedy
          for; or (y) consider this Agreement to be null and void or terminate this
          Agreement, without any liability to Sellers, and seek additional damages,
          expenses and costs with respect thereto, but only to the extent such additional
          damages, expenses and costs exceed the Liquidated Damages amount. In the event
          that the Sellers bring a claim for specific performance and win such a suit and
          actually receive the full Purchase Price, then the Initial Payment shall still
          be Liquidated Damages and shall not be counted towards the Purchase Price (for
          clarity, the Sellers can still claim other damages caused to Sellers due to
such           breach), unless Purchaser&#146;s failure to pay resulted from a failure by
a           third party to provide funding to the Purchaser directly as a result of a
          material breach by Sellers of a representation in Section 2 and/or Section 3 of
          this Agreement.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Consequences
of Third Party Claims That Prevent Transfer of Escrowed           Shares</U>.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without
derogating from Section 1.2(b) above, in the event that during the           period in
which the Escrowed Shares are held in escrow by the Escrow Agent any           third
party that has a claim against the Purchaser, brings a claim that results           in a
lien (&#147;<U>IKUL</U>&#148;) or similar measurement (&#147;<U>Purchaser           Lien
on Escrowed Shares</U>&#148;) on the Purchaser&#146;s rights and           entitlement to
the Escrowed Shares, and such Purchaser Lien on Escrowed Shares           was not lifted
within twenty (20) days thereafter &#150; then the following           consequences shall
apply: (a) the Sellers shall have the right to immediately           terminate this
Agreement, and in such case the Purchaser shall have no right of           any kind or
type in such Escrowed Shares or in the Company, and (ii) and the           applicable
Liquidated Damages amount shall remain with the Sellers and be           considered
liquidated damages in accordance with the provisions detailed in sub           section
(b) above.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that during period in which the Escrowed Shares are held in escrow           by
the Escrow Agent any third party that has a claim against the Sellers brings           a
claim that results in a lien (&#147;<U>IKUL</U>&#148;) or similar measurement           (&#147;<U>Seller
Lien on Escrowed Shares</U>&#148;) on the Escrowed Shares that           prevent the
transfer of the Escrowed Shares to the Purchaser and such Seller           Lien on
Escrowed Shares was not lifted within twenty (20) days thereafter &#150;          then
the following consequences shall apply: the Purchasers shall have the right           to
immediately terminate this Agreement, and in such case the Purchaser shall           have
no right of any kind or type in such Escrowed Shares or in the Company, and
          shall receive all portions of the Purchase Price already paid to the Sellers or
          to the Escrow Agent.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>8</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment
of the Purchase Price shall be in US Dollars and shall be made, by wire
          transfer of immediately available funds to a bank(s) account(s) designated by
          the Sellers and by the Escrow Agent, respectively, in a written notice to the
          Purchaser at least two (2) Business Days prior to the Closing.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 1.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>License Agreement.</U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
Closing the Company and Magic Ltd. shall execute a license agreement (the &#147;<U>License
Agreement</U>&#148;), such License Agreement in the form attached hereto as <B><U>Schedule
1.3</U></B><U></U>. The License Agreement shall provide for the payments of license fees
by the Company to Magic Ltd. in the aggregate amount of three million US dollars
(US$3,000,000).  </FONT></P>


<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE II </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>REPRESENTATIONS AND
WARRANTIES OF THE SELLERS AND THE COMPANY </U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in the disclosure schedule delivered by the Company to Purchaser prior to the
execution of this Agreement which shall refer to specific numbered sections and lettered
subsections of this Agreement (the &#147;<U>Company Disclosure Schedule</U>&#148;), the
Company and each of the Sellers represent and warrant to Purchaser as follows (the
disclosures in one section or subsection of the Company Disclosure Schedule shall qualify
only the correspondingly numbered section or subsection of this Agreement, except to the
extent that the applicability and significance of the disclosure in one section or
subsection to another section or subsection of this Agreement is reasonably apparent to a
reader possessing no additional knowledge of the subject matter of the disclosure): </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Organization and Qualification</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the Company and its Subsidiaries (as defined below) is a limited liability corporation
duly organized and validly existing under the laws of its jurisdiction of organization,
with requisite power and authority to own, operate, license and lease its properties and
to carry on its business as it is now being conducted. Each of the Company and its
Subsidiaries is qualified or licensed to do business in every jurisdiction where the
nature of the business conducted by it or the properties owned or leased by it requires
qualification, except where the failure to be so qualified or licensed would not, in the
aggregate, reasonably be expected to have a material adverse effect on the Company or the
Company&#146;s Business. Complete and correct copies of the currently in effect
Certificate of Incorporation and By-Laws of the Company and each Subsidiary are attached
hereto as <B><U>Schedule 2.1</U></B><U></U>. Complete and correct copies of all actions of
the stockholders and directors of the Company and each Subsidiary for the three (3) fiscal
years preceding the date hereof have been delivered to the Purchaser. No proceedings have
been initiated and are currently pending relating to the dissolution or merger of the
Company. </FONT></P>

<p align=center>
<font size=2>9</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Authorization</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions contemplated hereby.
The Company&#146;s By-Laws and Certificate of Incorporation are in full force and effect.
The execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder, and the consummation by the Company of the
transactions contemplated hereby have been, or will have been prior to the Closing, duly
and validly authorized by the Company&#146;s corporate bodies as required by applicable
law and by the Company&#146;s Certificate of Incorporation and By-Laws. No other corporate
action on the part of the Company is necessary to authorize the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors&#146; rights generally, and except to the extent that the
remedy of specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>No Violation</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the execution and delivery of this Agreement by<SUB> </SUB>the Company, the performance by
the Company of its obligations hereunder nor the consummation by the Company of the
transactions contemplated hereby will (a) violate, conflict with or result in any breach
of any provision of the Certificate of Incorporation or By-Laws of the Company, each as
currently in effect (b) except as noted on <B><U>Schedule 2.3</U></B><U></U> hereto,
violate, conflict with or result in a violation or breach of, or constitute a default
(with or without due notice or lapse of time or both) or result in the creation of a Lien
(as defined below) or give rise to a right of termination, cancellation or acceleration
under the terms, conditions or provisions of any note, bond, mortgage, indenture or deed
of trust or any material license, lease or agreement (each, a &#147;<U>Contract</U>&#148;)
to which the Company or any Subsidiary is a party, or (c) violate any order, writ,
judgment, injunction, decree statute, law, rule or regulation of any court or Governmental
Authority (as defined below) applicable to the Company or any Subsidiary. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Capitalization</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
registered capital of the Company consists of 1,000,000 common stock, par value US$1.00
per share (the &#147;<U>Common Stock</U>&#148;), of which 100,000 shares of Common Stock
are issued and outstanding as follows: 83,888 shares of Common Stock are held and
beneficially owned by Magic Inc. and 16,112 shares of Common Stock are held and
beneficially owned by Magic Ltd.; and 1,000,000 preferred shares, par value US$1.00 per
share, none of which are issued. The entire issued and outstanding share capital of the
Company as of the date of this Agreement is beneficially owned by the Sellers and such
shares of Common Stock have been validly issued, are fully paid and non-assessable, were
not issued in violation of any rights and have been issued in compliance with all
applicable federal and state laws. There are no options, warrants, calls, subscriptions,
conversion or other rights, agreements or commitments obligating the Company to issue any
additional share capital of the Company or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any share capital of the
Company. </FONT></P>


<p align=center>
<font size=2>10</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Subsidiaries and Equity Interests</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Schedule
2.5</U></B><U></U> of the Company Disclosure Schedule lists all the Subsidiaries of the
Company and, for each such Subsidiary, the state of organization and each jurisdiction in
which such Subsidiary is qualified or licensed to do business. Each Subsidiary is
operating in compliance with its organizational documents and, in all material respects,
in compliance with applicable law. Except as set forth on <B><U>Schedule
2.5</U></B><U></U>, all the outstanding shares of capital stock of, or other equity
interests in, each such Subsidiary have been validly issued and are fully paid and
non-assessable and are owned directly by the Company free and clear of all pledges,
claims, liens, charges, encumbrances, security interests or other third-party rights of
any kind or nature whatsoever (collectively, &#147;<U>Liens</U>&#148;), and free of any
restriction on the right to vote, sell or otherwise dispose of such capital stock or other
equity interests. Except for the capital stock of the Subsidiaries, the Company does not
own, directly or indirectly, any capital stock of or any other kind of right, or otherwise
hold any equity, membership, partnership, joint venture or other ownership interest, in
any other entity. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Consents and Approvals</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth on <B><U>Schedule 2.6</U></B><U></U> of the Company Disclosure Schedule, no
filing or registration with, no notice to and no permit, authorization, consent or
approval of any Governmental Authority or any other third party is necessary for the
consummation by the Company of the transactions contemplated by this Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Financial Statements</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has delivered to the Purchaser (a) copies of the audited consolidated balance
sheets of the Company for the twelve (12) months period ended on December 31, 2006,
together with the related audited consolidated statements of income, stockholders&#146;
equity for the fiscal years ended December 31, 2006, and the notes thereto, attached
hereto as <B><U>Schedule 2.7A</U></B><U></U> (the &#147;<U>Company 2006 Financial
Statement</U>&#148;) and unaudited, unreviewed financial statements for the nine (12)
months period ended September 30, 2007, attached hereto as <B><U>Schedule
2.7B</U></B><U></U> (the &#147;<U>Interim Financial Statements</U>&#148; and together with
the Company 2006 Financial Statements, the &#147;<U>Company Financial
Statements</U>&#148;). The Company Financial Statements (i) are accurate and complete in
all material respects, (ii) were prepared in accordance with U.S. generally accepted
accounting principles applied on a consistent basis (&#147;<U>GAAP</U>&#148;) throughout
the periods covered thereby, except as otherwise noted thereon, and (iii) present fairly
in all material respects the consolidated financial position, results of operations and
changes in cash flow of the Company as of such dates and for the periods then ended
(except that the Interim Financial Statements do not contain all of the notes required by
GAAP and are subject to normal year-end adjustments). To the Company&#146;s knowledge,
there are no material liabilities or financial obligations of the Company or its
Subsidiaries that are required to be reflected on a balance sheet prepared in accordance
with GAAP, other than liabilities and obligations: (x) provided for or reserved against in
the Company Financial Statements; or (y) arising after September 30, 2007 in the ordinary
course of business, and which are not material to the financial position of the Company. </FONT></P>

