As part of our growth strategy, we have made a significant number of acquisitions ~~over the past few years, including a total of nine acquisitions during the years 2010 through 2012~~ (see Item 5, “Operating and Financial Review and Prospects—Recent Acquisitions” in this annual ~~report), and~~report for a description of certain of these acquisitions). We expect to continue to make ~~acquisitions.~~acquisitions and investments in the future as part of our growth strategy. We frequently evaluate the tactical or strategic opportunity available related to complementary businesses, products or technologies. ~~The process of~~There can be no assurance that we will be successful in making additional acquisitions. Even if we are successful in making additional acquisitions, integrating an acquired company’s business into our operations ~~and/~~or of investing in new technologies may (1) result in unforeseen operating difficulties and large expenditures and ~~may~~(2) absorb significant management attention that would otherwise be available for the ongoing development of our business, ~~and~~both of which may result in the loss of key customers ~~and/~~or personnel and expose us to unanticipated liabilities.

In recent years, several of our competitors have also completed acquisitions of companies in our markets or in complementary markets. As a result, it may be more difficult for us to identify suitable acquisitions or investment targets or to consummate acquisitions or investments once identified on acceptable terms or at all. If we are not able to execute on our acquisition strategy, we may not be able to achieve our growth strategy, may lose market share, or may lose our leadership position in one or more of our markets.

We often compete with others to acquire companies, and such competition may result in decreased availability of, or an increase in price for, suitable acquisition candidates. We also may not be able to consummate acquisitions or investments that we have identified as crucial to the implementation of our strategy for other commercial or economic reasons. Further, we may not be able to obtain the necessary regulatory approvals, including those of competition authorities and foreign investment authorities, in countries where we seek to consummate acquisitions or make investments. For those and other reasons, we may ultimately fail to consummate an acquisition, even if we announce the intended acquisition.

In the future we may require significant financing to complete an acquisition or investment, whether through bank loans, raising of debt or otherwise. We cannot assure you that such financing options will be available to us on reasonable terms, or at all. If we are not able to obtain the necessary financing, we may not be able to consummate a substantial acquisition or investment and execute our growth strategy. In addition, if we consummate one or more significant acquisitions in which the consideration consists, in whole or in part, of our ordinary shares or American Depositary Shares (“ADSs”) representing our ordinary shares, our shareholders may suffer immediate dilution of their interests in us or the value of their interests in us.

Other risks commonly encountered with acquisitions include the effect of the acquisition on our financial and strategic position, the inability to integrate successfully ~~integrate~~ or commercialize acquired technologies and achieve expected synergies or economies of scale on a timely basis and the potential impairment of acquired assets. Further, we may not be able to retain the key employees that may be necessary to operate the business we acquire and we may not be able to attract, in a timely ~~attract~~manner, new skilled employees and management to replace them. From time to time, we may also need to acquire complementary technologies, whether to execute our strategies or in order to comply with customer needs. There are no assurances that we will be able to acquire or successfully integrate an acquired company, business or technology, or successfully leverage such complementary technology in the market.

~~Moreover, there~~There can be no assurance that the anticipated benefits of any acquisition or investment will be realized. Future acquisitions or investments could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, amortization expenses related to intangible assets and impairment of goodwill, any of which could have a material adverse effect on our operating results and financial condition. In addition, we may knowingly enter into an acquisition that will have a dilutive impact on our earnings per share.

There can be no assurance that we will be successful in making additional acquisitions or effective in integrating such acquisitions into our existing business. We may also compete with others to acquire companies, and such competition may result in decreased availability of, or increased prices for, suitable acquisition candidates. In addition, for possible commercial and economic considerations, we may not be able to consummate acquisitions that we have identified as crucial to the implementation of our strategy. We may not be able to obtain the necessary regulatory approvals, including those of competition authorities and foreign investment authorities, in countries where we seek to consummate acquisitions. For those and other reasons, we may ultimately fail to consummate an acquisition, even if we announce that we plan to acquire a company.

In addition, if we consummate one or more significant acquisitions in which the consideration consists, in whole or in part, of ordinary shares or American Depositary Shares (ADSs), representing our ordinary shares, shareholders would suffer dilution of their interests in us. We have also invested in companies which can still be considered in the start-up or development stages. These investments are inherently risky as the market for the technologies or products they have under development are typically in the early stages and may never materialize. We could lose our entire initial investment in these companies. Due to changes in the industry and market conditions, we could also be required to realign our resources and consider restructuring or other action, which could result in an impairment of goodwill.

~~We may not be able to sustain growth.~~

We cannot assure you that we will be able to sustain our growth in future years. The increasing proportion of advanced software applications in our overall sales mix might not compensate for the slowing growth rates of our recording solutions and other more mature products. In addition, our new solutions might not achieve wide market acceptance, and therefore might fail to support revenues growth. The failure to successfully implement our growth strategy could affect our ability to sustain growth and could materially adversely affect our results of operations.

Our ~~shift towards advanced software applications could adversely affect our business.~~

Historically we have supplied the hardware and some software for implementing multimedia recording solutions. Our shift towards providing advanced software applications and a multi-product offering has required and will continue to require substantial investment and change in our business model, including the move to a more direct sales and service model, including customer installations. This requires, among other things, the continuous evolution of our sales force, maintenance and support offerings, manpower, research and development, and customer installation methods, as well as our route to market. Our customers’ end-users are changing and therefore we need to expand our relationships and brand recognition within our customer base. While this new business model has so far affected our business positively in terms of growth and profitability, it leads to longer sales cycles and higher customization requirements. In addition, the sale of a multi-product offering is usually subject to a prolonged process of product testing and acceptance only once all components of the product offering are proven to be working together as a complete system. The sale of advanced software applications is also subject to prolonged processes of customization, implementation and testing. Therefore, the increasing proportion of advanced software applications in our overall sales mix leads to a longer period between the time we "book" an order and the time we recognize the revenue from such orders. All of the above factors could result in a delay in revenue recognition and materially adversely affect our results of operations.

~~Our failure to adequately adapt to IT industry trends and customers' consolidation could negatively impact our future operating results.~~

Technological trends, such as the evaluation of virtualization technologies, the need for IT efficiency (converting IT costs from capital expenses to operating expenses) and the increased demand for business agility are all contributing to the move of cloud computing into the mainstream.

If enterprise customers embrace cloud computing, it will change the way they source business solutions, preferring Hosted and cloud-based Software-as-a-Service (or SaaS). Although we are adapting and evolving our delivery options to include on-premise, Hosted, cloud-based SaaS, or blended-hybrid deployment offerings, we may not be able to timely and adequately meet customer needs, which could have an adverse effect on our business, financial condition and results of operations. Furthermore, the business model of SaaS differs from the business model for the sale of products and services, and could, as a result, impact our revenues and cash generation. In addition, cloud computing could make it easier for new competitors (such as telecom carriers) to enter our markets due to the lower up-front technology costs. Such increased competition is likely to heighten the pressure to decrease pricing. Such increased competition and the above-mentioned change in business model may negatively impact our revenues.

Furthermore, some of our enterprise customers have increased in size, partly due to consolidation in the financial market. If our technology is not scalable enough to support these changes, it may have a material adverse effect on our business, financial condition and results of operation.

~~If the pace of spending by government and security organizations slows, our security business may be adversely affected, perhaps materially.~~

The market for our Security Solutions is highly dependent on the spending cycle and spending scope of federal, state, local and municipal governments and security organizations in international markets. We cannot be sure that the spending cycle will materialize as we expect and that we will be positioned to benefit from the potential opportunities.

~~We face foreign exchange currency risks.~~

We are impacted by exchange rate fluctuations. We are likely to face risks from fluctuations in the value of the NIS, EUR, GBP and other currencies compared to the dollar, the functional currency in our financial statements. A significant portion of the expenses associated with our Israeli operations, including personnel and facilities related expenses, are incurred in NIS, whereas most of our business and revenues are generated in dollars, and to a lesser extent, in GBP, EUR and other currencies. If the value of the dollar decreases against the NIS, our earnings may be negatively impacted. In addition, a significant portion of the expenses associated with our European, operations are incurred in GBP and EUR. As a result, we may experience increase in the costs of our operations, as expressed in dollars, which could adversely impact our earnings. Furthermore, if the Israeli inflation rate exceeds the rate of the NIS devaluation against foreign currencies, or otherwise increases, and we will be required to keep our expenses in line with the rate of inflation, then our NIS expenses may grow.

~~Our uneven~~seasonal sales patterns could significantly impact our revenues and earnings.

The sales cycle for our products and services is ~~variable, typically~~ ranging between a few weeks to several months from initial contact with the potential client to the signing of a contract. Frequently, sales orders accumulate towards the latter part of a given quarter. In addition, our revenues are typically highest in the fourth quarter and lowest in the first quarter. We believe this seasonality is typical for many software companies and that it may become more pronounced as the proportion of advanced software applications in our overall sales mix continues to increase. Looking forward, given the lead-time required by our contract manufacturer, if a large portion of sales orders are received late in the quarter, we may not be able to deliver products within the quarter and thus such sales will be deferred to a future quarter. There can be no assurance that such deferrals will result in sales in the near term, or at all. Thus, delays in executing client orders may affect our revenue and cause our operating results to vary widely. Additionally, as a high percentage of our expenses, particularly employee compensation and other overhead costs, are relatively fixed, a variation in the level of sales, especially at or near the end of any quarter, may have a material adverse impact on our quarterly operating results.

In addition, our quarterly operating results may be subject to significant fluctuations due to other factors, including the timing and size of orders and shipments to customers (including delays in execution of customer orders), variations in distribution channels, mix of products and services, new product introductions, competitive pressures and general economic conditions. It is difficult to predict the exact mix of products for any period between hardware, software and services as well as within the product category between ~~interaction related~~interaction-related platforms and related applications and transactional related platforms and applications, digital video, physical security information management and communications intelligence. Because a significant portion of our overhead consists of fixed costs, our quarterly results may be adversely impacted if sales fall below management’s expectations.applications. Further, the period of time from order to delivery of our platforms and applications is short, and therefore our backlog for such products is currently, and is expected to continue to be, small and substantially unrelated to the level of sales in subsequent periods. As a result, our results of operations for any quarter may not necessarily be indicative of results for any future period, and may be below our forecasts.

