ITEM 15 – CONTROLS AND PROCEDURES

Disclosure controls and procedures

        As of December 31, 2008, we performed an evaluation under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within Retalix to disclose material information otherwise required to be set forth in our reports. Nevertheless, our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable level of assurance as of December 31, 2008.  

Management’s Annual Report on Internal Control over Financial Reporting

        Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s 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 generally accepted accounting principles.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2008 based on the framework for Internal Control-Integrated Framework set forth by The Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management concluded that as of December 31, 2008, our internal control over financial reporting was effective.

Attestation report of the registered public accounting firm

        Kesselman & Kesselman, a member of PricewaterhouseCoopers International Limited, the independent registered public accounting firm that audited our 2008 consolidated financial statements included in this annual report, has issued an attestation report on our internal control over financial reporting. The report appears elsewhere herein.

Changes in internal control over financial reporting

Except for organizational changes in the accounting department of our U.S. office and the implementation of further internal controls that strengthen the governance over our U.S. office activity there were no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 15 – CONTROLS AND PROCEDURES

Disclosure controls and procedures

        As of December 31, 2007, we performed an evaluation under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within Retalix to disclose material information otherwise required to be set forth in our reports. Nevertheless, our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable level of assurance as of December 31, 2007, because of a material weakness in our internal control over financial reporting discussed below.  

Management’s Annual Report on Internal Control over Financial Reporting.

        Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s 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 generally accepted accounting principles.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2007 based on the framework for Internal Control-Integrated Framework set forth by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

        During the fourth quarter of 2007, we experienced the following problems with our internal control over financial reporting in relation to the recording of a few transactions in one of our U.S. offices: an invoice was issued with an incorrect discount, a formula error caused the miscalculation of certain revenues that are based on percentage of completion accounting, and an adjustment to the provision for sales commissions was under-accrued. We performed sufficient procedures to ensure that all material errors were identified and corrected before we reported our results of operations to the public. Nevertheless, we concluded that the aggregation of these separate deficiencies reflects insufficient complement of personnel in one of our U.S. subsidiaries with an appropriate level of knowledge, experience and training in the application of generally accepted accounting principles commensurate with our financial reporting requirements, and therefore constitutes a material weakness, which still existed as of the end of the year.   Therefore, our management concluded that as of December 31, 2007, our internal control over financial reporting was not effective.

        Notwithstanding the foregoing, our independent registered public accounting firm has concluded that our consolidated financial statements included in this annual report present fairly, in all material respects, the financial condition and results of operations of the Company in accordance with U.S. generally accepted accounting principles for the year ended December 31, 2007.

Management’s Remediation Initiatives. 

        Under the direction of our Chief Executive Officer and Chief Financial Officer and in consultation with the Audit Committee of our Board of Directors, we have already begun taking measures to remediate the effectiveness of our internal control over financial reporting.

        Since the beginning of 2008, we have replaced several employees and made organizational changes in the accounting department of our U.S. office. In addition, we are reexamining the control design in this office as well as its appropriate professional staffing and training. We have also started implementing additional reconciliation controls.

        We believe that these measures, as well as additional measures that are planned for 2008, will remediate the material weakness of our internal control over financial reporting.

Attestation report of the registered public accounting firm

        Kesselman & Kesselman, a member of PricewaterhouseCoopers International Limited, the independent registered public accounting firm that audited our 2007 consolidated financial statements included in this annual report, has issued an attestation report on our internal control over financial reporting. The report appears elsewhere herein.

Changes in internal control over financial reporting

Although we have made changes since the end of 2007 as described above, there were no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 15 – CONTROLS AND PROCEDURES

Disclosure controls and procedures

        As of December 31, 2007, we performed an evaluation under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within Retalix to disclose material information otherwise required to be set forth in our reports. Nevertheless, our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable level of assurance as of December 31, 2007, because of a material weakness in our internal control over financial reporting discussed below.  

Management’s Annual Report on Internal Control over Financial Reporting.

        Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s 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 generally accepted accounting principles.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2007 based on the framework for Internal Control-Integrated Framework set forth by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

        During the fourth quarter of 2007, we experienced the following problems with our internal control over financial reporting in relation to the recording of a few transactions in one of our U.S. offices: an invoice was issued with an incorrect discount, a formula error caused the miscalculation of certain revenues that are based on percentage of completion accounting, and an adjustment to the provision for sales commissions was under-accrued. We performed sufficient procedures to ensure that all material errors were identified and corrected before we reported our results of operations to the public. Nevertheless, we concluded that the aggregation of these separate deficiencies reflects insufficient complement of personnel in one of our U.S. subsidiaries with an appropriate level of knowledge, experience and training in the application of generally accepted accounting principles commensurate with our financial reporting requirements, and therefore constitutes a material weakness, which still existed as of the end of the year.   Therefore, our management concluded that as of December 31, 2007, our internal control over financial reporting was not effective.

        Notwithstanding the foregoing, our independent registered public accounting firm has concluded that our consolidated financial statements included in this annual report present fairly, in all material respects, the financial condition and results of operations of the Company in accordance with U.S. generally accepted accounting principles for the year ended December 31, 2007.

Management’s Remediation Initiatives. 

        Under the direction of our Chief Executive Officer and Chief Financial Officer and in consultation with the Audit Committee of our Board of Directors, we have already begun taking measures to remediate the effectiveness of our internal control over financial reporting.

        Since the beginning of 2008, we have replaced several employees and made organizational changes in the accounting department of our U.S. office. In addition, we are reexamining the control design in this office as well as its appropriate professional staffing and training. We have also started implementing additional reconciliation controls.

        We believe that these measures, as well as additional measures that are planned for 2008, will remediate the material weakness of our internal control over financial reporting.

Attestation report of the registered public accounting firm

        Kesselman & Kesselman, a member of PricewaterhouseCoopers International Limited, the independent registered public accounting firm that audited our 2007 consolidated financial statements included in this annual report, has issued an attestation report on our internal control over financial reporting. The report appears elsewhere herein.

Changes in internal control over financial reporting

Although we have made changes since the end of 2007 as described above, there were no changes in our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 15 – CONTROLS AND PROCEDURES

Disclosure controls and procedures

        As of December 31, 2006, we performed an evaluation under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2006, to provide reasonable assurance that the information required to be disclosed in filings and submissions under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that material information related to us and our consolidated subsidiaries is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.

Management’s annual report on internal control over financial reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a- 15(f)~ of the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and our board of directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurances with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decline.

        Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control–Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2006.

        Pursuant to temporary rules of the Securities and Exchange Commission that permit us to only provide management’s report on internal control over financial reporting, this Annual Report on Form 20-F does not include an audit report by our independent registered public accounting firm regarding the effectiveness of our internal control over financial reporting and such firm has not attested to management’s report on our internal control over financial reporting above.

Changes in internal control over financial reporting

        As of the end of the period covered by our previous annual report, we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. The evaluation was performed with the participation of our key corporate senior management and under the supervision and with the participation of our chief executive officer and chief financial officer. Based on this prior evaluation, our principal executive officer and principal financial officer became aware of several revisions to our internal control over financial reporting that were required to our previously announced quarterly and annual financial statements for 2005. These revisions reflected changes in timing of the recognition of revenues, accounting treatment for open contracts of acquired entities and activities, reallocations among Retalix’s classes of revenues and other expense issues.

        Based upon the these revisions, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2005 because at that time we did not have effective controls designed and in place to ensure that these items were accounted for and reported in accordance with generally accepted accounting principles. In order to address the failure to have effective controls designed and in place as described above, we implemented stricter internal control over financial reporting to insure more detailed reporting in advance to management and review by management of transactions with lower minimums of volume. We also recruited additional qualified accounting personnel and improved our documentation of procedures, policies and controls as well as their actual implementation. In addition, we are using more relevantly experienced external evaluation firms in connection with accounting due diligence processes and purchase price allocations in order to insure that key accounting issues are addressed.

        There is no assurance that the disclosure controls and procedures or the new internal control over financial reporting will operate effectively under all circumstances. Nevertheless, our chief executive officer and our chief financial officer believe that with the implementation of these corrective actions, the controls and procedures were effective as of December 31, 2006, so as to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rule and forms.

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ITEM 15 – CONTROLS AND PROCEDURES

        As of the end of the period covered by this annual report, we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a – 15(e) and 15d – 15(e) of the Exchange Act). The evaluation was performed with the participation and under supervision of key corporate senior members of our management including our chief executive officer and our chief financial officer. Based on this evaluation, our chief executive officer and our chief financial officer have concluded that our disclosure controls and procedures are effective.

        There were no significant changes in our internal control over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect our internal control over financial reporting during the period covered by this annual report.

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