<p align=center>
<font size=2>11</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Absence of Undisclosed Changes</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
September 30, 2007 until the date hereof, and except as set forth in <B><U>Schedule
2.8</U></B><U></U> of the Company Disclosure Schedule, there has not been to the
Company&#146;s knowledge: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
material damage, destruction or loss, whether or not covered by insurance to
               any of the Company or a Subsidiary; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
waiver by the Company of a material right or of a material debt owed to the
               Company and relating to or materially affecting the business of the
Company or                any part thereof except in the ordinary course of business; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
sale, transfer or lease of any of Company&#146;s material assets or rights
               ,except in the ordinary course of business, or imposition of any Liens, on
any                of Company&#146;s material assets or rights; or </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>d) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any
change in the accounting methods or accounting principles or practices
               employed by the Company other than changes required by GAAP as reflected
in the                notes attached to the Company Financial Statements; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Litigation</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
is no suit, or proceeding pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any director or officer of the Company, in such
capacity, nor is there any judgment, decree, injunction, rule or order of any
Governmental Authority or arbitrator outstanding against, or, to the knowledge of the
Company, any investigation by any Governmental Authority involving, the Company or any of
its Subsidiaries or any director or officer of the Company, in such capacity. The Company
is not a plaintiff or claimant in any pending action, suit, or proceeding pending, and is
not presently contemplating any such action, suit or proceeding. This Section 2.9 does
not relate to any matters with respect to Taxes and environmental matters, which are
addressed solely in Section 2.12 and Section&nbsp;2.18, respectively.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Title to Properties</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Schedule
2.10(a)</U></B><U></U> of the Company Disclosure Schedule           contains a complete
and accurate list of all real property utilized, owned or           leased by the Company
or any Subsidiary.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the Company and its Subsidiaries has good and marketable title to, or           valid
leasehold interests in, all its properties and other assets except for           such as
are no longer, nor reasonably expected to be, used in the conduct of its
          business. All such properties and other assets, other than properties and other
          assets in which the Company or any of its Subsidiaries has a leasehold
interest,           are free and clear of all Liens.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>12</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Section 2.10 does not relate to any matters with respect to intellectual
          property, which are addressed solely in Section 2.15.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Material Contracts</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Schedule
2.11(a)</U></B><U></U> of the Company Disclosure Schedule           contains a true and
complete list of all written or oral Contracts agreements or           understandings of
the Company and/or any Subsidiary that are responsible for           revenues, expenses
or costs of at least two hundred thousand US dollars           (US$200,000) per annum
(the &#147;<U>Material Contracts</U>&#148;).  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any of its Subsidiaries is in material violation of or           in
material default under (nor does there exist any condition which upon the
          passage of time or the giving of notice or both would cause such a material
          violation of or material default under) any Material Contract to which it is a
          party or by which it or any of its properties or other assets is bound.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Taxes</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth on <B><U>Schedule 2.12</U></B><U></U> of the Company Disclosure Schedule: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
Tax Returns required to be filed by the Company and its Subsidiaries prior           to
the Closing Date for all taxable periods ending on or before the Closing Date
          have been timely filed, giving effect to any extension thereof and all such Tax
          Returns are true, complete and correct in all material respects. Each of the
          Company and its Subsidiaries (i) has paid all Taxes that are shown to be due on
          such Tax Returns, and (ii) has paid for the payment of all Taxes for which, to
          the knowledge of the Company, the Company or its Subsidiaries have liability
for           any taxable year or other period which shall have ended on or prior to the
          Closing Date. Each of the Company and its Subsidiaries has withheld all taxes,
          required to be withheld, on or prior to the Closing Date.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are no outstanding agreements extending the statutory period of limitation
          applicable to any claim<I></I>for, or<I></I>the period for the collection or
          assessment<I></I>of, Taxes due from the Company or any Subsidiary for any
          taxable period.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the knowledge of the Company, no investigation, audit or other proceeding by
          any court or Governmental Authority is pending with respect to any Taxes due
          from or with respect to the Company or<I></I>any Subsidiary.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any Subsidiary was required by any Governmental           Authority to
make any material adjustment in Taxes by reason of a change or           proposed change
in accounting method or otherwise.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the<I></I>Company nor any Subsidiary is liable for<I></I>the Taxes of                any
taxpayer other than the Company and such Subsidiary for any taxable period,
               which shall have ended on or prior to the Closing Date.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>13</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Compliance with Applicable Law</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the Company and its Subsidiaries has materially complied with, is not in violation in
any material respects of, and has not received any notices in writing of violation with
respect to, any U.S. federal, state or local statute, law or regulation or any orders or
regulations of any Governmental Authority. Each of the Company and its Subsidiaries are in
possession of and in compliance, in all material respects, with all material permits and
licenses required under applicable laws, for the conduct of their business as currently
conducted. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Brokers' Fees and Commissions</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 1-TNR" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in <B><U>Schedule 2.14</U></B><U></U> of the Company Disclosure Schedule, the
Company or any Subsidiary has not employed any investment banker, broker or finder and the
Company is not liable for any brokers&#146; fees, success fees or commissions due to any
third party, in connection with the transactions contemplated hereby. </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Intellectual Property</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Schedule
2.15(a)</U></B><U></U> of the Company Disclosure Schedule lists           all Trademarks
(as defined below) and registered Copyrights (as defined below)           and all
registrations of, and applications to register, any of the foregoing           with any
Governmental Authority and any renewals or extensions thereof, owned or           filed
(as the case may be) by the Company or any Subsidiary. Neither the Company           nor
any Subsidiary has received any notice of, and to the Company&#146;s           knowledge
there are no, Actions pending or threatened, in respect of the Company
          Intellectual Property (as defined below) which is owned by the Company, nor is
          the Company actually aware of any suit, action or proceeding for any third
party           rights in such Company Intellectual Property (as defined below). All the
          Intellectual Property necessary to conduct the business of the Company and its
          Subsidiaries, as presently conducted (the &#147;<U>Company Intellectual
          Property</U>&#148;) is owned exclusively or licensed from third parties by the
          Company or a Subsidiary, and with respect to Company Intellectual Property that
          is subject to a third party license, the Company and/or the Subsidiaries have
          the right to use such Company Intellectual Property free and clear of all
Liens,           subject to the terms of such third party licenses. <B><U>Schedule
          2.15(b)</U></B><U></U> lists all of the Intellectual Property licensed by the
          Company to third parties, except for the sale or license of Company products to
          its customers.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
with respect to Intellectual Property owned by the Company, to the           Company&#146;s
knowledge, neither the Company nor any Subsidiary is infringing           or has
infringed upon, misappropriated or violated in any other way, any           Intellectual
Property rights of any third party rights and to the knowledge of           the Company,
no person is currently infringing upon any intellectual property           rights of the
Company or any Subsidiary, and (ii) with respect to Intellectual           Property which
is licensed from third parties to the Company, the Company is not           actually
aware that such third party Intellectual Property infringes or is           alleged to
infringe any Intellectual Property of others.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>14</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Schedule
2.15(c)(1)</U></B><U></U> lists all of the Company&#146;s           Intellectual Property
licensed from third parties. Except as listed in <B><U>Schedule 2.15(c)(2)</U></B><U></U> of
the Company Disclosure Schedule all           Company Intellectual Property, other than
the Company Intellectual Property           which is licensed from third parties, was to
the Company&#146;s knowledge (i)           developed by the Company, a Subsidiary or by
employees or consultants thereof           pursuant to a customary invention assignment
agreement assigning all rights with           respect thereto to the Company, (ii)
created by third parties who assigned           ownership of their rights to the Company
pursuant to a customary confidentiality           and invention assignment agreement, or
(iii) assigned to the Company pursuant to           a valid assignment agreement.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as disclosed in <B><U>Schedule 2.15(d)</U></B><U></U> of the Company           Disclosure
Schedule, each person employed by the Company or a Subsidiary           (including
consultants and independent contractors) during the three-year (3)           period
ending on the date hereof and, to the Company&#146;s knowledge, each           other
third party having access during such period to confidential information           of the
Company or a Subsidiary or to any Company Intellectual Property, has           executed a
confidentiality and non-disclosure agreement in a form containing           terms
customary in the industry. To the Company&#146;s knowledge, neither the
          execution or delivery of such agreements, nor the carrying on of the business
of           the Company or any Subsidiary as currently conducted by any of their
respective           employees (including consultants and independent contractors,
working in           capacities similar to employees) conflicts with or constitutes a
breach of the           terms, conditions or provisions of, or constitutes a default
under, any           contract, covenant or instrument under which any such employee
(including           consultants and independent contractors, working in capacities
similar to           employees) is obligated. The Company and each Subsidiary have taken
reasonable           steps in accordance with normal industry practice to protect their
rights in           confidential information and trade secrets.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Employees; Labor Relations</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Schedule
2.16(a)</U></B><U></U> of the Company Disclosure Schedule sets                forth a
list of all the directors, officers, employees and consultants                (excluding
consultants and employees entitled to receive less than fifty                thousand US
dollars (US$50,000) per annum, lawyers and accountants) of the                Company and
any Subsidiary (the &#147;<U>Employees</U>&#148;) and all                compensation and
benefits payable per annum or which the Company or any                Subsidiary, as
relevant, is bound (pursuant to written or oral agreements) to                provide to
each Employee. Except as set forth in <B><U>Schedule                2.16(a)</U></B><U></U>,
no Employee is entitled to or was promised any equity                rights in the
Company, bonuses or other future payments of any type whatsoever                from the
Company; except for any bonuses or future payments due to such                employees
for work performed following the Closing Date in the ordinary course                of
business and consistent with the Company&#146;s prior practices and which are
               not mentioned in Schedule 2.16, provided such bonuses and payments do not
exceed                an aggregate amount of two hundred thousand US dollars
(US$200,000).  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser has received true and complete copies of all employment and
               consultancy agreements (including any agreements between the Company or
any                Subsidiary and any such Employee concerning Company Intellectual
Property,                confidentiality and non-competition) under which the key
Employees are engaged.                Neither the Company nor any Subsidiary is a party
or subject to any collective                bargaining agreement with any labor union or
any local or subdivision thereof.                There is no current union organizing
activity among any of the Employees or any                union representative petition
pending or threatened. Except as set forth on <B><U>Schedule 2.16(b)</U></B><U></U> of
the Company Disclosure Schedule, there                are no customs or customary
practices regarding Employees that could be deemed                to be binding on the
Company or any Subsidiary.  </FONT></P></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>15</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the Company and its Subsidiaries is materially in compliance with all
          legislative or other provisions, rules and regulations relating to employees,
          and their terms and conditions of employment and has made all deductions,
          withholdings and payments required to be made by law, or reserves therefor have
          been made in the Company Financial Statements.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>ERISA</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any Subsidiary or Affiliate (within of Section 414 (b) or (c) of the Code)
maintains or has in the last five (5) years prior to the date hereof maintained,
contributed to or has in the last five (5) years prior to the date hereof had any
obligation to contribute to, or any liability with respect to any employee benefit plan
(as defined in Section 3(3) of ERISA). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.18.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Environmental Matters</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
Each of the Company and its Subsidiaries is, and has been, in material
               compliance with all Environmental Laws and (ii) there is no Action
pending, or,                to the knowledge of the Company, threatened against or
affecting the Company or                any of its Subsidiaries or any real property
owned, operated or leased by the                Company or any of its Subsidiaries
relating to or arising under Environmental                Laws, and, to the knowledge of
the Company, neither the Company nor any of its                Subsidiaries has received
any notice of or entered into or assumed by Contract                or operation of law
or otherwise, any obligation, liability, order, settlement,                judgment,
injunction or decree relating to or arising under Environmental Laws.                This
Section 2.18, including all subsections, represents the sole and exclusive
               representation and warranty of the Company regarding environmental
matters. For                purposes of this Agreement:  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;each
of the Company and its Subsidiaries has obtained all permits, licenses and
               other authorizations that are required under applicable Environmental Laws
               (&#147;<U>Environmental Permits</U>&#148;) to conduct their businesses and
has                filed all material obligatory reports, notices, assessments, plans,
inventories,                and applications required by Environmental Laws
(collectively,                &#147;<U>Filings</U>&#148;);  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;no
judicial or administrative proceedings or investigations are pending or, to
               the Company&#146;s knowledge, threatened against the Company or any of its
               Subsidiaries and no written notice, citation, summons or order has been
               delivered to the Company or any Subsidiary by any Governmental Authority
               pursuant to any applicable Environmental Laws (collectively,
               &#147;<U>Environmental Claims</U>&#148;);  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>16</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;there
have been no environmental investigations, studies, audits, tests, reviews
               or other analyses conducted by the Company or the Subsidiary in relation
to any                real property owned or leased by the Company or any Subsidiary; and  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;neither
the Company nor any Subsidiary, nor any of the real property currently                or,
to the knowledge of the Company, formerly owned, operated or leased by them,
               is currently subject to any environmental remediation, clean-up or other
               environmental obligation arising under applicable Environmental Laws.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.19.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Customers and Suppliers</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Schedule
2.19(a)</U></B><U></U> of the Company Disclosure Schedule           contains a true and
complete list of the Company&#146;s material customers and           the sales to such
customers in respect of the business of the Company during the           twelve-month
period ended December 31, 2006 and the nine-month period ended           September 30,
2007. The Company has received no written notice, from any           customer listed on
<B><U>Schedule 2.19(a)</U></B><U></U>, announcing the           termination of the
agreement between the Company and such customer.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>Schedule
2.19(b)</U></B><U></U> of the Company Disclosure Schedule           contains a true and
complete list of the Company&#146;s material suppliers and           the purchases by the
Company and its Subsidiaries from such suppliers during the           twelve-month period
ended December 31, 2006 and the nine-month period ended           September 30, 2007.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.20.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Transactions with Affiliates</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in <B><U>Schedule 2.20</U></B><U></U> of the Company Disclosure Schedule, no
officer, director or stockholder of the Company, (or immediate family member of any of the
foregoing) has or has had, directly or indirectly, (i)&nbsp;an interest in any entity
which furnished or sold, or furnishes or sells, services, products or technology to the
Company or any Subsidiary or (ii)&nbsp;any interest in any entity that purchases any goods
or services from the Company, or (iii)&nbsp;a beneficial interest in any Material Contract
to which the Company is a party. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.21.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Disclaimer of Warranties</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as and to the extent expressly set forth in this Section 2, taken together with the
Company Disclosure Schedule, the Company and each of the Sellers, are not making and have
not made any representations or warranties whatsoever, express or implied, relating to the
Company or its Subsidiaries, including any representations or warranties as to the future
sales or profitability of the Company or its Subsidiaries, or arising by statute or
otherwise in law, from a course of dealing or usage of trade. All such other
representations and warranties are hereby expressly disclaimed by the Company.
Notwithstanding the foregoing, the Company represents and warrants that no representation
or warranty provided by the Company or any Seller herein, and no statement contained in
the Company Disclosure Schedule contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading. </FONT></P>