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Our quarterly results may be volatile at times, which could cause us to miss our forecasts.

Historically, our revenues have reflected seasonal fluctuations related to slower spending activities in the first quarter, and the increased activity related to the year-end purchasing cycles of many users of our products. We believe that we will continue to encounter quarter-to-quarter seasonality, especially given the increasing proportion of advanced software applications in our overall sales mix. Moreover, we typically enter into a significant number of transactions in the last week of a given quarter. As a result, transactions that do not meet all the recognition criteria of that quarter may only be recognized in the following quarter, which may have an adverse impact on the booking and revenues in the quarter in which such transactions were entered into. In addition, the timing in which transactions are entered into may shift from one quarter to another. Customers often shift their buying decision towards the end of their budgetary year, which could result in the shifting of booking and revenues from one quarter to another and in many cases to the last quarter of a calendar year, which may also have an adverse impact on the booking and revenues in the quarter during which such transactions were to be entered into.

We operate with ~~certain~~a backlog and we face factors such as timing and volume of orders within a given period that affect our ability to fulfill these orders and to determine the amount of our revenues within the period.

We derive a substantial portion of our sales through indirect channels, making it more difficult for us to predict revenues because we depend partially on estimates of future sales provided by third parties. In addition, changes in our arrangements with our network of channel partners or in the products they offer, such as the introduction of new support programs for our customers, which combines support from our channel partners with back-end support from us, could affect the timing and volume of orders. Furthermore, our expense levels are based, in part, on our expectations as to future revenues. If our revenue levels are below expectations, our operating results are likely to be adversely affected, since most of our expenses are not variable in the short term.

Our ability to forecast our operating results is also affected by the fact that pricing, margins, and other deal terms may vary substantially from transaction to transaction, especially across business lines.

We generally provide our expectations as to future revenues in the coming quarters and year. These expectations are based on management estimation and expectation, the existing backlog and an analysis of assumptions and assessments that may not materialize or end up being inaccurate. We might not meet our expectations or those of industry analysts in a particular future quarter, including as a result of the factors described above as well as other factors mentioned in Item 3, of"Key Information" in this annual report.

We depend on our ability to recruit and retain key personnel.

In order to compete, we must recruit and retain executives and other key employees. Hiring and retaining qualified executives and other key employees is critical to our business, and competition for highly qualified and experienced managers in our industry is intense. There is no guarantee that additional key management members will not leave the Company, or if they do, that we will be able to identify and hire qualified replacements, or that the transition of new personnel will not cause disruption in our business.

1013

In addition, due to our growth, or as a result of regular recruitment, we will be required to hire and integrate new employees. Recruiting and retaining qualified engineers and computer programmers to perform research and development and to commercialize our products, as well as qualified personnel to market and sell those products, are critical to our success. As of December 31, 2015, approximately 25% of our employees were devoted to research and product development and approximately 21% were devoted to marketing and sales. There can be no assurance that we will be able to successfully recruit and integrate new employees.

There is intense competition to recruit highly skilled employees in the technology industry. We have suffered from attrition in our workforce in previous years and we believe that such attrition will continue in the future. We may not be able to offer current and potential employees a compensation package that is satisfactory in order to keep them within our employment.

In certain locations in which we have development centers, the rate of attrition is high and could have a negative impact on our ability to retain our employees in such centers, timely develop our products and service our customers. In addition, the migration of development and other activities and functions to low-cost countries may result in disruption to our business due to differing levels of employee knowledge, expertise and organizational and leadership skills, greater employee attrition and increased cost of retaining our most highly-skilled employees.

An inability to attract and retain highly qualified employees may have an adverse effect on our ability to develop new products and enhancements for existing products and to successfully market such products, all of which would likely have a material adverse effect on our results of operations and financial position. Our success also depends, to a significant extent, upon the continued service of a number of key management, sales, marketing and development employees, the loss of any of whom could materially adversely affect our business, financial condition and results of operations.

If we lose our key suppliers, our business may suffer.

Further, as suppliers discontinue their products, or modify them in manners incompatible with our current use, or use manufacturing processes and tools that could not be easily migrated to other vendors, we could have significant delays in product availability, which would have a significant adverse impact on our results of operations and financial condition. Although we generally maintain an inventory for some of our components and subassemblies to limit the potential for an interruption and we believe that we can obtain alternative sources of supply in the event our suppliers are unable to meet our requirements in a timely manner, we cannot assure you that our inventory and alternative sources of supply would be sufficient to avoid a material interruption or delay in production and in availability of spare parts.

We ~~might recognize a loss with respect~~rely on software from third parties. If we lose the right to use that software, we would have to spend additional capital to redesign our ~~financial investments.~~existing software to adhere to new third party providers or develop new software.

We ~~invest most~~integrate and utilize various third party software products as components of our ~~cash through a variety of financial investments. If the obligor of any~~products and solutions to enhance their functionality. Our business could be disrupted if functional versions of these ~~investments defaults~~software products were either no longer available to us or ~~undergoes reorganization in bankruptcy, we may lose a portion of such investment and our financial income may decrease.~~no longer made available to us on commercially reasonable terms. In addition, ~~a downturn~~some of our third party vendors use proprietary technology and software code that could require significant redesign of our products in the ~~credit markets could adversely affect~~case of a change in vendor. If we lost the ~~liquidity~~right to use such third party software, we would be required to spend additional capital to either redesign our software to function with alternate third party software or develop these components ourselves. As a result, we might be forced to limit the features available in our current or future products and solutions offerings and the commercial release of our ~~investments, or the downgrading of the credit rating of our investments~~products and solutions could ~~cause us to recognize some loss. For information on the types of our investments, see Item 11, “Quantitative and Qualitative Disclosures About Market Risk” in this annual report.~~be delayed.

Incorrect or improper use of our products and solutions or failure to properly provide professional services and maintenance services could result in negative publicity and legal liability.

Our products and solutions are complex and are deployed in a wide variety of network environments. The proper use of our software requires training and, if our software products are not used correctly or as intended, ~~inaccurate results~~there may be ~~produced.~~inaccurate results. Our products may also be intentionally misused or abused by clients who use our products. The incorrect or improper use of our products and solutions or our failure to properly provide professional services and maintenance services, including installation, training, project management, product customizations and consulting to our clients may result in losses suffered by our clients, which could result in negative publicity and product liability or other legal claims against us.

~~We rely on software from third parties. If we lose the right to use that software, we would have to spend additional capital to redesign our existing software to adhere to new third party providers~~Undetected errors or ~~develop new software.~~

~~We integrate and utilize various third party software products as components of~~malfunctions in our products ~~to enhance their functionality. Our business could be disrupted if functional versions of these software products were either no longer available to us~~ or no longer made available to us on commercially reasonable terms. In either case, we would be required to spend additional capital to either redesign our software to function with alternate third party software or develop these components ourselves. We might as a result be forced to limit the features available in our current or future product offerings and the commercial release of our products could be delayed.

~~Undetected problems in our products~~solutions could directly impair our financial results and we could face potential product liability ~~claims against us.~~

If flaws in the design, production, assembly or testing of our products and solutions (by us or our suppliers) were to occur, we could experience a rate of failure in our products or solutions that would result in substantial repair, replacement or service costs and potential liability and damage to our reputation. There can be no assurance that our efforts to monitor, develop, modify and implement appropriate test and manufacturing processes for our products or solutions will be sufficient to permit us to avoid a rate of failure in our products or solutions that results in substantial delays in shipment, significant repair or replacement costs or potential damage to our reputation, any of which could have a material adverse effect on our business, results of operations and financial condition.

We may be subject to claims that our products are defective or that some function or malfunction of our products caused or contributed to property, bodily or consequential damages. We attempt to minimize this risk by incorporating provisions into our distribution and standard sales agreements that are designed to limit our exposure to potential claims of liability. No assurance can be given that all claims will be barred by the contractual provisions limiting liability or that the provisions will be enforceable. We carry product liability insurance in the amount of $25,000,000 per occurrence and $25,000,000 overall per annum. No assurance can be given that the amount of any individual claim or all claims will be covered by the insurance or that the amount of any individual claim or all claims in the aggregate will not exceed insurance policy coverage limits. A significant liability claim against us could have a material adverse effect on our results of operations and financial position.

Any undetected errors or malfunctions in our products could adversely affect our reputation, result in significant costs to us, impair our ability to market our products and expose us to legal liability.claims.

Our software products are highly complex. Despite extensive testing by us and by our clients, ~~we have in the past discovered~~our products may include errors, failures, bugs or other weaknesses. Such errors, failures, bugs or other weaknesses in our ~~software applications and will likely continue to do so in the future. Such errors, failures, bugs or other weaknesses in~~ products ~~released by us~~ could result in product returns, loss of or delay in market acceptance of our products, loss of competitive position, or claims by clients or others, which would seriously harm our revenues, financial condition and results of operations. Correcting and repairing such errors, failures or bugs could also require significant expenditures of our capital and other resources and could cause interruptions, delays or cessation of our product licensing.

In addition, the identification of errors in our software applications or the detection of bugs by our clients may damage our reputation in the market as well as our relationships with existing clients, which may result in our inability to attract or retain clients.

Further, since our products are used for, among other things, compliance recording and operational risk management functions that are often critical to our clients and must adhere to certain rules and regulations, we are potentially subject to product liability claims. In particular, some of our customers, including financial institutions, may suffer significant damages as a result of a failure of our solutions to perform their functions. Although we attempt to limit any potential exposure through quality assurance programs, insurance and contractual terms, we cannot assure you that we will be able to eliminate or successfully limit our liability for any failure of our solutions. Any product liability insurance we carry may not be sufficient to cover our losses resulting from any such product liability claims. The successful assertion of one or more large product liability claims against us could have a material adverse effect on our results of operations and financial condition.

