S FAS 140 The FASB issued Statement of Financial Accounting Standard No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS No. 140). SFAS No. 140 replaces SFAS No. 125 as it revises the standards for accounting for securitizations and other transfers of financial assets and collateral and re q u i res certain disclosures. SFAS No. 140 is effective for transfers and s e rvicing of financial assets and extinguishments of liabilities occurring after March 31, 2001 and in certain limited instances can be applied early. S FAS No. 140 re q u i res recognition and reclassification of collateral and for disclosures relating to securitzation and collateral for fiscal years ending after December 15, 2000.The Company does not expect SFAS No. 140 to have a material effect on its financial statements. Forward-Looking Statements This document contains statements that constitute forw a rd-looking statements within the meaning of section 27A of the Securities Act and section 21E of the U.S. Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this document, including, without limitation, statements re g a rding (i) the Company’s business plans and financing plans and re q u i rements, (ii) trends affecting the Company’s business plans and financing plans and re q u i rements, (ii) trends affecting the Company’s business, (v) the adequacy of capital to meet the Company’s capital re q u i rements and expansion plans, (vi) the assumptions underlying the C o m p a n y ’s business plans, (vii) business strategy, (viii) government re g u l a t o ry action, (ix) technological advances and (x) projected costs and revenues, are forw a rd-looking statements. Although the Company believes that the expectations reflected in such forw a rd- looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Forw a rd-looking statements are typically identified by the w o rds believe, expect, anticipated, intend, estimate and similar expressions.  Investors are cautioned that any such forw a rd looking statements are not guarantees of future perf o rmance and involve risks and uncert a i n t i e s . Actual results may materially differ from those in the forw a rd-looking statements as a result of various factors, including: technological and business developments in the local card and electronic banking markets affecting the transaction and other fees which the Company is able to c h a rge for its services; foreign exchange fluctuations; competition from bank owned ATM networks, outsource providers of ATM services and s o f t w a re providers; the Company’s relationships with its major customers, sponsor banks in various markets and International Card Org a n i z a t i o n ; and changes in laws and regulations affecting the Company’s business. These risks, and other risks are described elsewhere in this document and the Company’s periodic filings with the Securities and Exchange Commission.  In 2000, 30% of the Company’s revenues were generated in Poland and Hungary, as compared to 27% in 1999 and 73% in 1998. The 2000 f i g u re has increased due to the increase in revenues for the Polish operations. In Hungary the majority of revenues received are denominated in Hungarian Forint and in Poland, the majority of revenues are denominated in Polish Zloty. However the majority of these foreign curre n c y denominated contracts are linked either to inflation or the retail price index. While it remains the case that a significant portion of the Company’s e x p e n d i t u res are made in or are denominated in U.S. Dollars the Company is also striving to achieve more of its expenses in local currencies to match its revenues.  The Company estimates that a further 10% depreciation in foreign exchange rates of the Deutsche Mark, Hungarian Forint, Polish Zloty and the British Pound Sterling against the U.S. dollar, would have the combined effect of a $7.1 million decrease in the re p o rted net loss. This was estimated using 10% of the Company’s net losses after adjusting for unusual impairment and other items including U.S. dollar denominated or indexed expenses. The Company believes that this quantitative measure has inherent limitations. It does not take into account any govern m e n t a l actions or changes in either customer purchasing patterns or the Company’s financing or operating strategies.  As a result of continued European economic convergence, including the increased influence of the Deutsche Mark, as opposed to the U.S. Dollar, on the Central European currencies, the Company expects that the currencies of the markets where it invests will fluctuate less against the Deutsche Mark than against the Dollar. Accord i n g l y, the Company believes that its Deutsche Mark denominated debt provides, in the medium to long term, for a closer matching of assets and liabilities than would Dollar denominated debt.  In recent years, Hungary, Poland and the Czech Republic have experienced high levels of inflation. Consequently, these countries’ currencies have continued to decline in value against the major currencies of the OECD over this time period. However, due to the significant reduction in the inflation rate of these countries in recent years, none of these countries are considered to have a hyper- i n f l a t i o n a ry economy. Furt h e r, the majority of all three subsidiaries’ revenues are denominated in the local curre n c y. Thus all three subsidiaries use their local currency as the functional c u rre n c y. The Polish and Czech subsidiaries changed their functional currency to the respective local currency as of January 1, 1998 and January 1, 1999, re s p e c t i v e l y, and the Hungarian subsidiary changed as of July 1, 1999.  G e rm a n y, France and the United Kingdom have experienced relatively low and stable inflation rates in recent years. There f o re, the local curre n c y in each of these markets is the functional curre n c y. Although Croatia, like Germany and France, has maintained relatively stable inflation and exchange rates, the functional currency of the Croatian company is the U.S. dollar due to the significant level of U.S. dollar denominated re v e n u e s and expenses. Due to the factors mentioned above, the Company does not believe that inflation will have a significant effect on results of operations or financial condition. The Company continually reviews inflation and the functional currency in each of the countries that it operates in. The fair market value of the Company's long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed i n t e rest rate debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of the Company's notes payable at December 31, 2000 was $37.5 million compared to a carrying value of $77.2 million. A 1% increase from prevailing interest rates at December 31, 2000 would result in a decrease in fair value of notes payable by approximately $1.5 million. Fair values were determined from quoted market prices and from investment bankers considering credit ratings and the remaining term to maturity. (See Note 20 to the Consolidated Financial Statements - Financial Instruments)  2 2 Interest Rate Risk Inflation and Functional Currencies QU A N T I TAT I V E A N D QU A L I TAT I V E DI S C L O S U R E S AB O U T MA R K E T RI S K Foreign Exchange Exposure