<p align=center>
<font size=2>17</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.22&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Insurance</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
insurance policy to which the Company or any of its Subsidiaries is a party           or
by which any of their assets are covered is valid and binding and in full           force
and effect, all premiums due thereunder have been paid when due and           neither the
Company nor any of its Subsidiaries has received any notice of           cancellation or
termination in respect of any such policy or is in default           thereunder, and the
Company has no knowledge of any reason or state of facts           that could reasonably
be expected to lead to the cancellation of such policies           or of any threatened
termination of, or material premium increase with respect           to, any of such
policies.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
claim under any insurance policy covering the Company or any of its
          Subsidiaries or any of their assets is currently pending.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.23&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Bank Accounts; Debt and Loan Facilities</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Details
regarding the Company&#146;s and any Subsidiary&#146;s bank accounts and credit facilities
are as set forth in <B><U>Schedule 2.23</U></B><U></U> of the Company Disclosure Schedule
and except for such bank accounts the Company and the Subsidiaries do not have any other
bank accounts severally or jointly with others. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE III </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2">REPRESENTATIONS AND
<BR><U>WARRANTIES OF THE SELLERS</U> </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Sellers hereby, jointly and severally, make the following representations and warranties
(unless otherwise required from the context in which case each Seller is making the
representation in regard to itself only) to the Purchaser: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Ownership of Shares of Common Stock</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Sellers are the holders of record and own beneficially the entire issued and outstanding
share capital of the Company as stated in <B><U>Schedule 3.1</U></B><U></U>, which sets
forth the number of shares owned by each Seller. Each Seller owns its portion of the
Purchased Shares free and clear of any Liens. The Sellers are not a party to any voting
trust, proxy or other agreement with respect to the voting of any of the Purchased Shares
which will remain in force or effect after the Closing. At Closing, each Seller will
convey to the Purchaser good title to the portion of the Purchased Shares owned by such
Seller free and clear of any Liens. </FONT></P>


<p align=center>
<font size=2>18</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Organization and Authority</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Seller is a limited liability corporation duly organized and validly existing under the
laws of its jurisdiction of organization. Each Seller has full corporate power and
authority and legal capacity to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to perform the obligations of such Seller hereunder.
The execution and delivery of this Agreement by the Sellers, the performance by each
Seller of its obligations hereunder, and the consummation by each Seller of the
transactions contemplated hereby have been, or will have been prior to the Closing, duly
and validly authorized by such Seller&#146;s corporate bodies as required by applicable
law and by such Seller&#146;s organizational documents. No other corporate action on the
part of the Sellers is necessary to authorize the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each Sellers and will constitute a valid and binding
obligation of the Sellers, enforceable against them in accordance with its terms, except
to the extent that such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect relating to
creditors&#146; rights generally, and except to the extent that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of<I> </I>the court before which any proceeding therefore
may be brought. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>No Conflicts</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the execution, delivery and performance by the Sellers of this Agreement, the performance
by each Seller of its obligations hereunder nor the consummation by each Seller of the
transactions contemplated hereby will (a) violate, conflict with or result in any breach
of any provision of each such Seller&#146;s organizational documents, as currently in
effect, (b) violate or breach any provision of any order, writ, judgment, injunction,
decree, law or statute, rule or regulation of any court or Governmental Authority
applicable to such Seller, or (c) violate, breach, cause a default under (with or without
due notice or lapse of time or both) any material contract, or result in the creation of a
Lien over the Purchased Shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Brokers' Fees and Commissions</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
for the Broker Fees and Prior Bonuses (as defined below) and any commissions to be paid by
Sellers, the Sellers have not employed any investment banker, broker or finder, and there
are no commissions due to any third party, in connection with the transactions
contemplated hereby. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Disclaimer of Warranties</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as and to the extent expressly set forth in this Section 3 and in Section 2 above, the
Sellers are not making and have made no representations or warranties whatsoever, express
or implied, relating to each Seller, the Company or the Subsidiaries. All such other
representations and warranties are hereby expressly disclaimed by the Sellers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE IV </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>REPRESENTATIONS AND
WARRANTIES OF PURCHASER </U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in the disclosure schedules delivered by the Purchaser to the Sellers (the
&#147;<U>Purchaser Disclosure Schedule</U>&#148;), the Purchaser represents and warrants
to the Company and the Sellers as follows: </FONT></P>

<p align=center>
<font size=2>19</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Organization and Qualification</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser is a partnership duly organized and validly existing under the laws of the
jurisdiction of its organization, with all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such power or
authority is not, in the aggregate, reasonably likely to have a Purchaser Material Adverse
Effect. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Authorization</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser has full partnership power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and delivery of this
Agreement by the Purchaser, the performance by the Purchaser of its obligations hereunder,
and the consummation by it of the transactions contemplated hereby have been duly
authorized by the Purchaser&#146;s partnership bodies as may be required under the
Purchaser&#146;s organizational documents. No other proceeding on the part of the
Purchaser is necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Purchaser and constitutes a valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms, except to
the extent that such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect relating to
creditors&#146; rights generally. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>No Violation</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the execution and delivery of this Agreement by the Purchaser, the performance by the
Purchaser of its obligations hereunder nor the consummation by the Purchaser of the
transactions contemplated hereby will (a) violate, conflict with or result in any breach
of any provision of the limited partnership agreement of the Purchaser, (b) violate,
conflict with or result in a violation or breach of, or constitute a default (with or
without due notice or lapse of time or both) under the terms, conditions or material
provisions of any note, bond, mortgage, indenture, deed of trust, license, lease or
agreement to which the Purchaser is a party, or (c) violate any order, writ, judgment,
injunction, decree, statute, rule or regulation of any court or domestic or foreign
Governmental Authority applicable to the Purchaser, except such defaults and violations
which, in the aggregate, are not reasonably likely to have a Purchaser Material Adverse
Effect. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Consents and Approvals</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth on <B><U>Schedule 2.6</U></B><U></U> of the Company&#146;s Disclosure
Schedule, Purchaser is not aware of any filing, registration, notice, permit,
authorization, consent or approval of any third party or any Governmental Authority
necessary for the consummation by the Purchaser of the transactions contemplated by this
Agreement. </FONT></P>

<p align=center>
<font size=2>20</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Brokers' Fees and Commissions</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Purchaser nor any of its directors, officers, employees or agents, has employed any
investment banker, broker or finder in connection with the transactions contemplated
hereby. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Experience</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks relating to the acquisition of the Company, and
has reviewed and inspected all of the data and information provided to it by the Company
in connection with this Agreement. The Purchaser acknowledges that it is able to evaluate
and bear the economic risks associated with the acquisition contemplated by this Agreement </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Receipt of Information</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser warrants, represents and acknowledges that it and its advisors have been granted
the opportunity to conduct, and has conducted, a due diligence inquiry of the Company and
its Subsidiaries, and their activities, including, but not limited, with respect to
Company Intellectual Property and agreements, and including further, the Purchaser was
granted the opportunity to interview their executives regarding the understanding of the
Company, their understanding of the market and their plans and expectations. The Purchaser
have met the management team and interviewed them. Nothing herein shall be deemed to limit
the Sellers&#146; and the Company&#146;s liabilities with respect to their representations
and warranties provided hereunder. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Financing</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchaser
shall have upon the due payment dates in accordance with Section 1.2 above the funds
necessary to consummate the transactions contemplated by this Agreement </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SECTION 4.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Conduct of Business of the Company Following the Closing and Prior to the Receipt by
Sellers of the Entire Purchase Price</U>.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser hereby represents and warrants that, except as for the actions referred to in
<B><U>Schedule 4.9</U></B><U></U> attached hereto (the &#147;<U>Actions</U>&#148;), until
the release of the Purchased Shares from the Escrow Agent to the Purchaser, the Purchaser
shall cause the Company and the Company shall, (i)&nbsp;conduct its business in the usual,
regular and ordinary course in substantially the same manner as heretofore conducted,
(ii)&nbsp;pay its debts and Taxes when due, (iii)&nbsp;pay or perform other material
obligations when due (including accounts payable), (iv)&nbsp;&nbsp;preserve intact its
present business organizations, and (v)&nbsp;use best efforts to keep available the
services of its present officers and key employees and maintain the existing compensation
arrangements with them, and (vi)&nbsp;use best efforts to preserve the relationships with
its customers, suppliers, distributors, licensors, licensees, and others having business
dealings with them. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
for the Actions, during the Escrow Period the Purchaser shall cause the Company not to,
and the Company shall not do any of the following: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>cause
or permit any amendments to its organizational documents; </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>21</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>merge,
consolidate, restructure, reorganize or take any similar action or
               transaction with respect to the Company or any subsidiary thereof; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>declare,
set aside, or pay any dividends on or make any other distributions
               (whether in cash, stock or property) in respect of any Company shares or
               repurchase or redeem any Company shares (or options, warrants or other
rights                exercisable therefore); </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>sell,
transfer, pledge, dispose of, grant any rights in, encumber, or pledge in
               or with respect to any of the Purchased Shares, or rights of any kind to
acquire                any of the Purchased Shares; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(v) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>issue,
sell, pledge, dispose of, encumber, or authorize, agree or commit to
               issue, sell, pledge, dispose of or deliver any additional shares of, or
rights                of any kind to acquire any shares of, the capital stock of the
Company or any                subsidiary or any other ownership interest (whether through
the issuance or                granting of options, warrants, commitments, subscriptions,
rights to purchase or                otherwise) of the Company or any subsidiary, except
for equity grants in the                Company to senior employees, that do not exceed,
in the aggregate, 0.5% of the                share capital of the Company; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>incur
any indebtedness, or make any loan to any Person (other than loans to
               employees in the ordinary course of business consistent with past
practice) or                guarantee any indebtedness of any Person, or purchase debt
securities of any                Person, or amend the terms of any outstanding loan
agreement; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vii) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(x)&nbsp;sell,
lease, license or transfer to any Person any material rights to                any
Company Intellectual Property or materially modify any Material Contract, or
               (y)&nbsp; enter into any contract containing any non-competition covenants
or                other restrictions relating to its business activities, other than
standard                distribution or reseller agreements in the ordinary course of
business                consistent with past practice; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(viii) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>enter
into any contract with, or pay any sums to, the Purchaser or its
               affiliates or into any contract in which any officer, director, employee,
               consultant or agent of the Company (or any member of their immediate
families)                has an interest; </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ix) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>acquire
or agree to acquire or sell or agree to sell by merging or consolidating
               with, or by purchasing or selling a substantial portion of the assets of,
or by                any other manner, any business or any corporation, partnership,
association or                other business organization or division thereof, or
otherwise acquire or sell or                agree to acquire or sell any assets which are
material, individually or in the                aggregate, to its business; </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>22</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>take, or agree in writing or
otherwise to take, any of the actions described above, or any other action that would
(i)&nbsp;prevent the Sellers, Purchaser and/or the Company from performing, or cause them
not to perform their respective covenants under this Agreement or the License Agreement,
(ii)&nbsp;cause or result in a challenge to, call into question or cast doubt on the
validity or enforceability of the this Agreement, the License Agreement, or any of the
transactions contemplated hereby. The Purchaser contemplates entering into certain new or
amended employment agreements with senior employees of the Company or its Subsidiaries.
The Purchaser undertakes (and the Purchaser shall cause the Company) that any new benefits
provided in such agreements that exceed current benefits shall come into effect only after
the transfer of the full Purchase Price to the Sellers. The Purchasers shall instruct the
management of the Company to adhere to the above provisions of this Section and to submit
to the Board of Directors of the Company any matter listed in this Section. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE V </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR"  -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>COVENANTS </U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
[Intentionally Left Blank]</FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Access to Information; Confidentiality</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=5%></TD>
               <TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               Between the date of this Agreement and the receipt by the Sellers of the
               Purchase Price in full, (i) the Sellers shall have an observer on the Board of
               Directors of the Company and each of its Subsidiaries (and each committee
               thereof). Such observer shall have a right to participate in all meetings of the
               Board of Directors of the Company and each of its Subsidiaries (and all
               committees thereof) and shall receive all information received by other Board
               members at the same time that such information is provided to any or all of the
               other Board members, and (ii) the Sellers shall have full and free access to the
               Company and any information related to the Company. The Company will give the
               Sellers and their authorized representatives reasonable access to all offices
               and other facilities and to all books and records of each of the Company and its
               Subsidiaries and will permit the Sellers to make such inspections, and will
               fully cooperate with regard to such inspections, as it may reasonably require,
               and will cause its officers to furnish the Sellers such financial and operating
               data and other information with respect to the business and properties of the
               Company, as the Sellers may from time to time reasonably request. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Default" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=5%></TD>
               <TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               Between the date of this Agreement and the receipt by the Sellers of the
               Purchase Price in full, except for disclosures expressly permitted by the terms
               of the confidentiality provisions included in the term sheet executed by Magic
               Ltd. and the Purchaser, dated as of December 30, 2007, as it may be amended from
               time to time (the &#147;<U>Confidentiality Agreement</U>&#148;), the Purchaser
               shall hold, and shall cause its officers, employees, accountants, counsel,
               financial advisors and other representatives to hold, all information received
               from the Company and/or the Sellers, directly or indirectly, in confidence in
               accordance with the Confidentiality Agreement. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>All Reasonable Efforts</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be
done, as promptly as practicable, all things necessary, proper and advisable under
applicable laws and regulations to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement. If at any time after the
Closing Date any further action is necessary or desirable to carry out the purposes of
this Agreement, including, without limitation, the execution of additional instruments,
the proper officers and directors of each party to this Agreement shall take all such
necessary actions.  </FONT></P>