Risks Relating to Our Financial Condition

We face foreign exchange currency risks.

Exchange rate fluctuations affect our operations. We experience risks from fluctuations in the value of the NIS, EUR, GBP and other currencies compared to the dollar, the functional currency in our financial statements. A significant portion of the expenses associated with our Israeli operations, including personnel and facilities related expenses, are incurred in NIS, whereas most of our business and revenues are generated in dollars, and to a certain extent, in GBP, EUR and other currencies. If the value of the dollar decreases against the NIS, our earnings may be negatively affected. In addition, a significant portion of the expenses associated with our European operations are incurred in GBP and EUR. As a result, we may experience an increase in the costs of our operations, as expressed in dollars, which could adversely affect our earnings.

We monitor foreign currency exposure and may use various instruments to preserve the value of sales transactions, expenses and commitments; however, this cannot assure our full protection against risks of currency fluctuations that could affect our financial results. As part of our efforts to mitigate these risks, we use foreign currency hedging mechanisms, which may be ineffective in protecting us against adverse currency fluctuations and can also limit opportunities to profit from exchange rate fluctuations that would otherwise be favorable. For information on the market risks relating to foreign exchange, please see Item 11, “Quantitative and Qualitative Disclosures about Market Risk” in this annual report.

Additional tax liabilities could materially adversely affect our results of operations and financial condition.

As a global corporation, we are subject to income and other taxes both in Israel and various foreign jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid or accrued is subject to our interpretation of applicable laws in the jurisdictions in which we do business. From time to time, we are subject to income and other tax audits in various jurisdictions, the timing of which is unpredictable. While we believe we comply with applicable tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes. If we are assessed additional taxes, it could have a material adverse effect on our results of operations and financial condition.

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In recent years we have seen changes in tax laws resulting in an increase in applicable tax rates, especially increased liabilities of corporations and limitations on the ability to benefit from strategic tax planning, with these laws particularly focused on international corporations. Such legislative changes in one or more jurisdictions in which we operate may have implications on our tax liability and have a material adverse effect on our results of operations and financial condition.

~~Inadequate~~

The Organization for Economic Cooperation and Development has recently introduced the base erosion and profit shifting (“BEPS”) project. The BEPS project contemplates changes to numerous international tax principles, as well as national tax incentives, and these changes, if adopted by individual countries, could adversely affect our provision for income taxes.

We might recognize a loss with respect to our financial investments.

We invest most of our cash through a variety of financial investments. If the obligor of any of our financial investments defaults or undergoes reorganization in bankruptcy, we may lose a portion of such investment and our assets and income may decrease. In addition, a downturn in the credit markets or the downgrading of the credit rating of our investments could result in a reduction in the market value of our holdings and reduce the liquidity of our investments, which could require us to recognize a loss and would adversely affect our assets and income. For information on the types of our investments, see Item 11, “Quantitative and Qualitative Disclosures About Market Risk” in this annual report.

Risks Relating to Intellectual Property and Data Protection

We may face risks relating to inadequate intellectual property ~~protections could prevent us~~protection and liability resulting from ~~enforcing or defending our intellectual property and we may be subject to liability in the event~~infringement by our products ~~infringe on the proprietary rights~~or solutions of third ~~parties and we are not successful in defending such claims.~~party proprietary rights.

Our success is dependent, to a significant extent, upon our proprietary technology. We currently hold ~~110~~135 U.S. patents and 7450 patents issued in additional countries covering substantially the same technology as the U.S. patents. We have over ~~103~~72 patent applications pending in the United States and other countries. We rely on a combination of patent, trade secret, copyright and trademark law, together with non-disclosure and non-competition agreements, as well as third party licenses to establish and protect the technology used in our systems. However, we cannot assure you that such measures will be adequate to protect our proprietary technology, that competitors will not develop products with features based upon, or otherwise similar to our systems, or that third party licenses will be available to us or that we will prevail in any proceeding instituted by us in order to enjoin competitors from selling similar products. In most of the areas in which we operate, third parties also have patents which could be found applicable to our technology and products. Such third parties may include competitors, as well as large companies, which invest millions of dollars in their patent portfolios, regardless of their actual field of business. Although we believe that our products and solutions do not infringe upon the proprietary rights of third parties, we cannot assure you that one or more third parties will not make a contrary claim or that we will be successful in defending such claim.

We generally distribute our software products under software license agreements that restrict the use of our products by terms and conditions prohibiting unauthorized reproduction or transfer of the software products. However, effective copyrights and other intellectual property rights protection may be inadequate or unavailable to us in every country in which our software products are available, and the laws of some foreign countries may not be as protective of intellectual property rights as those in Israel and the United States.

~~From~~In the past we received, from time to time, ~~we receive~~ “cease and desist” letters alleging patent infringements. ~~However,~~Although there are currently no formal infringement claims or other actions ~~have been filed with respect~~pending against us, in the event that we are required to defend ourselves against any such ~~alleged infringement, except for past claims which have since been settled or dismissed. Defending infringement~~ claims or ~~other claims~~actions we could ~~involve~~be subject to substantial costs and diversion of management resources.

In addition, to the extent we are not successful in defending such claims, we may be subject to injunctions with respect to the use or sale of certain of our products or to liabilities for damages and may be required to obtain licenses which may not be available on reasonable ~~terms, any~~terms. Any of ~~which~~these may have a material adverse impact on our business or financial condition.

We face risks relating to our use of certain “open source” software tools that may be subject to intellectual property infringement claims, the assertion of which could impair our product development plans, interfere with our ability to support our clients or require us to pay licensing fees.tools.

Certain of our software products contain a limited amount of open source code and we may use more open source code in the future. In addition, certain third party software that we embed in our products contains open source code. Open source code is code that is covered by a license agreement that permits the user to liberally use, copy, modify and distribute the software without cost, provided that users and modifiers abide by certain licensing requirements. The original developers of the open source code provide no warranties on such code.

As a result of our use of open source software, we could be subject to suits by parties claiming ownership of what we believe to be open source code and we may incur expenses in defending claims that we did not abide by the open source code license. In addition, third party licensors do not provide intellectual property protection with respect to the open source components of their products, and therefore we may not be indemnified by such third party licensors in the event that we or our customers are held liable in respect of the open source software contained in such third party software. If we are not successful in defending against any such claims that may arise, we may be subject to injunctions and/or monetary damages or be required to remove the open source code from our products. Such events could disrupt our operations and the sales of our products, which would negatively impact our revenues and cash flow.

~~In addition,~~

Moreover, under certain conditions, the use of open source code to create derivative code may obligate us to make the resulting derivative code available to others at no cost. The circumstances under which our use of open source code would compel us to offer derivative code at no cost are subject to varying interpretations. If we are required to publicly disclose the source code for such derivative products or to license our derivative products that use an open source license, our previously proprietary software products may be available to others without charge. If this happens, our customers and our competitors may have access to our products without cost to them, which could harm our business.

We monitor our use of such open source code to avoid subjecting our products to conditions we do not intend. The use of such open source code, however, may ultimately subject some of our products to unintended conditions so that we are required to take remedial action that may divert resources away from our development efforts.

If we ~~lose~~fail to prevent information security breaches, our ~~key suppliers, our business may suffer.~~

Certain components and subassemblies that are used in the manufacture of our existing products are purchased from a single or a limited number of suppliers. In the event that any of these suppliers are unable to meet our requirements in a timely manner, we may experience an interruption in production until an alternative source of supply can be obtained. Any disruption, or any other interruption of a supplier’s ability to provide components to us, could result in delays in making product shipments, which could have a material adverse effect on our business,operations, financial condition and results of operations. In addition, some of our major suppliers use proprietary technology and software code that could require significant redesign of our products in the case of a change in vendor. Further, as suppliers discontinue their products, or modify them in manners incompatible with our current use, or use manufacturing processes and tools that could not be easily migrated to other vendors, we could have significant delays in product availability, which would have a significant adverse impact on our results of operations and financial condition. Although we generally maintain an inventory for some of our components and subassemblies to limit the potential for an interruption and we believe that we can obtain alternative sources of supply in the event our suppliers are unable to meet our requirements in a timely manner, we cannot assure you that our inventory and alternative sources of supply would be sufficient to avoid a material interruption or delay in production and in availability of spare parts.

~~If we lose our key personnel or cannot recruit additional personnel, our business~~reputation may ~~suffer.~~

Due to growth, or as a result of regular recruitment, we will be required to hire and integrate new employees. Recruiting and retaining qualified engineers and computer programmers to perform research and development and to commercialize our products, as well as qualified personnel to market and sell those products, are critical to our success. As of December 31, 2012, approximately 24% of our employees were devoted to research and product development and approximately 24% were devoted to marketing and sales. There can be no assurance that we will be able to successfully recruit and integrate new employees.

There is often intense competition to recruit highly skilled employees in the technology industry. We have suffered from attrition in our workforce in previous years and we believe that such attrition will continue in the future. We may not be able to offer current and potential employees a compensation package that is satisfactory in order to keep them within our employ.

~~If we are unable to maintain the security of our systems, our business, financial condition and operating results could~~ be harmed.

The occurrence of information security breaches (or the belief that any such ~~breaches~~breach has occurred) in the operation of our business or by third parties using our products and solutions could harm our business, financial condition and operating results. Some of our customers use our products to compile and analyze highly sensitive or confidential information. We may come into contact with such information or data when we perform service or maintenance functions for our customers. While we have internal policies and procedures for employees in connection with performing these functions, the perception or fact that any of our employees has improperly handled sensitive information of a customer or a customer’s ~~customer~~end user could negatively ~~impact~~affect our business.