<p align=center>
<font size=2>23</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Public Announcements</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
press release or announcement concerning the transactions contemplated hereby will be
issued by the Company or the Sellers without the prior consent of the Purchaser or by the
Company or the Purchaser without the prior consent of Magic Ltd.; except as such release
or announcement may be required under applicable law or stock exchange regulations or
rules in which a party&#146;s shares are regularly traded, in which case the party
required to make the release or announcement will allow the party whose consent would
otherwise be required reasonable time to comment on such release or announcement in
advance of such issuance.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>No Solicitation of Employees</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of Purchaser or its limited partnerships will, at any time during the period from the
date hereof through the first anniversary of the Closing Date, directly or indirectly,
solicit the employment of any of Sellers&#146; employees as of the date hereof without
the prior written consent of the relevant Seller, <I>provided </I> that the Purchaser or
the Company shall not be prohibited from offering employment to any employee of any of
the Sellers as of the date hereof whose employment with any of the Sellers was terminated
by the Sellers after the date hereof.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of Sellers will, at any time during the period from the date hereof through the first
anniversary of the Closing Date, directly or indirectly, solicit the employment of any of
Company&#146; employees as of the date hereof without the prior written consent of the
Purchaser, <I>provided</I> that the Sellers shall not be prohibited from offering
employment to any employee of any of the Company or its Subsidiaries as of the date
hereof whose employment with the Company or its Subsidiaries was terminated by the
Company after the date hereof.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Company Closing Status</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
Closing, the Company shall possess cash and/or cash equivalents in the amount of one
million US dollars (US$1,000,000) (the &#147;<U>Company Closing Status</U>&#148;). In
addition, the Company shall possess (i) an additional amount of five hundred thousand US
dollars (US$500,000) in cash, such additional amount to be used for payments (in
accordance with written instructions delivered by Sellers to Purchaser and the Company)
of any unpaid portion of the 2007 performance bonuses and success bonuses due to the
completion of the transaction contemplated by this Agreement (the &#147;<U>Prior Bonuses</U>&#148;)
to certain key management employees (&#147;<U>Key Employees</U>&#148;) listed on <B><U>Schedule
5.6</U></B><U></U> attached hereto (due to such employees under their existing agreements
as of the Closing Date), and (ii) an additional sum of one hundred thousand US dollars
(US$100,000) for payment of Broker Fees (as defined in Section 3.4 above). Nothing herein
shall be deemed to impose on the Purchasers or the Company liability to pay any Prior
Bonuses or Broker Fees, exceeding the forgoing amounts. In the event that the actual
amounts payable to the Key Employees as Prior Bonuses shall be lower then the sum of five
hundred thousand US dollars (US$500,000), the Company shall promptly refund to Sellers
any such excess amount.  </FONT></P>


<p align=center>
<font size=2>24</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>License Agreement.</U> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
Closing, the Company and Magic Ltd. shall execute and deliver the License Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Assistance To Purchaser. </U> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without
derogating from the Purchaser&#146;s representation in Section 4.8 above, during the
Escrow Period the Sellers shall provide any reasonably requested information by Purchaser
relating to the Company, <I>provided </I> such information is in the knowledge and
possession (and does not require further analysis) of Sellers; <I>provided, however</I>,
that (i) the Sellers shall not be required to make any representation or warranty or to
guaranty any obligation to any third party; and (ii) that any non delivery of such
information shall not relieve the Purchasers from their obligations and liabilities as
stipulated in this Agreement.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Post Closing Assistance of Company Employees and Access to Certain Information</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commencing
on the Closing and thereafter, Purchaser shall, in response to a           reasonable
request by any Seller, provide to Magic Ltd., at no cost to the           Sellers except
for reimbursement of Purchaser&#146;s, Company&#146;s or such           employee&#146;s
out-of-pocket expenses, the services of any key Employee, as           reasonably
requested by any of the Sellers to assist the Sellers with           preparation of any
filings with any Governmental Authority and response to any           inquiries from any
Governmental Authority or any third parties and preparation           of financial
statements for the year 2007.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commencing
on the Closing and thereafter Sellers shall cooperate with the           Company and
Purchasers in the efforts to receive all consents and approvals           required with
respect to the Share Purchase in accordance with <B><U>Schedule           2.6</U></B><U></U> of
the Company Disclosure Schedule.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Non-Compete.</U> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
Seller shall, at any time during the three-year (3) period immediately
          following the Closing Date, directly or indirectly, own, manage, control or
          participate in the ownership, management or control of any business which
          competes with the Company&#146;s business as conducted as of the Closing Date
          (i.e. selling the Company&#146;s software application to the Continuance Care
          Retirement Community market) nor shall Sellers actively divert existing
          customers of the Company or any Subsidiary to a competitor of the Company or
any           Subsidiary; <I>provided</I> that, the foregoing shall not prohibit Sellers
          (together) from owning as a passive investment of five percent (5%) or less of
          the outstanding equity of any publicly-traded entity; and <I>provided</I>, <I>further</I>,
for clarity, that it shall not prevent Sellers from selling the           Software (as
such term is defined in the License Agreement) or any new versions           of such
Software in any market whatsoever (including to competitors of the           Company or
its Subsidiaries).  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>25</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
purchaser of a majority or a controlling interest in any of the Sellers (via
          merger, share acquisition or otherwise) shall be bound by the foregoing
          non-compete obligation <U>solely</U> with respect to such Sellers and its
          operations and/or business as of the closing of such acquisition, as a
          subsidiary, unit or division with such purchaser, as the case may be, and the
          foregoing undertaking shall not in any manner limit, restrict hinder any such
          other operations, activities, investments holdings etc., of such purchaser.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Errors and Omissions Insurance Policy</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Purchasers hereby undertake to cause the Company and its Subsidiaries to procure no later
then January 9, 2008, and to maintain thereafter during the Escrow Period, an errors and
omissions insurance similar to the existing errors and omissions insurance covering the
Company and its Subsidiaries attached hereto as <B><U>Exhibit  5.10</U></B>, with a
coverage of not less then three million US dollars (US$3,000,00) per incident and per
annum.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE VI </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR"  -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>CLOSING </U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Closing</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
closing of the transactions contemplated by this Agreement (the
&#147;<U>Closing</U>&#148;) shall take place simultaneously with the execution of this
Agreement, at the offices of Meitar, Liquornik Geva &amp; Leshem Brandwein, on December
30, 2007 (the &#147;<U>Closing Date</U>&#148;). At the Closing: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company and the Sellers shall deliver to the Purchaser (or the Escrow Agent,           as
indicated) the following:  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
the Escrow Agent, stock certificates in the name of the Escrow Agent
          representing the Purchased Shares, accompanied by validly executed stock powers
          to the Escrow Agent with respect to the transfer of the Purchased Shares from
          the Sellers to the Escrow Agent;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
the Escrow Agent, blank stock power deeds allowing the Escrow Agent to           transfer
the Purchased Shares to either the Purchaser or the Sellers, as set           forth in
this Agreement, as the case may be;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
the Purchaser, resignations of all directors of the Company and its
          Subsidiaries of the Company and its Subsidiaries;  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iv) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
the Purchaser, the License Agreement duly executed by Magic Ltd. and the
          Company; and  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(v) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
the Purchaser, the Escrow Agreement, duly executed by the Purchaser and the
          Escrow Agent.  </FONT></P></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>26</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchaser
shall deliver or cause to be delivered to the Sellers the following:  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
copy of the License Agreement duly executed by the Purchaser; and  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Purchaser shall pay to the Sellers the funds payable at the Closing pursuant
               to Section 1.2 hereof; and  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser shall deliver to the Sellers the Escrow Agreement, duly executed
               by the Purchaser.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall record the transfer of the Purchased Shares to the Escrow
               Agent on the Company&#146;s stockholders ledger and other records in
accordance                with the Escrow Agreement and the Company shall make all
filings and                registrations as may be necessary to perfect such transfer and
shall deliver                copies thereof to the Purchaser.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE VII </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>INDEMNIFICATION </U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Survival of Representations and Warranties</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
representations and warranties contained in this Agreement and all claims with respect
thereto shall survive the execution and delivery of this Agreement and the Closing
hereunder until the lapse of thirteen (13) months of the Closing Date, except that the
provisions of Section 2.9 (Litigation) and 2.15 (Intellectual Property) hereof shall
survive until thirty (30) months following the Closing Date, the provisions of Section
5.10 (Non Compete) shall survival until expiration of thirty six (36) months following the
Closing Date and the provisions of Sections 2.1 (Organization and Qualification), 2.4
(Capitalization), 2.5 (Subsidiaries and Equity Interest) shall survive until the end of
the applicable statute of limitations and 2.12 (Taxes) shall survive until the lapse of
ninety (90) days following the end of the applicable statute of limitations (the
&#147;<U>Survival Period</U>&#148;). Any claim hereunder for breach of any representation
or warranty or Third Party Claim (as defined below) must be notified in writing to the
Indemnifying Party (as defined below) prior to the expiration of the applicable Survival
Period. </FONT></P>

<p align=center>
<font size=2>27</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Indemnification by the Sellers</U>. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
and after the Closing and until the lapse of the applicable Survival           Period,
the Sellers, jointly and severally, shall indemnify and hold the           Purchaser and
the Company and its respective officers, directors, employees,           agents and
representatives (the &#147;<U>Purchaser Indemnified           Parties</U>&#148;)
harmless, subject to certain limitations as described herein,           from and against,
and agree to promptly defend the Purchaser Indemnified Parties           from and
reimburse the Purchaser Indemnified Parties for, any and all Losses (as           defined
below) which any Purchaser Indemnified Party actually suffers or incurs,           or
becomes subject to, directly or indirectly as a result of or in connection           with
any: (i) material breach of any representation and warranty under this
          Agreement, (ii) material breach of any covenant made or other obligation by the
          Company or the Sellers in this Agreement and/or (iii) Tax liability or
          deficiency of the Company with respect to periods which have ended, on or prior
          to, the Closing Date. For the avoidance of doubt, a claim for indemnification
in           respect of Tax liability or deficiency of the Company as stated herein above
          shall not be subject to any limitation whatsoever, including, but not limited
to           any limitation of time or amount of claim, whether pursuant to this
Agreement or           any other agreement, and any such Tax liability which is subject
to indemnity           shall be paid by the Sellers to the relevant tax authorities no
later than the           last date upon which the Purchaser Indemnified Parties are
required under           applicable law to make such payments after giving effect to any
extension           obtained, such payment not to be deemed to limit the Sellers&#146; right
to seek           extension or otherwise challenge or dispute any requirement to pay such
Taxes.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Indemnification Procedure</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser shall as soon as possible notify the Sellers via registered mail,           in
writing of any claim or demand made by a third party (&#147;<U>Third Party           Claim</U>&#148;),
which the Purchaser has determined has given or could give           rise to a right of
indemnification under Section 7.2.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Sellers shall have the right to assume, and with respect to claims or           demands
made by any tax authority which are subject to indemnification           hereunder, shall
be obligated to assume, the defense, including all costs and           expenses of such
defense and employ counsel to defend any such claim or demand           asserted against
any Purchaser Indemnified Party. Subject to the previous           sentence, the
Purchaser Indemnified Parties shall have the right to participate           in (but not
control) the defense of any such claim or demand at its own expense.           Except
with respect to the defense by the Sellers of any claim or demand related           to
taxes which is subject to indemnification hereunder, in the event that such
          counsel has a conflict of interest in representing such Purchaser Indemnified
          Party, Sellers shall also reimburse the Purchaser Indemnified Party for the
          reasonable expenses of one legal counsel to be appointed by it to participate
in           (but not control) the defense of any such claim. The Sellers shall notify
the           Purchaser Indemnified Parties in writing, within fifteen (15) Business Days
          after the date of the notice of claim given by the Purchaser to the Sellers
          under Section 7.3(a) of its election to defend any such third party claim or
          demand. The Sellers shall not settle or compromise any such claim or demand
          without the Purchaser&#146;s prior written consent unless such settlement
          contains a complete discharge and full release of any liability of the
Purchaser           Indemnified Parties under such claim or demand. The Purchaser
Indemnified           Parties shall make available to the Sellers or its representatives,
all records           and other material in the Purchaser Indemnified Parties&#146; possession
          reasonably required by it for its use in contesting any third party claim or
          demand. The Purchaser Indemnified Parties shall not settle or compromise any
          such claim or demand without the Sellers&#146; prior written consent.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Purchaser determines in good faith that it is entitled to indemnification
          pursuant to Section&nbsp;7.2 (not based on a Third Party Claim) and the
          Purchaser desires to seek an indemnification claim hereunder, the Purchaser
          shall give to the Sellers a written notice with respect thereto, in addition to
          any notice required under Section 7.3(a) (a &#147;<U>Purchaser&#146;s Notice of
          Claim</U>&#148;) setting forth in reasonable detail the basis for such claim,
          providing copies of all relevant documents or other information, and specifying
          the amount of Losses claimed (which, if not finally determined, may be a good
          faith estimate thereof) (the amount of Losses so claimed being hereinafter
          referred to as the &#147;<U>Purchaser&#146;s Indemnity Claim Amount</U>&#148;).  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>28</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Sellers may, within thirty (30) days after receipt of any Purchaser&#146;s
          Notice of Claim, object to such Purchaser&#146;s Notice of Claim and dispute
the           claim in full or any Purchaser&#146;s Indemnity Claim Amount set forth in
such           Purchaser&#146;s Notice of Claim by delivery to the Purchaser of written
notice           of such dispute (a <U>&#147;Sellers&#146; Dispute Notice</U>&#148;),
setting           forth in reasonable detail the basis for such dispute and the amount of
the           Purchaser&#146;s Indemnity Claim Amount which the Sellers object to being
          claimed by the Purchaser in respect of the Purchaser&#146;s Notice of Claim.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Purchaser does not receive a Sellers&#146; Dispute Notice that relates to           a
Purchaser&#146;s Notice of Claim within thirty (30) days after the Purchaser
          actually delivers such Purchaser&#146;s Notice of Claim to Sellers, such claim
          specified in the Purchaser&#146;s Notice of Claim will be conclusively deemed a
          liability of the Sellers and the Sellers shall pay the Purchaser&#146;s
          Indemnity Claim Amount (subject to the limitation set forth below) on demand or
          set off such Indemnity Claim Amount (or any portion thereof) against any
license           fees still due to Sellers under the License Agreement in accordance
with the           provisions of Section 7.7 below, or, in case of any portion of the
          Purchaser&#146;s Indemnity Claim Amount is subject to further assessment, on
          such later date when the amount of such claim (or such portion thereof) becomes
          finally determined. If the Sellers have timely delivered the Sellers&#146;          Dispute
Notice, as provided above, the Sellers and the Purchaser will proceed in           good
faith to negotiate a resolution of such dispute and, if not resolved           through
negotiations within thirty (30) days after the delivery of the           Sellers&#146; Dispute
Notice, the parties will be free to pursue such remedies           as may be available
under this Agreement.<U></U> </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(f) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commencement
of the procedure stated in this Section 7.3 shall not preclude the           Purchaser
from commencing the procedure under Section 7.7 simultaneously.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Limitations on Indemnification Under Section 7.2.</U> </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Sellers shall not be liable and shall not indemnify the Purchaser Indemnified Parties with
respect to any claims pursuant to Section 7.2 or otherwise under this Agreement: (i) to
the extent that the Loss is recovered from insurance proceeds; (ii) if the aggregate
amount of Losses already paid (or set off or withheld under Section 7.7 below in
accordance with its terms, taken together) by the Sellers pursuant to indemnification
claims under Section 7.2 exceeds two million US dollars (US$2,000,000) (the &#147;<U>Cap
Amount</U>&#148;), <I>excluding, however</I>, (x) Losses resulting from fraud by the
Seller, (y) any payments that the Company may be required to make to any Governmental
Authority for, or any Losses arising from any Tax deficiencies for which Purchaser or the
Company are entitled to indemnification under Section 7.2 above, which amounts shall also
not be subject to the Basket Amount (as defined below); or (iii) until the aggregate
amount of Losses actually incurred by the Purchaser Indemnified Parties with respect to
such claims exceeds one hundred and fifty thousand US dollars (US$150,000) in the
aggregate (the &#147;<U>Basket Amount</U>&#148;), and then the Purchaser Indemnified
Parties will be entitled to all Losses from the first dollar underlying such claim. </FONT></P>

<p align=center>
<font size=2>29</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Indemnification by the Purchaser</U>. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
and after the Closing and until the lapse of the Purchaser Survival Period, the Purchaser
shall indemnify and hold the Sellers, their Affiliates and their respective officers,
directors, employees, agents and representatives (the &#147;<U>Sellers Indemnified
Parties</U>&#148;) harmless from and against, and agree to promptly defend the Sellers
Indemnified Parties from and reimburse the Sellers Indemnified Parties for, any and all
Losses, at such time that they are incurred, which the Sellers Indemnified Parties may at
any time suffer or incur, or become subject to, directly as a result of, or in connection
with any material inaccuracy in any representations and warranties and/or breach of any
material covenant made by the Purchaser in this Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Procedures for Indemnification</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
procedures for indemnification set forth in Section 7.3 herein shall apply<U>
<I></I></U><I>mutatis mutandis</I> to the indemnification obligation under Section 7.5
herein. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Right to Set-Off Indemnity Final Undisputable Amounts from Fees Under The
License Agreement</U>. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both
the Sellers and the Purchaser acknowledge that there is a sum of three           million
US dollars (US$3,000,000) to be paid as license fees (&#147;<U>License           Fees</U>&#148;)
under the License Agreement out of which, the first amount of           one million US
dollars (US$1,000,000) to be paid under the License Agreement           (the &#147;<U>Exempt
Amount</U>&#148;) shall be payable unconditionally to Magic           Ltd. For the
avoidance of any doubt, except for any First Year Tax Set Off, the           Exempt
Amount shall not be subject to the right of the Purchaser to set off as
          provided below and any set-off right under this Section will be allowed subject
          to and conditioned upon the payment in full of the Exempt Amount.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Sellers and the Purchaser agree that the following set off of Undisputable
          Indemnity Amounts (as defined below) will be allowed against the Remaining
          License Fees (as defined below) and that no other set off will be allowed; all
          according to the following terms and conditions: Commencement of the procedure
          stated in this Section 7.7 shall not preclude the Purchaser from seeking
          indemnity pursuant to Section 7.3 simultaneously.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>30</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Set Off Notice (as defined below) must be delivered to the Sellers prior to           the
due date for payment of any Remaining License Fees in accordance with the
          License Agreement; for avoidance of doubt, any Remaining License Fees (or
          portions thereof) not subject to a Set Off Notice on their payment date
          according to the License Agreement will be paid according to the terms of the
          License Agreement and may not be delayed or withheld for any reasons in
          connection with this Section 7.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(ii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once
a Set Off Notice was delivered to the Sellers during and subject to the
          applicable Survival Periods and the Cap Amount (as defined below), the
Purchaser           shall be allowed to withhold the Remaining License Fees (or a smaller
amount,           mentioned in the Set Off Notice) only until such time as the Set Off
Notice (or           any portion thereof) becomes either:  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 3- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=15%></TD>
<TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(A) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;an
Undisputable Indemnity Amount &#150; in which case Purchaser may set off the
          Remaining License Fees against such Undisputable Indemnity Amount; or  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 3- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=15%></TD>
<TD WIDTH=85%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(B) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
Rejected Set Off Notice (as defined below) &#150; in which case the Purchaser
          shall immediately pay such Remaining License Fees (or a smaller amount,
withheld           due to the Set Off Notice) detailed therein (up to the Remaining
License Fees).  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iii) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
will be no set off of any sums unless the Sellers shall be liable to           indemnify
any Purchaser Indemnified Party in accordance with all the provisions           and
limitations of Section 7 herein.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(iv) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
set offs together shall not exceed, in the aggregate, together with any           other
indemnity payment/obligations/claims under this Agreement, two million US
          dollars (US$2,000,000).<U></U> </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(v) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that any Remaining License Fees were actually withheld and           thereafter
were classified hereunder as Rejected Set Off Notice &#150; the           Purchaser shall
add to the Remaining License Fees (or any portion thereof) an           annual interest
(paid ratably for part of a year) in the amount equal to the           then current LIBOR
plus three percent (3%) accrued from the due date for payment           of such fees
under the License Agreement until actual payment of such License           Fees.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 2- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=10%></TD>
<TD WIDTH=90%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(vi) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
will be no set off in case Purchaser is in default under this Agreement or           the
Company is in default under the License Agreement.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Remedies Exclusive</U>. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without
derogating from, and subject to, Section 1 above, except for specific performance and any
other equitable remedies and except in the event of fraud, the parties acknowledge and
agree that the indemnification provisions of this Section 7 shall be the exclusive
remedies of the parties with respect to the transactions contemplated by this Agreement
and the parties agree that they will not exercise any other remedy. Anything contained in
this Agreement to the contrary notwithstanding, neither the Purchaser Indemnified Parties,
nor the Sellers Indemnified Parties will be entitled to any recovery from the other party
under this Agreement for such Indemnified Party consequential, incidental, special,
punitive or indirect damages, including loss of profits or loss of opportunities. </FONT></P>