Cyber security attacks are becoming increasingly sophisticated and in many cases may not be identified until a security breach actually occurs. If ~~in handling this information,~~ we fail to ~~comply~~recognize and deal with such security attacks and threats and if we fail to update our ~~privacy policies~~products and solutions and prevent such threatened attacks in real time to protect our customers’ or ~~privacy~~other parties’ sensitive information, whether retained in our systems or by our customers using our products, our business and security laws, we could incur civil liability to government agencies, customers and individuals whose privacy was compromised. If personal information is received or used from sources outside the United States, we couldreputation will be ~~subject to civil, administrative or criminal liability under the laws of other countries. In addition, third~~harmed.

Third parties may attempt to breach our security measures or inappropriately ~~use~~take advantage of our ~~products~~solutions, including our SaaS and hosting services, through computer viruses, electronic break-ins and other disruptions. ~~If successful,~~We may be subject to lawsuits and other liability if confidential information, including passwords, financial information, or other personal information, including information of our customers, partners and vendors, may be improperly obtained by others and we may be subject to lawsuits and other liability. Any internal or external security breaches could harm our reputation and even the perception of security risks, whether or not valid, could inhibit market acceptance of our ~~products.~~products and services.

As we increase the scale of our cloud-based offerings, we store and process more information of our customers, including personal information of end users of those customers, in the cloud. Despite our efforts to constantly improve our security controls, it is possible we may not be able to prevent the improper disclosure of such information that we or our vendors store and manage. Misuse or improper disclosure of this information could harm our reputation, lead to legal exposure to our customers, and subject us to liability, including under data protection laws. Perceptions that our products or services do not adequately protect the privacy of personal information could inhibit sales of our products or services and limit customer adoption of our cloud-based solutions.

1519

Risks Relating to Regulatory Environment

~~Our business could be materially adversely affected by changes~~

Changes in the legal and regulatory ~~environment.~~environment could materially and adversely affect our business, results of operations and financial condition.

Our business, results of operations and financial condition could be materially and adversely affected if laws, regulations or standards relating to our business and products, us or our employees (including labor laws and regulations) are newly implemented or changed. Newly implemented laws and regulations include requirements in the United States, Europe and other territories in relation to, data privacy and protection, anti-bribery and anti-corruption, import and export, labor, tax and environmental and social issues (such as in relation to use of hazardous substances, disposal of waste and use of conflict minerals). From time to time, we may also operate pursuant to specific authorizations of, and commitments towards, U.S., Israeli or other governmental authorities and agencies. While we make every effort to comply with such requirements, we cannot assure you that we will be fully successful in our efforts, and that our business will not be harmed. Failure to comply with such laws, regulations, authorizations and commitments could results in fines, damages, civil liability and criminal sanctions against us, our officers and our employees, prohibitions on the conduct of our business and damage to our reputation.

We believe there is a global trend toward adoption and enforcement of data privacy, information security and cyber related legislation and procedures. Regulations or interpretive positions may be enforced specifically with respect to the use of SaaS and hosting services and other outsourced services. Adoption of such legislation and regulations may require that we invest in the modification of our solutions to comply with such legislation and regulations, cause a reduction in the use of our solutions and services or subject ourselves or our customers to liability resulting from a breach of such regulations. If we are unable to comply with these specific requirements or guidelines, or privacy and information security legislation in general, it could materially adversely affect our business and results of operations.

Failure to comply with privacy legislation or procedures may cause us to incur civil liability to government agencies, customers, shareholders and individuals whose privacy may have been compromised.

In addition, our revenues would be ~~harmed~~adversely affected if we fail to adapt our products and services to changes in rules and regulations applicable to the business of certain ~~of our~~ clients, such as rules and regulations regarding securities trading, broker sales compliance and anti-money laundering, ~~laws~~which could have an impact on their need for our products and ~~regulations.~~

services. There are growing compliance and regulatory initiatives and changes for corporations and public organizations around the world that ~~include both internal and external regulations and~~ are driven by events and concerns such as accounting scandals, security threats and economic conditions.

While we attempt to prepare in advance for these new initiatives and standards, we cannot assure you that we will be successful in our efforts, that such changes will not negatively affect the demand for our products and services, or that our competitors will not be more successful or prepared than us.

With respect to the telecommunications industry specifically, there may be increased regulations, including with respect to privacy and protection of personal information. Adoption of such regulations may require that we invest in the modification of our solutions to comply with such regulations, cause Alternatively, a reduction in the ~~use~~implementation of ~~our solutions or subject us or our customers to liability resulting from~~compliance and regulatory requirements in the industries in which we operate could result in a ~~breach of such regulations. The adoption of these types of regulations~~decrease in demand, which could materially and adversely affect our business and results of operations.

In ~~recent years, the European Union issued directives on the Restriction~~certain industries in which we operate, there may be regulations or guidelines for use of ~~the Use of Certain Hazardous Substances~~SaaS and hosting services that mandate specific controls or require enterprises to obtain certain approvals prior to outsourcing certain functions. In addition, we may be limited in ~~Electrical~~our ability to transfer or outsource business to certain jurisdictions, and ~~Electronic Equipment, or “RoHS,” and Waste Electrical and Electronic Equipment, or “WEEE.” We are making every effort~~may be limited in ~~order~~our ability to maintain compliance with these directives, without otherwise adversely affecting the quality and functionalities of our products. The countries of the European Union, as a single market for our products, accountedundertake development activity in 2011 and 2012 for approximately 17% of our revenues. If our products fail to comply with WEEE or RoHS directives or any other directive issued from time to time by the European Union, we could be subject to penalties and other sanctions that could have a material adverse effectcertain jurisdictions, which may impede on our ~~results of operations~~efficiency and financial condition. In addition, similar regulations are being formulated in other parts of the world. We may incur substantial costs in complying with other similar programs that might be enacted outside Europe in the future.

Moreover, the Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of certain minerals, known as “conflict” minerals, originating from the Democratic Republic of Congo (DRC) and adjoining countries. As a result, in August 2012, the SEC adopted annual disclosure and reporting requirements for those who use conflict minerals mined from the DRC and adjoining countries in their products, as well as guidelines regarding efforts to identify the sourcing of such “conflict” minerals. These new requirements will require due diligence efforts in 2013, with initial disclosure requirements beginning in May 2014. There will be costs associated with complying with these disclosure requirements, including for due diligence to determine the sources of conflict minerals used inadversely affect our products and other potential changes to products, processes or sources of supply as a consequence of such verification activities. These requirements may have the effect of reducing the pool of suppliers who can supply DRC “conflict-free” components and parts, and we may not be able to obtain DRC conflict-free products or supplies in sufficient quantities for our operations or at competitive prices. Also, we may face reputational challenges if we determine that certain of our products contain minerals not determined to be “conflict free” or if we are unable to sufficiently verify the origins for all conflict minerals used in our products.

~~If we fail to meet current and new performance criteria prescribed by compliance regulators, we may suffer a loss to our business.~~

~~Our~~ business results of operations and financial condition could be materially adversely affected if we fail to meet current and new performance criteria prescribed by compliance regulators on our customers, such as the recording of 100% of the calls at our contact centers.

~~Unpredictable events, including extreme weather events, earthquakes and tsunamis, may adversely affect our business.~~

The occurrence of catastrophic events, such as hurricanes, storms, earthquakes, tsunamis, floods and other catastrophes that adversely affect the business climate in any of our markets could have a material adverse effect on our business, financial condition and results of operations. ~~Some of our operations are located in areas that have been in the past, and may be in the future, susceptible to such occurrences.~~

If we fail to maintain effective internal controls ~~in accordance with Section 404 of the Sarbanes-Oxley Act of 2002,~~over financial reporting, it could have a material adverse effect on our business, operating results, and ~~share price.~~the price of our ordinary shares and ADSs.

~~The Sarbanes-Oxley Act of 2002 imposes certain duties on us. Our efforts~~Effective internal controls are necessary for us to ~~comply with the requirements of Section 404, which first applied to our~~provide reliable financial reports and prepare consolidated financial statements for ~~2006, have resulted~~external reporting purposes in ~~increased general~~accordance with U.S. generally accepted accounting principles and ~~administrative expenses and a devotion~~U.S. securities laws, as well as to effectively prevent material fraud. Because of ~~management time and attention to compliance activities, and we expect these efforts to require the continued commitment of significant resources. If~~inherent limitations, even effective internal control over financial reporting may not prevent or detect every misstatement. In addition, if we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting. Furthermore, as we grow our business or acquire businesses, our internal controls may become more complex and we may require significantly more resources to ensure they remain effective. In addition, we may identify material weaknesses or significant deficiencies in our internal control over financial reporting. Failure to maintain effective internal control over financial reporting could result in investigation ~~and/~~or sanctions by regulatory authorities, and could have a material adverse effect on our business and operating results, investor confidence in our reported financial information, and the market price of our ordinary shares and ADSs.

~~Additional tax liabilities could materially adversely affect our results of operations and financial condition.~~

As a global corporation, we are subject to income and other taxes both in Israel and various foreign jurisdictions. Our domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid or accrued is subject to our interpretation of applicable laws in the jurisdictions in which we do business. From time to time, we are subject to income and other tax audits in various jurisdictions, the timings of which are unpredictable. While we believe we comply with applicable tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes. Should we be assessed additional taxes, there could be a material adverse effect on our results of operations and financial condition.

Risks Relating to ~~the Markets~~our Presence in ~~Which We Operate~~

~~The markets in which we operate are highly competitive and we may be unable to compete successfully.~~

The markets for our products, solutions and related services are, in general, highly competitive. Some of our principal competitors or potential competitors may have advantages over us, including greater resources, a broader portfolio of products, applications and services, larger patent and intellectual property portfolios and access to larger customer bases, all of which would enable them to adapt better to new or emerging technologies or customer requirements or devote more resources to the marketing and sale of their products and services. Additionally, continued price reductions by some of our competitors, particularly at times of economic difficulty, may result in our loss of sales or require that we reduce our prices in order to compete, which would adversely affect our revenues, gross margins and results of operations.

New potential entrants to our markets may lead to the widespread availability and standardization of some of the products and services, which could result in the commoditization of our products and services, reduce the demand for our products and services and drive us to lower our prices. System integrators, as well as infrastructure vendors, that have decided and/or may decide in the future to enter our market space and compete with us by offering comprehensive solutions, could result in a substantial decline in our sales. Moreover, major enterprise software vendors, such as those from the traditional enterprise business intelligence and business analytics sector, Customer Relationship Management (or CRM), or infrastructure players (mostly telephony or switch vendors), may decide to enter our market space and compete with us in this emerging opportunity, either by internal development of comprehensive solutions or through acquisition of any of our existing competitors. Such competition could have a material adverse effect on our business, financial condition or results of operations.

While the market for our software applications is constantly growing, successful positioning and sales execution of our products is a critical factor in our ability to successfully compete and maintain growth. As a result, we expect to continue making significant expenditures on research and development and marketing. In addition, our software solutions may compete with software developed internally by potential clients, as well as software and other solutions offered by competitors. We cannot ensure that the market awareness or demand for our new products or applications will grow as rapidly as we expect, or that the introduction of new products or technological developments by others will not adversely impact the demand for our products.

In addition, the transition to VoIP platforms is continuing, and may allow one or more of our competitors to take a leadership position with respect to this technology. Strategic partners may change their vendor preference as a result or may develop embedded VoIP recording as part of the VoIP switch or networking infrastructure. Successful marketing of our products and services to our customers and partners will be critical to our ability to maintain growth. We cannot assure you that our products or existing partnerships will permit us to compete successfully. The market for some of our solutions is highly fragmented and includes products offering a broad range of features and capabilities. Consolidation through mergers and acquisitions, or alliances formed, among our competitors in this market, who may have greater resources than we have, could substantially influence our competitive position.

Our competitors include a number of large, established manufacturers and distributors of similar products, as well as newly emerging competitors. Prices of most of our solutions have decreased throughout the market in recent years, primarily due to competitive pressures. We cannot assure you that the prices will not continue to decrease or that our gross profit will not decrease as a result. In addition, the success of some of our solutions depends on our ability to develop an effective network of distributors, while facing pricing pressures and low barriers to entry. We cannot assure you that our products and services or alliances will permit us to compete successfully.

~~Conditions and changes in the local and global economic environments may adversely affect our business and financial results.~~

Adverse economic conditions in markets in which we operate can harm our business. Global financial conditions during recent years have been characterized by increased volatility and several financial institutions either went into bankruptcy or had to be rescued by governmental authorities. These economic factors have led to decreased credit availability, as well as declines in economic growth and employment levels in almost all sectors. These financial conditions may still exist in certain jurisdictions and may expand with a much broader impact. Among these uncertainties are the financial conditions of certain governments in Europe, which may have an impact on the entire Euro zone.

To the extent that our business suffers as a result of such unfavorable economic and market conditions, our operating results may be materially adversely affected. In particular, enterprises may continue to reduce spending in connection with their contact centers. Financial institutions may also continue to reduce spending in relation to trading floors and operational risk management. IT-related capital expenditures are typically cyclical, with generally higher budgets in times of improving economic conditions and lower budgets in times of economic slowdowns. In addition, enterprises’ ordering and payment patterns are influenced by market conditions and could cause fluctuations in our quarterly results. Moreover, our clients may, due to imminent regulatory or operational deadlines or objectives or for other reasons, prioritize other expenditures over the solutions that we offer.

Disruption in the credit markets and any other disruption to the global economy could, therefore, have a number of follow-on effects on our business, including a possible: (i) slow-down in our business, resulting from lower customer expenditure, inability of customers to pay for products and services, insolvency of customers or insolvency of key partners, (ii) negative impact on our liquidity, financial condition and share price, which may impact our ability to raise capital in the market, obtain financing and secure other sources of funding in the future on terms favorable to us, and (iii) decrease in asset values that are deemed to be other than temporary, which may result in impairment losses.

~~We depend on the stability of the North American market.~~

Over half of our sales are generated from North America. In the event that there is further deterioration or a future crisis in the economic and financial stability in the United States, specifically but not limited to the financial services sector (which is our main industry vertical), it could result in reduced spending by our top tier customers or the delay or postponement of orders, all of which may have a negative impact on our sales to this region. This may materially adversely affect our results of operations and may increase the difficulty for us to accurately forecast and plan our future business.

~~The markets in which we operate are characterized by rapid technological changes and frequent new products and service introductions.~~

We operate in several markets, each characterized by rapidly changing technology, new product introductions and evolving industry standards. The introduction of products embodying new technology and the emergence of new industry standards might exert price pressures on our existing products or render them obsolete. Existing and potential competitors might introduce new and enhanced products that could adversely affect the competitive position of our products. Our most significant market is the market for Customer Interaction applications. Customer Interaction applications are utilized by entities in various sectors to capture, store, retrieve and analyze recorded data. The market for our Customer Interaction applications is, in particular, dominated by a group of highly competitive vendors that are introducing dynamic competitive offerings around evolving industry standards.

We believe that our ability to anticipate changes in technology and industry standards and to successfully develop and introduce new, enhanced and differentiated products, on a timely basis, in each of the markets in which we operate, is a critical factor in our ability to grow our business. As a result, we expect to continue to make significant expenditures on research and development, particularly with respect to new software applications, which are continuously required in all our business areas. The convergence of voice and data networks and wired and wireless communications could require substantial modification and customization of our current cross-channel products, as well as the introduction of new multi-channel products. Further, customer adoption of these new technologies may be slower than we anticipate. We cannot assure you that the market or demand for our products and solutions will be sustained or grow as rapidly as we expect, if at all, that we will successfully develop new products or introduce new applications for existing products, that such new products and applications will achieve market acceptance, or that the introduction of new products or technological developments by others will not render our products obsolete. In addition, our products must readily integrate with major third party security, telephone, front-office and back-office systems. Any changes to these third party systems could require us to redesign our products, and any such redesign might not be possible on a timely basis or achieve market acceptance. Our inability to develop products that are competitive in technology and price and responsive to customer needs could have a material adverse effect on our business, financial condition and results of operations.

Therefore, some of the factors that could have a material adverse effect on our business, financial condition and results of operations include industry specific factors; our ability to continuously develop, introduce and deliver commercially viable products, solutions and technologies; the market’s rate of acceptance of the product solutions and technologies we offer; and our ability to keep pace with market and technology changes and to compete successfully.

~~Risks Relating to~~ Israel

We are subject to the political, economic and security conditions in Israel.

Our headquarters, ~~and~~ primary research and development facilities, ~~as well as the facilities~~and a substantial percentage of ~~Flextronics Israel Ltd.,~~ our ~~key manufacturer,~~manufacturing capabilities, are located in ~~the State of Israel, and we are directly affected by the political,~~Israel. Political, economic and ~~security~~military conditions ~~to which~~in Israel ~~is subject.~~directly affect our operations. Since the establishment of the State of Israel, ~~in 1948,~~ a number of armed conflicts have taken place, ~~between Israel and its Arab neighbors. A state of hostility,~~ varying in degree and ~~intensity, has led to security and economic problems for Israel. In past years there was a high level of violence~~intensity. There have been ongoing hostilities between Israel and the Palestinians, including continuous rocket and missile attacks on certain areas of the country over the last couple of years, and negotiations between Israel and representatives of the Palestinian Authority in an effort to resolve the state of conflict have been sporadic and have failed to result in peace. The establishment in 2006 of a government in the Gaza territory by representatives of the Hamas militant group has created additional unrest and uncertainty in the region. In each of December 2008 and November 2012, Israel engaged in an armed conflict with Hamas, each of which involved additional missile strikes from the Gaza Strip into Israel and disrupted most day-to-day civilian activity in the proximity of the border with the Gaza Strip.years. There can be no assurance that such attacks will not ~~hit~~have an impact our premises or major infrastructure and transport facilities in the country, which may have a material adverse effect on our ability to conduct business. ~~Recent political events~~

Israel also faces threats from Hezbollah militants in Lebanon, from ISIS and ~~continuous unrest~~rebel forces in ~~various countries in the Middle East, including~~Syria, and from Iran. Moreover, some of Israel’s neighboring countries ~~(including the ongoing civil war in Syria),~~ have shaken and continue to impact the stability of those countries. In addition, Iran has threatened to attack Israel and is known to have long range missiles, which could hit every location in Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon, which could result in rocket and missile shooting towards Israel.recently undergone or are undergoing significant political changes. Any of these situations could escalate in the future and turn violent, which could affect the Israeli economy generally and us in particular, and have a ~~severe~~negative impact on our ability to operate. In addition, acts of terrorism, armed conflicts or political instability in the region could negatively affect global and local economic conditions and harm our results of operations. ~~We cannot predict the effect on the region of any diplomatic initiatives or political developments involving Israel or the Palestinians or other countries in the Middle East or North Africa.~~ Furthermore, several countries restrict doing business with Israel and Israeli companies, and additional companies may restrict doing business with Israel and Israeli companies or boycott Israel as a result of an increase in hostilities or due to disagreement with Israel’s policies and agenda. This may also seriously harm our operating results, financial condition and the ability to expand our business. Our products are heavily dependent upon components imported from, and most of our sales are made to, countries outside of Israel. Accordingly, our business, financial condition and results of operations could be materially adversely affected if trade between Israel and its present trading partners were interrupted or curtailed.

Our results of operations may be negatively affected by the obligation of our personnel to perform military service.

Some of our officers and employees are obligated to perform up to 36 days of annual military reserve duty, and in the event of a military conflict, including the ongoing conflict with the Palestinians, these persons could be called to active duty at any time, for extended periods of time and on very short notice. The absence of a number of our officers and employees for significant periods could disrupt our operations and harm our business. We cannot assess the full impact of these obligations on our workforce or business if conditions should change.