<p align=center>
<font size=2>31</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE VIII </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>DISPUTE RESOLUTION </U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 8.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Submission to Arbitration</U>. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
parties hereto undertake to adopt the principle of good faith and to use their best
efforts towards an amicable solution as a definitive settlement for any claim, controversy
or dispute related to this Agreement or to any of the transactions contemplated hereby.
Any and all disputes as to the validity, efficacy, violation, interpretation, termination,
breach and consequences thereof, shall be settled by arbitration, on the following terms
and conditions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
dispute shall be submitted to a single arbitrator (the           &#147;<U>Arbitrator</U>&#148;)
whose identity shall be agreed by the parties. In           the event that parties fail
to reach an agreement with respect to the identity           of the arbitrator within
seven (7) days of the date of delivery of a notice of a           party to another party,
any party may request the President of the Israeli Bar           to appoint an
arbitrator.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
arbitration will take place in Tel-Aviv.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Arbitrator will submit his/her ruling within thirty (30) Business Days of           the
date of his/her appointment, which shall be reasoned and explained and shall           be
in accordance to the substantive laws of the State of Israel without giving
          effect, however, to its rules of procedure and evidence. The arbitrator may
give           interim remedies, but it is agreed between the Parties that each Party has
the           right to approach the competent courts of Tel Aviv-Jaffa (instead of the
          Arbitrator) to receive any interim remedies.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
otherwise provided for in this Agreement, the Arbitrator&#146;s fees and
          expenses shall be borne equally by the parties to the arbitration.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
arbitral award may be enforced in any competent court having jurisdiction           over
the parties or their assets. Each party shall use its best efforts to           ensure
the arbitration is concluded as quickly and as efficiently as reasonably
          possible.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(f) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the avoidance of doubt, this Agreement shall constitute an arbitration
          agreement in accordance to the requirement of the Israeli Arbitration Laws,
1968           without the need for any other action to be taken.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>32</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 8.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Governing Law and Venue</U>. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR"  -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Agreement shall be governed by and construed in accordance with the laws of the State of
Israel, without giving effect to the principles thereof relating to conflict of laws;
<I>provided</I>, <I>however</I>, that matters involving the internal corporate affairs of
the Company shall be governed by the laws of the jurisdiction in which the Company is
organized. Subject to, and without derogating from, the arbitration agreement under
Section 8.1 above, the competent courts of Tel-Aviv shall have exclusive jurisdiction to
hear all disputes arising in connection with this Agreement and no other courts shall have
any jurisdiction whatsoever in respect of such disputes. The Parties agree that each Party
has the right to approach the competent courts of Tel Aviv-Jaffa to receive any interim
remedies. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ARTICLE IX</FONT></P>


<!-- MARKER FORMAT-SHEET="Head Center Underline-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>MISCELLANEOUS
PROVISIONS </U></FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Amendment and Modification</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement may be amended, modified or supplemented by a written instrument signed by
Purchaser and the Sellers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Waiver of Compliance; Consents</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
failure of Purchaser, on the one hand, or of the Company or the Sellers, on the other
hand, to comply with any obligation, covenant, agreement or condition contained herein may
be waived in writing by the Sellers or Purchaser, respectively, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any other failure. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Validity</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement, which shall remain
in full force and effect and shall be construed to the maximum extent in order to give
effect to the parties intention as set forth in this Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Expenses</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
party shall bear its own costs associated with this Agreement and the transactions
contemplated hereby. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Parties in Interest</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall be binding upon and, except as provided below, inure solely to the benefit
of each party hereto, and, nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement. </FONT></P>

<p align=center>
<font size=2>33</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Notices</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
notices and other communications hereunder shall be in writing and shall be deemed given
upon the earlier of delivery thereof if by hand or upon receipt if sent by mail
(registered or certified mail, postage prepaid, return receipt requested) or on the second
next Business Day in the United States of America after deposit if sent by a recognized
overnight delivery service or upon transmission if sent by facsimile transmission or
e-mail (with request of assurance of receipt in a manner customary for communication of
such type) as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Hang Lv 1-10%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
to Purchaser, to: </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 5-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=30%>&nbsp;</TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Fortissimo Capital Fund GP LP
<BR>
<BR>Attention: Marc Lesnick
<BR>Facsimile No.: (972-3) 915-7411
<BR>
<BR>with copies to:
<BR>
<BR>Amit, Pollak, Matalon &amp; Co.
<BR>17 Yitzhak Sadeh St.
<BR>Tel Aviv, Israel 67775
<BR>Attention: Shlomo Landress, Adv.
<BR>Facsimile No : (972-3) 568-9001
</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                  (b) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If
to the Company, to:</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 5-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=30%>&nbsp;</TD>
<TD WIDTH=70%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">Advanced Answers On Demand Holding, Inc.
<BR>8100 N. University Drive,
<BR>3<SUP>rd </SUP>Floor,
<BR>Tamarac 33321,
<BR>Florida, USA
<BR>
<BR>Attention: ________
<BR>Facsimile No : _____________ </FONT></TD>
</TR>
</TABLE>
<BR>





<!-- MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
with
a copy to: </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 5-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=30%>&nbsp;</TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Meitar, Liquornik, Geva &amp; Leshem,
<BR>Brandwein, Law Offices
<BR>16 Aba Hillel Silver Road
<BR>Ramat-Gan 52506, Israel
<BR>Attention: Dan Shamgar, Adv.
<BR>Facsimile No.: (972-3) 610-3111</FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Hang Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                  (c) </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>if
to the Magic Ltd., to: </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Magic Software Enterprises Ltd.
<BR>Attn: Mr. Amit Birk, Adv.
<BR>Legal Department
<BR>5 Haplada St.
<BR>Or Yehuda, 60218
<BR>Israel
<BR>Facsimile No : (972-3) 538-9393</FONT></TD></TR>
</TABLE>
<BR>




<p align=center>
<font size=2>34</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
with
a copy to: </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 5-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=30%>&nbsp;</TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Meitar, Liquornik, Geva &amp; Leshem,
<BR>Brandwein, Law Offices
<BR>16 Aba Hillel Silver Road
<BR>Ramat-Gan 52506, Israel
<BR>Attention: Dan Shamgar, Adv
<BR>Facsimile No.: (972-3) 610-3111</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                  (d) </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> if to the Magic Inc., to: </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> c/o Magic Software Enterprises Ltd.
<BR>Attn: Mr. Amit Birk, Adv.
<BR>Legal Department
<BR>5 Haplada St.
<BR>Or Yehuda, 60218
<BR>Israel
<BR>Facsimile No.: (972-3) 538-9393</FONT></TD></TR>
</TABLE>
<BR>







<!-- MARKER FORMAT-SHEET="Para Flush Lv 2-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
with
a copy to: </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 5-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=30%>&nbsp;</TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Meitar, Liquornik, Geva &amp; Leshem,
<BR>Brandwein, Law Offices
<BR>16 Aba Hillel Silver Road
<BR>Ramat-Gan 52506, Israel
<BR>Attention: Dan Shamgar, Adv</FONT></TD>
</TR>
</TABLE>
<BR>





<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Counterparts</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Transfer Taxes</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
transfer, conveyance or other similar taxes, duties, excises or governmental changes
imposed by any taxing jurisdiction, domestic or foreign, and all recording or filing fees,
notaries fees or other similar charges with respect to the transfer of the Purchased
Shares or otherwise on account of this Agreement or the transactions contemplated hereby
shall be borne equally by the Sellers (one half in the aggregate) and Purchaser (one half
in the aggregate) and the portion of such amount borne by the Sellers pursuant hereto
shall, to the extent required by law, be withheld from the proceeds payable to the
Sellers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Headings</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
article and section headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not affect in anyway the
meaning or interpretation of this Agreement. </FONT></P>

<p align=center>
<font size=2>35</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Certain Definitions.</U> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of this Agreement, the term: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Action</U>&#148; means
any claim, action, suit, arbitration, inquiry,           proceeding or investigation by
or before any Governmental Authority.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; of
any person means another person that directly or           indirectly, through one or
more intermediaries, controls, is controlled by, or           is under common control
with, such person.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Business
Day</U>&#148; shall have the meaning set forth in Rule           14d-1(g)(3) under the
Exchange Act.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material
Adverse Effect</U>&#148; means any event that has a long term           material adverse
effect on the business of the Company and its Subsidiaries,           taken as a whole,
or that prevents the Company and/or Sellers from consummating           the transaction
under this Agreement.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(e) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Code&#148; means
the Internal Revenue Code of 1986, as amended  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(f) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>control</U>&#148; shall
have the meaning ascribed to it in the Israel           Securities Law, 5728-1968.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(g) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Company
Closing Status</U>&#148; as defined in Section 5.9.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(h) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Company
Intellectual Property</U>&#148; as defined in Section 2.15.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(i) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Environmental
Laws</U>&#148; means all applicable U.S. federal, state,           local or foreign
statutes, codes, rules, regulations or permits relating to the           environment,
natural resources, pollution or contamination or toxic or hazardous           substances.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(j) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>First
Year Tax Set Off</U>&#148; means a Set Off Notice delivered by           the Purchaser,
prior to the expiration of twelve (12) months following the           Closing Date,
relating to any claims or demands exceeding the sum of two million           US dollars
(US$2,000,000) made by any tax authority against the Company or any           of its
Subsidiaries prior to the expiration of twelve (12) months from the           Closing
Date and which are subject to indemnification under Section 7.2(a) (iii)
          hereunder.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(k) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Governmental
Authority</U>&#148; means any national, state, local or           municipal authority and
any other entity exercising an executive, legislative,           judicial, regulatory or
administrative function of or pertaining to any such           authority.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>36</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(l) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Intellectual
Property</U>&#148; means any and all intellectual           property, in any jurisdiction
including: (i) all trade marks, service marks,           brand names, certification
marks, trade dress, assumed names, business names,           trade names and other
indications of origin (&#147;<U>Trademarks</U>&#148;);           (ii) patents and patent
rights (&#147;<U>Patents</U>&#148;); (iii) trade secrets           and other confidential
or non-public business information, including formulae,           compositions, inventor&#146;s
notes, discoveries and improvements, know-how,           manufacturing and production
processes and techniques, and research and           development information (whether or
not patentable), invention disclosures,           unpatented blue prints, drawings,
specifications, designs, plans, proposals and           technical data, business and
marketing plans, and customer lists and           information; (iv) writings and other
copyrightable works of authorship,           including computer programs, databases and
documentation therefor, and all           copyrights to any of the foregoing (&#147;<U>Copyrights</U>&#148;)
; (v)           integrated circuit topographies and mask works; (vi) moral rights; (vii)
          features of shape, configuration, pattern or ornament and design registrations;
          (viii) any other intellectual property rights, and (ix) registrations of, and
          applications to register, any of the foregoing with any Governmental Authority
          and any renewals or extensions thereof.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(m) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>knowledge</U>&#148; of<I></I>the
Company or of the Sellers shall mean           the actual knowledge of the persons listed
in <B><U>Schedule           9.10(m)</U></B><U></U> after due inquiry with their
subordinated persons in the           Company (including applicable consultants), the
Company&#146;s accountants and           legal advisors.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(n) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loss</U>&#148; means
all liability, loss, damage or injury, and all           costs and expenses, including
interest, and including further without           limitation, penalties, costs of
preparation and investigation and the reasonable           fees and expenses of
attorneys, accountants and other professional advisers,           actually incurred.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(o) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>person</U>&#148; means
an individual, corporation, partnership, joint           venture, association, trust,
unincorporated organization or, as applicable, any           other entity.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(p) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Permitted
Actions</U>&#148; as defined in Section 5.1.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(q) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Purchaser
Material Adverse Effect</U>&#148; means any event that would,           or reasonably be
expected to, materially impact or delay the ability of the           Purchaser to perform
its obligations under this Agreement and the License           Agreement or to consummate
the transactions contemplated by this Agreement and           the License Agreement.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(r) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Purchaser
Survival Period</U>&#148; means one year from the Closing           Date.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(s) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Rejected
Set Off Notice</U>&#148; means any one of the following: (i) a           Set Off Notice,
which following discussions between a Seller and Purchaser, both           parties agree
should be rejected by such Seller, or (ii) a final and an           unappealable
Arbitration or court ruling with respect to any such Set Off Notice           (or
portions thereof) which was disputed by the relevant Seller rejecting such           Set
Off Notice.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(t) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Remaining
License Fees</U>&#148; only if the payment to Magic Ltd. of           the Exempt Amount
was made, this term shall mean any remaining amount equal to           the Cap Amount of
the License Fee.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(u) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiaries</U>&#148; means
any entity over which the Company has           control.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>37</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(v) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Set
Off Notice</U>&#148; means a written notice submitted in good faith           by
Purchaser to any Seller asking to set off the Remaining License Fees (or any
          portion thereof) resulting from any (a) Third Party Claim, or (b)
          Purchaser&#146;s Notice of Claim (as such terms are defined above) (all within
          the applicable Survival Period) delivered in writing and reasonable detail to
          such Seller; which Purchaser believes in good faith is subject to
          indemnification by such Seller in accordance with the provisions of Section
7.7.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(w) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Taxes</U>&#148; shall
mean means any U.S. federal tax or Israeli,           state, local or other foreign
income tax, gross receipts tax, license tax,           payroll tax, employment tax,
excise tax, severance tax, stamp tax, occupation           tax, premium tax, windfall
profits tax, environmental tax (including taxes under           section 59A of the Code),
customs duties, capital stock tax, franchise tax,           profits tax, withholding tax,
social security tax (or similar), unemployment           tax, disability tax, real
property tax, personal property tax, sales tax, use           tax, transfer tax,
registration tax, value added tax, or other tax of any kind           whatsoever,
including any interest, penalty or addition thereto, whether           disputed or not.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(x) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Tax
Returns</U>&#148; shall mean any return, declaration, report, claim           for refund
or information return or statement relating to any Tax, including any           schedule
or attachment thereto and including any amendment thereof.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(y) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Undisputable
Indemnity Amount</U>&#148; means any one of the following:           (i) the amount
stated in a Set Off Notice, undisputed by the Sellers in writing           within thirty
(30) days following the receipt of such Set Off Notice by such           Seller, and (ii)
the amount of a final and an unappealable Arbitration or court           ruling upholding
the Set Off Notice with respect to any such Set Off Notice (or           potions thereof)
which was disputed by such Seller.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Entire Agreement</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement, including all exhibits and Schedules hereto, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained herein or
therein. There are no agreements, representations, warranties or covenants other than
those expressly set forth herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject matter. For
clarity it is agreed that all the rights, obligations and liabilities under this Agreement
of the Purchaser shall be jointly and severally between the Purchasers&#146; individuals. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Assignment</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall not be assigned by operation of law or otherwise, without the written
consent of the other parties hereto; except that (i) Sellers may freely assign all rights
and obligations under this Agreement (as long as the assignee assumes both the rights and
the obligations under such assignment), and (ii) Purchaser may, following the Escrow
Period (and not prior thereto), transfer, sell or otherwise dispose of the Purchased
Shares but may not assign or transfer in any manner this Agreement or any rights,
privileges or obligations under this Agreement. </FONT></P>

<p align=center>
<font size=2>38</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notwithstanding the above, with
respect to Purchaser: (a) following the payment in full of the Purchase Price and of the
License Fees under the License Agreement (whether on the due payment date for such
payments or at an earlier date), the Purchaser shall be allowed to assign this Agreement
subject to the following conditions precedent: (i) the assignee is a Purchaser or
transferor of all of the Purchased Shares hereunder, and (ii) the only indemnification
obligation that shall be assigned and survive such assignment shall be the indemnification
under Section 7.2(a)(iii) with respect to Tax indemnification and all other
indemnification obligations and liabilities of the Sellers shall immediately upon such
assignment expire and shall have no further force or effect (except that Purchaser shall
still be entitled to any indemnification in accordance with the provisions of Section 7
above with respect to any Purchaser&#146;s Notice of Claim which was delivered to the
Sellers during the applicable Survival Period and prior to the date of such assignment),
and (iii) such assignee signs a delivers an assignment letter to the Sellers undertaking
all the rights and obligations under this Agreement.</FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2> It is agreed between the Sellers and
the Purchaser that any sale of shares of the SPC or change of control of SPC (unless to a
controlled affiliate of Fortissimo (more then fifty one percent (51%)) or pursuant to a
merger of SPC into the Company), shall be considered an assignment of this Agreement and
is subject to the provisions relating to assignment detailed in this Section above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Incorporation of Exhibits and Schedules</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Attachments, Annexes and Schedules identified in this Agreement are
          incorporated herein by reference and made a part hereof.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 1- TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=RIGHT WIDTH=5%></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is understood and agreed that the specification of any dollar amount in the
          representations and warranties contained in this Agreement or the inclusion of
          any specific item in the disclosure schedule is not intended to imply that such
          amounts or higher or lower amounts, or the items so included or other items,
are           or are not material, and neither party shall use the fact of the setting of
such           amounts or the fact of the inclusion of any such item in the disclosure
schedule           in any dispute or controversy between the parties hereto as to whether
any           obligation, item or matter not described herein or included in the
disclosure           schedule is or is not material for purposes of this Agreement.  </FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Facsimiles</U>. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
parties agree that facsimile copies of signatures shall be deemed originals for all
purposes hereof and that a party hereto may produce such copies, without the need to
produce original signatures, to prove the existence of this Agreement in any proceeding
brought hereunder. </FONT></P>

<p align=center>
<font size=2>39</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN
WITNESS WHEREOF, each of the parties executed this Agreement as of the day and year first
above written:</B> </FONT></P>




<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>SELLERS
</B><BR>
<BR>MAGIC SOFTWARE ENTERPRISES LTD.
<BR>
<BR>
<BR>By:
<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
<BR>Title: </FONT></P>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MAGIC SOFTWARE ENTERPRISES, INC.

<BR>
<BR><BR>By:
<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
<BR>Title:</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Center Italic-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>[SPA SIGNATURE PAGE] </I></FONT></P>


<p align=center>
<font size=2>40</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>COMPANY </FONT></H1>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ADVANCED ANSWERS ON DEMAND HOLDING, INC.

<BR>
<BR>
<BR>By:
<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
<BR>Name:
<BR>Title:</FONT></P>






<!-- MARKER FORMAT-SHEET="Head Center Italic-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>[SPA SIGNATURE PAGE] </I></FONT></P>

<p align=center>
<font size=2>41</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>PURCHASER
</B><BR>
<BR><B>FORTISSIMO CAPITAL FUND GP LP
</B><BR>
<BR>By:
<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
<BR>Name:
<BR>Title:
<BR>
<BR>AOD HOLDINGS, INC.
<BR>
<BR>By:
<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
<BR>Name:
<BR>Title: </FONT> </P>





<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNDERTAKING </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the event that AOD Holdings, Inc.
defaults under this agreement, Fortissimo Capital Fund GP LP hereby commits to cover all
of AOD Holdings, Inc.&#145;s obligations under this Agreement, including without
limitation, the obligation to pay the Purchase Price. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORTISSIMO CAPITAL FUND GP LP
<BR>
<BR>By: _____________________________<BR>
<BR>________________________________                                                  </FONT></P>






<!-- MARKER FORMAT-SHEET="Head Center Italic-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>[SPA SIGNATURE PAGE] </I></FONT></P>

<p align=center>
<font size=2>42</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">


</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8
<SEQUENCE>15
<FILENAME>exhibit_8.htm
<TEXT>
<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">


<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 8</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>List of Subsidiaries
and Affiliates of the Registrant</U> </FONT> </H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth the
legal name, location and country of incorporation and percentage ownership of each of the
registrant&#146;s subsidiaries and affiliated companies: </FONT></P>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH align=left><FONT FACE="Times New Roman" SIZE=1>Subsidiary/Affiliate Name</FONT><HR WIDTH=95% SIZE=1 COLOR=black NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Country of<BR>Incorporation</FONT><HR WIDTH=95% SIZE=1 COLOR=black NOSHADE></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Ownership<BR>Percentage</FONT><HR WIDTH=95% SIZE=1 COLOR=black NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="70%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises Inc.</FONT></TD>
     <TD WIDTH="15%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>United States</FONT></TD>
     <TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>CoreTech Consulting Group, LLC</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>United States</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>CoreTech Consulting Group, Inc.</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>United States</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises (UK) Ltd.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>United Kingdom</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Hermes Logistics Technologies Limited</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>United Kingdom</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Magic Beheer B.V</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Netherlands</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises Netherlands B.V</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Netherlands</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises Spain Ltd.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Spain</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises GmbH</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Germany</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises France S.A.R.L</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>France</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Magic Benelux B.V</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Netherlands</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises (Israel) Ltd.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Israel</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises Italy S.r.l</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Italy</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Magic Software Japan K.K</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Japan</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Magic Software Enterprises India Pvt. Ltd.</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>India</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Onyx Magyarorszag Szsoftverhaz</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Hungary</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100%</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>CarPro Systems Ltd.</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Israel</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>90.48%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Nextstep Infotech Prt. Ltd.</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>India</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>40%</FONT></TD></TR>
</TABLE><BR>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>16
<FILENAME>exhibit_12-1.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">



<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 12.1</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATION PURSUANT
TO </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION 302(a) OF THE
SARBANES-OXLEY ACT OF 2002 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Guy Bernstein, certify
that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.
          I have reviewed this annual report on Form 20-F of Magic Software Enterprises
          Ltd.; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.
          Based on my knowledge, this report does not contain any untrue statement of a
          material fact or omit to state a material fact necessary to make the statements
          made, in light of the circumstances under which such statements were made, not
          misleading with respect to the period covered by this report; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.
          Based on my knowledge, the financial statements, and other financial information
          included in this report, fairly present in all material respects the financial
          condition, results of operations and cash flows of the registrant as of, and
          for, the periods presented in this report; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.
          The registrant&#146;s other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13(a)-15(e) and 15d-15(e)) and internal control over
          financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
          for the registrant and have: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;
          Designed such disclosure controls and procedures, or caused such disclosure
          controls and procedures to be designed under our supervision, to ensure that
          material information relating to the registrant, including its consolidated
          subsidiaries, is made known to us by others within those entities, particularly
          during the period in which this report is being prepared; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;
          Designed such internal control over financial reporting, or caused such internal
          control over financial reporting to be designed under our supervision, to
          provide reasonable assurance regarding the reliability of financial reporting
          and the preparation of financial statements for external purposes in accordance
          with generally accepted accounting principles; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;
          Evaluated the effectiveness of the registrant&#146;s disclosure controls and
          procedures and presented in this report our conclusions about the effectiveness
          of the disclosure controls and procedures, as of the end of the period covered
          by this report based on such evaluation; and </FONT></P>