~~Service and enforcement of legal process on us and our directors and officers~~It may be difficult to ~~obtain.~~enforce a U.S. judgment against us and our officers and directors in Israel or the United States, or to serve process on our officers and directors.

Service of process upon us, our Israeli subsidiaries, our directors and officers, and the Israeli experts, if any, named in this annual report, substantially all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, because the majority of our assets and substantially all of our directors, officers, and such Israeli experts are located outside the United States, any judgment obtained in the United States against us or these individuals or entities may be difficult to collect within the United States. Additionally, it may be difficult to enforce civil liabilities under U.S. federal securities law in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing these matters.

Subject to specific time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter, including a judgment based upon the civil liability provisions of the U.S. securities laws, as well as a monetary or compensatory judgment in a non-civil matter, provided that the following conditions are met:

subject to limited exceptions, the judgment is final and non-appealable;

the judgment was given by a court competent under the laws of the state in which the court is located and is otherwise enforceable in such state;

the judgment was rendered by a court competent under the rules of private international law applicable in Israel;

the laws of the state in which the judgment was given provides for the enforcement of judgments of Israeli courts;

adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and evidence;

the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel;

the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; and

an action between the same parties in the same matter was not pending in any Israeli court at the time the lawsuit was instituted in the U.S. court.

We currently benefit from local government programs as well as international programs and local tax benefits that may be discontinued or reduced.

We derive and expect to continue to derive significant benefits from various programs including Israeli tax benefits relating to our ~~“Approved, Privileged and Preferred~~“Preferred Enterprise” programs and certain grants from the Office of the Chief Scientist of the Ministry of ~~Industry, Trade and Labor, ("OCS"~~Economy (or “OCS”), for research and development.

To be eligible for tax benefits as ~~an “Approved, Privileged, and~~a Preferred Enterprise,” we must continue to meet certain ~~conditions, including making certain specified investments in fixed assets.~~conditions. While we believe that we meet the ~~statutory~~ conditions to entitle us to previously obtained Israeli tax benefits, there can be no assurance that the tax authorities in Israel will concur. Should it be determined that our Approved, Privileged or Preferred Enterprise programs have not, or do not meet the statutory conditions, our provision for income taxes will increase materially. On December 29, 2010, the Israeli parliament approved a further amendment to the law (“Amendment”) dealing with Approved and Privileged Enterprise programs effective as of January 1, 2011. This amendment generally abolishes the previous tax benefit routes that were afforded under the law, specifically the tax-exemption periods previously allowed, and introduces certain new tax benefits for industrial enterprises (termed “Preferred Enterprises”) meeting the criteria of the law. The Company became subject to the Amendment commencing January 1, 2012. We do not believe that the Amendment has had or will continue to have a material effect on our provision for taxes, as long as we meet all of the criteria mentioned therein.

Tax-exempt income generated under our Approved or Privileged Enterprise programs, will subject us to taxes upon dividend distribution (which for Privileged Enterprises includes the repurchase of our shares – See Item 16E, “Purchases of Equity Securities by the Issuer and Affiliated Purchasers” in this annual report, for additional information about repurchase programs) or complete liquidation. Our current dividend distribution plans can be found in Item 8, “Financial Income” in the section entitled Dividends. We maintain our intention not to distribute any amounts of our undistributed tax exempt income as dividends as we intend to reinvest our tax-exempt income. Accordingly, no deferred income taxes have been provided on income attributable to our Approved or Privileged Enterprise programs as the undistributed tax exempt income is essentially permanent in duration. Please see Item 10, “Additional Information – Taxation Previously tax-exempted earnings - Amendment of the Investments Law – 2012” for a description of recent relief within the law governing Israeli taxes payable on undistributed previously tax-exempt income.

To be eligible for OCS-related grants and benefits, we must continue to meet certain conditions, including conducting the research, development, manufacturing of products developed with such OCS grants in Israel ~~(unless a special approval has been granted for performing manufacturing activities outside Israel)~~ and ~~as of 2012,~~ providing the OCS with an undertaking that the ~~know how~~know-how to be funded and any derivatives thereof is wholly owned by us, upon its creation. Under Israeli law, products incorporating know-how developed with grants from the OCS are required to be manufactured in Israel, unless prior approval of a governmental committee is obtained. As a condition to obtaining this approval, we may be required to pay to the OCS up to 300% of the grants we received and to repay these grants on an accelerated basis, depending on the portion of manufacturing performed outside Israel. In addition, we are prohibited from transferring to third parties the know-how developed with these grants without the prior approval of a governmental committee and, possibly, ~~the payment of~~paying a fee. See Item 4, “Information on the Company—Research and Development” in this annual report, for additional information about OCS programs.

~~From time~~

Moreover, we participate in the European Community Framework Program for Research, Technological Development and Demonstration, which funds and promotes research. Under these programs we need to ~~time,~~comply with certain conditions. If we fail to comply with these conditions, the ~~Israeli Government has discussed reducing~~benefits received could be canceled and we could be required to refund any payments previously received under these programs or ~~eliminating~~pay additional amounts with respect to the ~~availability of~~grants received under these ~~grants, programs and benefits and there can be no assurance that the Israeli Government’s support of these grants, programs and benefits will continue.~~ programs.

If grants, programs and benefits available to us or the laws, rules and regulations under which they were granted are eliminated or their scope is further reduced, or if we fail to meet the conditions of existing grants, programs or benefits and are required to refund grants or tax benefits already received (together with interest and certain inflation adjustments) or fail to meet the criteria for future ~~“Preferred~~Preferred Enterprises,” our business, financial condition and results of operations could be materially adversely ~~affected including an increase in our provision for income taxes.~~affected.

Moreover, we participate in the European Community Framework Programme for Research, Technological Development and Demonstration, which funds and promotes research. There are no royalty obligations associated with receiving such funding. From time to time we may apply for new grants under the Framework Programme. Under these programs we need to comply with certain conditions. If we fail to comply with these conditions, the benefits received could be canceled and we could be required to refund any payments previously received under these programs or pay additional amounts with respect to the grants received under these programs. If the European Union, or any other applicable jurisdiction, discontinues or modifies these programs and potential tax benefits, our business, financial condition and results of operations could be adversely affected.

Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, ~~us,~~our company, which could prevent a change of ~~control.~~control, even when the terms of such a transaction are favorable to us and our shareholders.

Israeli corporate law regulates mergers, ~~and tender offers,~~ 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~~our shareholders whose country of ~~our shareholders.~~residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. These and other similar provisions could delay, prevent or impede an acquisition of ~~us.~~ us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.

See Item 10, “Additional Information—Mergers and Acquisitions” in this annual report, for additional discussion ~~about some~~regarding anti-takeover effects of Israeli law.

Risks ~~related~~Relating to our ADSs and Ordinary Shares ~~and ADSs~~

~~Our share~~The market price of each of our ADSs and our ordinary shares is volatile and may decline.

Numerous factors, some of which are beyond our control, may cause the market price of our ADSs and ordinary shares ~~or our ADSs, each of which represents one ordinary share,~~ to fluctuate significantly. These factors include, among other ~~things, announcements of technological innovations, development~~things:

Quarterly variations in our operating results;

Changes in expectations as to our future financial performance, including financial estimates by securities

Perceptions of our company held by analysts and investors;

Additions or departures of key personnel;

Announcements related to dividends;

Development of or disputes concerning our intellectual property rights;

Announcements of technological innovations;

Customer orders or new products by us or our competitors;

Acquisitions or investments by us or by our competitors and partners;

Currency exchange rate fluctuations;

Earnings releases by us, our partners or our competitors;

General financial, economic and market conditions;

Political changes and unrest in regions, natural catastrophes;

Market conditions in the industry and the general state of the securities markets, with particular emphasis on the technology and Israeli sectors of the securities markets; and

General stock market volatility.

Our ADSs and ordinary shares are traded on different markets and this may result in price variations.

Our ADSs have been listed on The NASDAQ Stock Market since 1996 and our ordinary shares have been traded on the Tel Aviv Stock Exchange, or ~~disputes concerning~~the “TASE”, since 1991. Trading in our ~~intellectual property rights, customer orders or new products by us or~~securities on these markets takes place in different currencies (our ADSs are traded in U.S. dollars and our ~~competitors, currency exchange rate fluctuations, earnings releases by us, our partners or our competitors, general economic~~ordinary shares are traded in New Israeli Shekels), and ~~market conditions, political changes~~at different times (resulting from different time zones, different trading days and ~~unrest in regions, natural catastrophes, market conditions~~different public holidays in the ~~industry~~United States and Israel). As a result the ~~general state~~trading prices of our securities on these two markets may differ due to these factors. In addition, any decrease in the price of our securities on one of these markets ~~with particular emphasis~~could cause a decrease in the trading price of our securities on the ~~technology and Israeli sectors~~other market.

Substantial future sales or the perception of ~~the securities markets.~~

~~Future~~ sales of our ADSs ~~may impact~~or ordinary shares could cause the ~~market~~ price of our ~~ADSs.~~ADSs or ordinary shares to decline.

~~If we or our shareholders sell~~Sales of substantial amounts of our ADSs or ordinary shares in the public market, or the ~~market~~perception that these sales could occur, could adversely affect the price of our ADSs and ordinary shares and could ~~decline. These~~impair our ability to raise capital through the sale of additional shares. Such sales may also ~~might~~ make it more difficult for us to sell equity or equity-related securities in the future at a time and ~~price that we deem appropriate. Following an acquisition,~~at a desirable price.

Holders of our ADSs ~~held by new holders may become freely tradable.~~are not treated as shareholders of our company.

Holders of our ADSs are not treated as shareholders of our company unless they withdraw the ordinary shares underlying the ADSs from the depositary, which holds the ordinary shares underlying the ADSs. Holders of ADSs therefore do not have any rights as shareholders of our company, other than the rights that they have pursuant to the deposit agreement with the depositary.

2425

Item 4.4. Information on the Company.

~~History and Development of the~~ Company Background

~~Our~~NICE was founded on September 28, 1986, as NICE Neptun Intelligent Computer Engineering Ltd., and on October 14, 1991 was renamed NICE-Systems Ltd, which is our legal and commercial ~~name~~name. NICE is ~~NICE-Systems Ltd. We are~~ a company limited by shares organized under the laws of the State of Israel. ~~We were originally incorporated as NICE Neptun Intelligent Computer Engineering Ltd. on September 28, 1986 and were renamed NICE-Systems Ltd. on October 14, 1991.~~ Our ~~principal executive offices~~headquarters are located at 2213 Zarchin Street, P.O. Box 690, Ra’anana ~~43107,~~4310602, Israel ~~and the telephone number at that location is +972-9-775-3030. Our agent for service in~~(Tel. +972-9-775-3151). In the United States, is our subsidiary, ~~Nice~~NICE Systems Inc., is located at 461 From Road, Paramus, New Jersey 07652.

~~For a summary~~In the last three fiscal years, our principal capital expenditures were the acquisition of other businesses, repurchases of our ~~recent~~ADRs and distributions of dividends. For information regarding our acquisitions and ordinary share repurchases, please see Item 5, “Operating and Financial Review and Prospects—Recent ~~Acquisitions”~~Acquisitions,” and “Liquidity and Capital Resources,” in this annual report. For additional information regarding our ordinary share repurchases, please also see Item 16E, “Purchases of Equity Securities by the Issuer and Affiliated Purchasers,” in this annual report.

For a breakdown of total revenues by products and services and by geographic markets for each of the last three years, please see Item 5, “Operating and Financial Review and Prospects – Results of Operation,” in this annual report.

About NICE

NICE is a leading global enterprise software provider that enables organizations to improve customer experience, drive business performance, ensure compliance and fight financial crime.

Our mission is to provide organizations with the confidence in making the right business decisions based on accurate, relevant and insightful information.

We help companies understand their customers and predict their needs, optimize their workforce to drive greater efficiency, and identify suspicious behaviour to prevent financial crime.

We do this by capturing customer interactions and transactions across multiple channels and sources. We then apply best-in-class analytics to this data to provide real-time insight and uncover intent. Our solutions allow organizations to operationalize this insight and embed it within their workflows and daily business processes.

Our advanced technologies and core competencies around data capture and the application of advanced analytics in real-time were developed organically and through multiple acquisitions.

We rely on several key assets to drive our growth:

· Our loyal customer base. Today, more than 20,000 organizations in over 150 countries, including 80 of the Fortune 100 companies, are using NICE solutions.

· Our market leadership makes us a well-recognized brand, and creates top-of-mind awareness for our solutions in our areas of operation.

· Our products and market leading data capture and analytics technologies, which are protected by a broad array of patents.

· Our ability to quickly drive mainstream adoption for innovative solutions and new technologies, which we introduce to the market through our direct sales force and distribution network.

· Our skilled employees and domain expertise in our core markets allows us to bring our customers the right solutions to address key business challenges and build strong customer partnerships.

· Our services and customer support, which enable our customers to quickly enjoy the benefits of our solutions, with multiple deployment models and support for full value realization.

We have established a leadership position in many of our areas of operation through offering comprehensive and innovative enterprise-grade solutions and technologies. Our customers, across all verticals, including banking, telecommunications, healthcare, insurance, retail, travel, public safety and more, are benefiting from the tangible and practical business value that our solutions provide.

Business Overview

~~We are a leading provider of software solutions that enable organizations to take the next-best-action~~

NICE operates and is an industry leader in ~~order to improve customer experience and business results, ensure compliance, fight financial crime, and safeguard people and assets.~~

Consumers transact and interact with and about organizations through various measures, including, among others, by phone (through both landline and mobile phones), face to face in the branch or store, and through the internet - primarily through social media and instant messaging, as well as other mobile applications. Through these many channels and touchpoints, consumers are generating mass amounts of data. Organizations are faced with the task of having to analyze and understand all this data in real time, so that they can take the right action and make an immediate and positive impact.

Our end-to-end solutions enable organizations to capture either directly or indirectly, analyze, and operationalize, both off-line and in real time, mass quantities of structured and unstructured data (Big Data) from multiple customer interaction channels, including phone calls, web activity mobile apps, emails, chat, social media, video, radio transmission, physical sensors, and transactions.

~~We operate in three business areas. Our~~two domains: Customer Interactions ~~business serves customer-centric organizations in Business-to-Consumer enterprises, such as in the financial services, telecommunications,~~ and ~~healthcare industries, and others. Our~~ Financial Crime ~~& Compliance business serves financial institutions~~ and ~~regulatory agencies. Our Security, Safety & Operations business addresses the needs of security sensitive organizations, such as banks, airports, mass transit, utilities,~~Compliance. NICE’s long term strategy is to strengthen its leadership position in these two market segments and ~~public safety agencies.~~

In each of our businesses, our solutions enable our customers to best prepare before, act during, and continuously improve interactions, transactions, and events. As a result, our solutions deliver substantial impact on revenue growth, operational efficiency, customer experience, compliance, and ensuring the safety and security of people and assets.further develop its position in adjacent markets.

~~We are offering our solutions primarily~~During 2015, NICE achieved significant milestones in ~~an on-premise business model. To address growing market demand~~executing its long term strategy, including the divestiture of its Physical Security and ~~customer need for~~Cyber and Intelligence businesses. This allows NICE to place greater operational flexibility with lower upfront costs and faster implementations, we also offer many of our solutions as Hosted or as Software as a Service (SaaS). We intend to continue to expand our offering as Hosted or in a SaaS model.

For a breakdown of total revenues by products and services and by geographic markets, for each of the last three years, please see Item 5, “Operating and Financial Review and Prospects – Results of Operation.”

~~Industry Trends~~

There are four major trends that we address with our solutions: increasingly demanding compliance requirements, organizations turning to advanced software to help improve revenues and efficiency, increased focus on, ~~improving customer experience,~~ and ~~a growing need to safeguard people and assets.~~

~~I. An Increasingly Demanding Compliance Environment~~

~~Organizations today have to deal with more regulations than ever before, more stringent enforcement~~increase its leadership position in, place, and the need to ensure compliance requirements for advanced technological solutions. This can be seen across our different markets: in customer interactions, financial transactions, and security operations.

~~In the contact center the need to record and analyze customer interactions is constantly growing as compliance and regulatory pressures are increasing.~~

Global financial institutions need to monitor transactions in order to ensure compliance due in part to the significant increase in enforcement by regulators, particularly across Europe and the United States, as is evidenced by substantial fines that have recently been levied.

We believe that security-conscious organizations are expected to continue to adopt solutions in order to meet regulations regarding increased physical security and reliability, such as the North American Electric Reliability Corporation Critical Infrastructure Protection (NERC-CIP).

~~II. Growing Need to Drive Revenues and Efficiency with Advanced Software~~

~~This trend can be observed across our different business areas.~~

~~Contact centers are seeking software solutions powered by advanced analytics to help them identify the motivations behind customer behaviors and thus improve service and sales.~~

~~In contact centers we also see voice biometrics being utilized for caller authentication to shorten call handle time and improved efficiency.~~

~~In security we see organizations looking to video analytics in highly crowded areas to minimize queues and crowd bottlenecks.~~

After investing in creating a more efficient contact center, organizations are looking to benefit from the same type of software solutions to make other areas of their business more efficient, including the back office, retail stores, and branches.

Organizations are looking to benefit from investments made in systems, such as video analytics for security and safety to also address operations, improve service-levels, and maximization of business continuity.

~~III. Increased Focus on Improving Customer Experience~~

~~This is another trend we see across our diverse business areas, as follows:~~

The nature of customer loyalty is evolving. Consumers today are more prone to switch their service provider or to start doing business with a competing service provider in parallel. Consumers are looking to have a consistent level of service excellence regardless of the communication channel, e.g., smart phones, web, chat, and social media. Thus, we believe that organizations are seeking to better understand and manage the customer experience across these many channels.

We also believe that the implementation of software solutions to combat fraud in the area of financial transactions is being driven by the need to protect the consumer and thus improve customer experience.

~~In addition, security solutions that are being deployed for security and security operations also carry experience benefits with capabilities for crowd control.~~

~~IV. Growing Need to Safeguard People and Assets~~

~~Increased urbanization in both developed and developing countries results in an increased need for ensuring safety and security, which we believe is driving large-scale safe city~~”its core markets. ~~security projects. These large-scale projects include installation and implementation of wide-scale security systems, which better synchronize and correlate multimedia data sources.~~

Furthermore, we believe that advanced security solutions are being sought to address the need for (i) heightened national security around the world, (ii) corporations to protect their IT networks, personnel, and corporate facilities, and (iii) governments and companies to prevent and/or combat cyber-attacks.

The number and variety of physical security sensors is growing substantially, with public and private organizations deploying security systems, such as surveillance cameras and access control and intrusion detection sensors. We believe that organizations, municipalities and governmental entities are seeking to eliminate the number of information silos created by deployment of redundant security systems so they can take the right actions, share information in real time, and successfully mitigate events.

Customer Interactions

Organizations that serve a large number of consumers are challenged to provide high quality service that is responsive to their customers’ ever changing needs and to differentiate themselves through efficient and effective customer service. In addition they have to find ways to leverage customer interactions and generate up-sell opportunities. These organizations need to accomplish these objectives while containing their operational costs and adhering to regulations. NICE Customer Interactions solutions help organizations address these challenges.

NICE is a global leader in the Customer Interactions domain. Our portfolio of solutions serves thousands of organizations worldwide, providing cross-channel data-driven insights that empower businesses to deliver consistent and personalized experience across the customer journey. Additionally, our solutions optimize business performance and ensure compliance.

Our solutions serve contact centers, back office operations and retail branches, spanning multiple industries, including: communications, banking, insurance, healthcare, Business Processes Outsourcing (or BPO), government, utilities, travel, and entertainment.