<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d) &nbsp;&nbsp;&nbsp;&nbsp;Disclosed
in this report any           change in the registrant&#146;s internal control over
financial reporting that           occurred during the period covered by the annual
report that has materially           affected, or is reasonably likely to materially
affect, the registrant&#146;s           internal control over financial reporting; and  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.
          The registrant&#146;s other certifying officer and I have disclosed, based on
          our most recent evaluation of internal control over financial reporting, to the
          registrant&#146;s auditors and the audit committee of the registrant&#146;s
          board of directors (or persons performing the equivalent function): </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;
          All significant deficiencies and material weaknesses in the design or operation
          of internal control over financial reporting which are reasonably likely to
          adversely affect the registrant&#146;s ability to record, process, summarize and
          report financial information; and </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;
          Any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrant&#146;s internal control over
          financial reporting. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: May 15, 2008 </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>/s/ Guy Bernstein
</U><BR>Guy Bernstein *
<BR>Acting Chief Executive Officer </FONT>
</P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* &nbsp;&nbsp;&nbsp;&nbsp;The originally executed copy of
this Certification will be maintained at the Company&#146;s offices and will be made
available for inspection upon request. </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>17
<FILENAME>exhibit_12-2.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 12.2</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATION PURSUANT
TO </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION 302(a) OF THE
SARBANES-OXLEY ACT OF 2002 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, David Zigdon, certify
that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.
          I have reviewed this annual report on Form 20-F of Magic Software Enterprises
          Ltd.; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.
          Based on my knowledge, this report does not contain any untrue statement of a
          material fact or omit to state a material fact necessary to make the statements
          made, in light of the circumstances under which such statements were made, not
          misleading with respect to the period covered by this report; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.
          Based on my knowledge, the financial statements, and other financial information
          included in this report, fairly present in all material respects the financial
          condition, results of operations and cash flows of the registrant as of, and
          for, the periods presented in this report; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.
          The registrant&#146;s other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13(a)-15(e) and 15d-15(e)) and internal control over
          financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
          for the registrant and have: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;
          Designed such disclosure controls and procedures, or caused such disclosure
          controls and procedures to be designed under our supervision, to ensure that
          material information relating to the registrant, including its consolidated
          Subsidiaries, is made known to us by others within those entities, particularly
          during the period in which this report is being prepared; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;
          Designed such internal control over financial reporting, or caused such internal
          control over financial reporting to be designed under our supervision, to
          provide reasonable assurance regarding the reliability of financial reporting
          and the preparation of financial statements for external purposes in accordance
          with generally accepted accounting principles; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;
          Evaluated the effectiveness of the registrant&#146;s disclosure controls and
          procedures and presented in this report our conclusions about the effectiveness
          of the disclosure controls and procedures, as of the end of the period covered
          by this report based on such evaluation; and </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;
          Disclosed in this report any change in the registrant&#146;s internal control
          over financial reporting that occurred during the period covered by the annual
          report that has materially affected, or is reasonably likely to materially
          affect, the registrant&#146;s internal control over financial reporting; and </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.
          The registrant&#146;s other certifying officer and I have disclosed, based on
          our most recent evaluation of internal control over financial reporting, to the
          registrant&#146;s auditors and the audit committee of the registrant&#146;s
          board of directors (or persons performing the equivalent function): </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;
          All significant deficiencies and material weaknesses in the design or operation
          of internal control over financial reporting which are reasonably likely to
          adversely affect the registrant&#146;s ability to record, process, summarize and
          report financial information; and </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;
          Any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrant&#146;s internal control over
          financial reporting </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: May 15, 2008 </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>/s/ David Zigdon
</U><BR>David Zigdon*
<BR>Chief Financial Officer </FONT>
</P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* &nbsp;&nbsp;&nbsp;&nbsp;The originally executed copy of
this Certification will be maintained at the Company&#146;s offices and will be made
available for inspection upon request. </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>18
<FILENAME>exhibit_13-1.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 13.1</B></U> </FONT> </P>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CERTIFICATION PURSUANT TO
<BR>18 U.S.C. SECTION 1350
<BR>AS ADOPTED PURSUANT TO
<BR>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B> </FONT>
</P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with the Annual Report
of Magic Software Enterprises Ltd. (the &#147;Company&#148;) on Form 20-F for the period
ending December 31, 2007 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, Guy Bernstein, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. &sect; 1350, as adopted pursuant to &sect; 906 of the
Sarbanes-Oxley Act of 2002, that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
          The Report fully complies with the requirements of section 13(a) or 15(d) of
the           Securities Exchange Act of 1934; and  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
          The information contained in the Report fairly presents, in all material
          respects, the financial condition and result of operations of the Company.  </FONT></P>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>/s/ Guy Bernstein
</U><BR>Guy Bernstein *
<BR>Acting Chief Executive Officer </FONT>
</P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>May 15, 2008 </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* &nbsp;&nbsp;&nbsp;&nbsp;The originally executed copy of
this Certification will be maintained at the Company&#146;s offices and will be made
available for inspection upon request. </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.2
<SEQUENCE>19
<FILENAME>exhibit_13-2.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 13.2</B></U> </FONT> </P>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CERTIFICATION PURSUANT TO
<BR>18 U.S.C. SECTION 1350
<BR>AS ADOPTED PURSUANT TO
<BR>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B> </FONT>
</P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with the Annual Report
of Magic Software Enterprises Ltd. (the &#147;Company&#148;) on Form 20-F for the period
ending December 31, 2007 as filed with the Securities and Exchange Commission on the date
hereof (the &#147;Report&#148;), I, David Zigdon, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. &sect; 1350, as adopted pursuant to &sect; 906 of the
Sarbanes-Oxley Act of 2002, that: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
          The Report fully complies with the requirements of section 13(a) or 15(d) of
the           Securities Exchange Act of 1934; and  </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)           The
information contained in the Report fairly presents, in all material           respects,
the financial condition and result of operations of the Company.  </FONT></P>




<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>/s/ David Zigdon
</U><BR>David Zigdon*
<BR>Chief Financial Officer </FONT>
</P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>May 15, 2008 </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>* &nbsp;&nbsp;&nbsp;&nbsp;The originally executed copy of
this Certification will be maintained at the Company&#146;s offices and will be made
available for inspection upon request. </FONT></P>


<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.1
<SEQUENCE>20
<FILENAME>exhibit_15-1.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 15.1</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
consent to the incorporation by reference in the Registration Statements on Form S-8 (File
Nos. 333-13270, 333-11220, 333-1946, 333-10794, 333-113552, 333-132221 and 333-149553) of
Magic Software Enterprises Ltd. (the &#147;Company&#148;), of our report dated May 15,
2008 with respect to the consolidated financial statements of the Company as of December
31, 2007, which report appears in the Company&#146;s Annual Report on Form 20-F for the
year ended December 31, 2007. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>/s/ Kost Forer Gabbay &amp; Kasierer</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>KOST FORER GABBAY &amp; KASIERER</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>A Member of Ernst &amp; Young Global</FONT></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tel Aviv, Israel<BR>May 15, 2008 </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.2
<SEQUENCE>21
<FILENAME>exhibit_15-2.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 15.2</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
REGISTERED PUBLIC </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
consent to the incorporation by reference in the Registration Statements on Form S-8 (File
Nos. 333-13270, 333-11220, 333-1946, 333-10794, 333-113552, 333-132221 and 333-149553) of
Magic Software Enterprises Ltd., of our report dated 12<SUP>th</SUP> January 2008, with
respect to the financial statements of Magic Software Enterprises UK Limited as of
December 31, 2007, which report appears in the Annual Report on Form 20-F of Magic
Software Enterprises Ltd. for the year ended December 31, 2007. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Levy Cohen
<BR>LEVY COHEN &amp; CO.
<BR>Registered Auditors
</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14<SUP>th</SUP> May 2008 </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.3
<SEQUENCE>22
<FILENAME>exhibit_15-3.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 15.3</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
REGISTERED PUBLIC </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
consent to the incorporation by reference in the Registration Statements on Form S-8 (File
Nos. 333-13270, 333-11220, 333-1946, 333-10794, 333-113552, 333-132221 and 333-149553) of
Magic Software Enterprises Ltd., of our report dated 12<SUP>th</SUP> January 2008, with
respect to the financial statements of Hermes Logistics Technologies Limited as of
December 31, 2007, which report appears in the Annual Report on Form 20-F of Magic
Software Enterprises Ltd. for the year ended December 31, 2007. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Levy Cohen &amp; Co.
<BR>LEVY COHEN &amp; CO.
<BR>Registered Auditors
</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent Lv 0-TNR" FSL="Workstation" -->
<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14<SUP>th</SUP>
May 2008 </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.4
<SEQUENCE>23
<FILENAME>exhibit_15-4.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 15.4</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
AUDITORS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
consent to the incorporation by reference in the Registration Statements on Form S-8 (File
Nos. 333-13270, 333-11220, 333-1946, 333-10794, 333-113552, 333-132221 and 333-149553) of
Magic Software Enterprises Ltd., of our report dated January 31, 2008 with respect to the
financial statements of Magic Software Japan K.K. as of December 31, 2006 and 2007 and for
the years then ended, which report appears in the Annual Report on Form 20-F of Magic
Software Enterprises Ltd. for the year ended December 31, 2007. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>/s/ KDA Audit Corporation</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>KDA Audit Corporation</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Registered Auditors</FONT></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tokyo, Japan<BR>[May 14], 2008 </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.5
<SEQUENCE>24
<FILENAME>exhibit_15-5.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 15.5</B></U> </FONT> </P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To the board of Management of
<BR>Magic Benelux B.V.
<BR>5 Haplada Street
<BR>OR Yehuda
<BR>Israel
</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dordrecht, May14, 2008 </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Re: KH/VK/NS </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Sirs, </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the incorporation by
reference in the Registration Statements on Form S-8 (File Nos. 333-13270, 333-11220,
333-1946, 333-10794, 333-113552, 333-132221 and 333-149553) of Magic Software Enterprises
Ltd., of our report dated February 5, 2008 with respect to the financial statements of
Magic Benelux B.V. as of December 31, 2006 and 2007 and for the two years ended December
31, 2007, which report appears in the Annual Report on Form 20-F of Magic Software
Enterprises Ltd. for the year ended December 31, 2007. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On behalf of Verstegen accountants en adviseurs,
<BR>
<BR>/s/ Drs L.K. Hoogerdoorn RA MGA.
<BR>Drs L.K. Hoogerdoorn RA MGA.
</FONT></P>


<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.6
<SEQUENCE>25
<FILENAME>exhibit_15-6.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 15.6</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
consent to the incorporation by reference in the Registration Statements on Form S-8 (File
Nos. 333-13270, 333-11220, 333-1946, 333-10794, 333-113552, 333-132221 and 333-149553) of
Magic Software Enterprises Ltd., of our report dated May 9, 2008 with respect to the
financial statements of Magic (Onyx) Magyarorsz&aacute;g Szoftverh&aacute;z Kft. as of
December 31, 2007, which report appears in the Annual Report on Form 20-F of Magic
Software Enterprises Ltd. for the year ended December 31, 2007. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><U>/s/ M&aacute;ria N&eacute;gyessy</U> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>M&aacute;ria N&eacute;gyessy</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Registered Auditors</FONT></TD></TR>
</TABLE><BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Budapest, May 14, 2008 </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.7
<SEQUENCE>26
<FILENAME>exhibit_15-7.htm
<TEXT>

<HTML>
<HEAD>
     <!-- Created by EDGAR Ease Plus (EDGAR Ease+) -->
     <!-- Project:        F:\EDGAR Filing\Magic Software Enterprises Ltd\85238\a85238.eep  -->
     <!-- Control Number: 85238                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Magic Software Enterprises Ltd                                   -->
     <!-- Project Name:   20-F                                                             -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>20-F</TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Scotch Rule Top-TNR" FSL="Workstation" -->
<HR ALIGN=LEFT WIDTH=100% SIZE=4 NOSHADE STYLE="margin-top: -5px">
<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE STYLE="margin-top: -10px">

<!-- MARKER FORMAT-SHEET="Head Right-TNR" FSL="Workstation" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Exhibit 15.7</B></U> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Indent Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
consent to the incorporation by reference in the Registration Statements on Form S-8 (File
Nos. 333-13270, 333-11220, 333-1946, 333-10794, 333-113552, 333-132221 and 333-149553) of
Magic Software Enterprises Ltd., of our report dated 14 February, 2008, with respect to
the financial statements of Magic Italy Srl as of December 31, 2007, which report appears
in the Annual Report on Form 20-F of Magic Software Enterprises Ltd. for the year ended
December 31, 2007. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><U>/s/ Federico Pozzi</U> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Federico Pozzi</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Revisore Ufficiale dei Conti</FONT></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14 May, 2008 </FONT></P>

<p align=center>
<font size=2></font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
</body>
</html>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