Our customers use our solutions to know their customers better, understand their needs in real time and drive the right “best next action.” In addition, they can ensure that their employees are engaged, properly trained and in a position to provide the highest quality of service.

With an engaged workforce and understanding of the intent and journey of its consumers, NICE allows its customers to provide consistent and personalized experience that customers expect, as well as improve operational efficiency, ensure regulatory compliance and increase revenues.

Financial Crime and Compliance

Financial institutions are regularly challenged with fraud prevention, anti-money laundering, and compliance adherence. They have a common need for risk management solutions that will help them keep pace with the changing threat landscape and adapt to evolving business and regulatory requirements.

NICE provides those organizations with proven capabilities for real-time and cross-channel fraud prevention, anti-money laundering, brokerage compliance and enterprise-wide case management. With this complete set of best-in-class solutions, financial institutions can tighten risk controls, lower operational and IT costs, enhance investigation efficiency, and improve customer experience.

NICE serves hundreds of organizations, including some of the world’s top financial institutions and regulatory authorities. Our solutions monitor millions of financial transactions daily, enabling organizations to mitigate the risk of financial crime, improve compliance and reduce operational costs.

Industry Trends

Following are the key trends that are driving demand for our solutions:

Increased Focus on Improving Customer Experience

Consumers demand better experiences across channels. Consumer behavior is significantly changing in terms of expectations and the way they interact with service providers. Consumers demand immediate, consistent and personalized experiences across all communication channels, including mobile apps, web, chat and over the phone. They easily and often traverse these channels depending on their task, location, time-of-day or even progress within a certain process. They view all of these channels as one, and organizations are expected to quickly adapt to the large verity of channels as well to view them in the same way their consumers do, offering a consistent experience across all channels.

Proliferation of analytics as a main driver for successful customer engagement. Organizations are increasingly implementing a customer-centric strategy to get better visibility to their customers’ multi-channel journey with them. Organizations are now moving from simple Business Intelligence tools to focused decisioning and real-time action solutions – being proactive instead of reactive and predictive/prescriptive instead of descriptive. Front, as well as back, office functions seek to employ analytics to better optimize their operations. Organizations today are exploring cognitive engagement solutions, like interactive computing, predictive analytics and machine learning.

Regulatory compliance is becoming an increasing consideration for customer service organizations. In many industries, including financial services, healthcare and utilities regulators are focusing attention on service and sales practices as well as handling customer complaints. Regulatory bodies such as the CFPB in the U.S. are directly imposing standards of care. Organizations are responding by deploying analytics software to monitor compliance adherence and alert to regulation violations in order to proactively avoid potential fines and penalties.

Organizations look at Big Data technologies to analyze a wealth of consumer information, derive new business insight and act in real time. Structured and unstructured data, from millions of multi-channel interactions, open up an opportunity to gain deep insight regarding customer and employee intentions and behavioral patterns. Organizations keep looking for ways to elevate their usage of Big Data and advance from glimpses of interactions and transactions to a meaningful understanding of behaviors and to identify a customer’s underlying concerns. Furthermore, they strive to ensure compliance in real time, which is then translated into action and providing the best solution and accurate response.

Preventing Financial Crime and Ensuring Compliance Stringent and evolving regulatory environment. Financial services regulators are calling for a fundamental change in the underlying culture of the entities that they regulate in order to send a strong message from the executive suite on down that protecting an institution, its customers, and its assets is of primary importance. Failings in corporate attitudes towards compliance are likely to continue to be a topic of great concern to financial services organizations. The need to ensure compliance with requirements for advanced technological solutions can be seen across customer interactions and financial services markets. Financial services organizations are increasingly being asked to document and prove to their regulators that the controls that are in place are working and effective. This is evidenced by substantial fines that have recently been levied against such institutions. Furthermore, the regulatory requirements are constantly evolving, requiring financial institutions to respond with solutions that are up to date with the latest modifications.

An Unpredictable Threat Landscape Environment. The growing number of data breaches and cyber security incidents puts increasing amounts of personally identifiable information and sensitive data at risk of exposure. This information can be used to open accounts that can be used for laundering money, terrorist financing, account fraud, market manipulation, social engineering, and more. Such potential risks threaten an organization’s reputation, as well as create large financial exposures due to both losses as well as fines. In addition, the large volumes of data having to do with both internal and external threats place an enormous operational burden on organizations dealing with threats. Having the ability to aggregate, analyze, compare, and decision those incidents and cases increasingly points to the need for a robust and comprehensive way in which cases are handled by large financial services organizations.

An Integrated Risk Management Platform. The growing complexity of risks and increasing magnitude of exposure, as well as the sophistication of financial criminals creates a growing need for single view of all risk, which allows organizations to aggregate the different detection signals and analyze them in light of the magnitude of exposure as well as the risk level. Financial institutions are seeking a single dashboard that can aggregate all such information from across the organization and present it to both operational people as well as to executives.

Technology Trends

~~We also address the~~The following technology ~~trends: growing masses~~trends define the roadmap for our solutions and are essential to meet the future needs and requirements of structured and unstructured data that are being captured by organizations, broader adoption of advanced analytics technologies, growing challenges for financial firms as well as governments as a result of the proliferation of IP-based communications including VoIP, as well as mobile devices and the use of social networks.our customers:

~~We believe that organizations~~

Big Data technologies to capture and manage structured and unstructured data - Organizations generate and manage an ever-increasing amount of structured and unstructured data through a myriad of daily interactions and transactions. Consequently they are ~~seeking~~faced with a growing, unmet need to ~~collect,~~more accurately analyze and ~~respond~~extract meaningful information from this data, in real time across multiple channels and sources and for a wide variety of business needs. As a result, organizations look for solutions to ~~the enormous amount of Big Data generated by customer interactions~~capture and ~~transactions~~manage structured and ~~by security sensors.~~unstructured data in an integrated manner, derive meaningful insights and act proactively and preemptively.

We believe that there is a growing adoption of advanced analytics technologies for enabling organizations to (i) mine insights from customer phone interactions, email messages, and online chat sessions, (ii) improve customer satisfaction, (iii) increase operational efficiency, and (iv) optimize marketing and sales effectiveness.

We see the adoption of video analytics to improve the effectiveness of an organization’s surveillance system. The organization can send real-time alerts to security personnel regarding intrusion management, crowd management, and situation indication.

~~We also believe that the need for transactional analytics is growing in order to prevent internal and external fraud, and to mitigate other forms of financial risk.~~

We believe that governments are realizing that existing intelligence capabilities are insufficient in handling challenges such as asymmetric and cyber warfare, IP-based communication and social networks proliferation, and that they are therefore more open to external solutions, which they expect to deliver not only monitoring capabilities, but also analytics-driven insights.

~~Trading compliance for mobile transactions represents another trend, with mobile recording already underway in Europe and now expanding to the United States.~~

~~Additionally, we also believe that continued pressures for improved operational efficiency is driving companies to adopt cloud based solutions due to the reduced TCO (total cost of ownership).~~

We believe that the increasing connectedness of communications and production lines, driven by advanced technology, is impacting the way companies conduct business, interact with their customers, and their needs and strategies in mitigating global risks.

~~Our Strategy~~

Our strategy is to be a global, multi-business leader in enabling large, industry-leading organizations to operationalize Big Data and take the next-best-action when interacting with people, by leveraging our unique technologies for real-time and offline analytics of structured and unstructured data.

The key elements of our corporate strategy include: continuing to provide solutions that are leaders in their respective markets; maximizing the synergies across our businesses; offering our solutions in an enterprise software model; expanding our business offering with SaaS and hosting; continuing to provide innovative cross-channel analytics solutions; continuing to invest in bringing more comprehensive solutions to our existing customers; and continuing to invest in internal innovation and development while pursuing acquisitions.

~~Maintaining leadership in the markets in which we operate.~~

We intend to maintain our market-leading position by continuing to offer a comprehensive portfolio of solutions that is differentiated by its ability to drive decisions and actions in addressing multiple business needs. Our extensive domain expertise and ability to deliver solutions that address the needs of large organizations will also continue to drive our leading position.

We also intend to continue developing our direct contact with customers, nurturing our partner ecosystem, and targeting growth in each of the business areas in which we operate. We also intend to lead the new product categories we enter as we introduce new solutions and enter new market segments.

~~Enterprise Software Business Model~~

Our strategy is to offer our solutions in alignment with an enterprise software business model that accounts for both on-premise and cloud-based models. Currently, the largest portion of our license sales comes from a perpetual license model, under which customers purchase a license to use our software indefinitely, alongside a purchase of related professional services and annual software maintenance. We also offer some of our solutions under a term license model, under which customers purchase a license to use our software for a fixed period of time. In addition, as an alternative to on-premise deployments, we also offer many of our solutions in cloud-based models - either as a hosted license or in a Software-as-a-Service (SaaS) model, enabling our customers with a lower total cost of ownership (TCO). We intend to continue offering our solutions in a variety of models, which enables us to be flexible in effectively addressing our customers’ ~~needs. This in turn will enable us to focus on growth and improving profitability.~~

In addition, in our on-premise business, maintenance revenues growth (which is primarily a result of very high renewal rates of maintenance contracts and the growth of our installation base) is also driving an increase in our recurring revenues. An increase in the proportion of recurring revenues out of our overall revenues mix is expected to provide more predictable revenue streams.

~~Expand our business offering with SaaS and Hosting.~~

We have expanded the delivery model of our products to provide SaaS and Hosting offerings. Some customers prefer these models as they lower the costs of deployment and allow them to scale the solutions faster while reducing capital investments. We see a growing demand for these models and they could enhance our penetration into smaller sized customers as well as enable our existing customers to broaden their use of our products. We intend to continue to broaden our offering delivered through these models.

~~Commitment to providing innovative, real-time analytics, and cross-channel solutions, that have significant impact on our customers~~’ ~~businesses.~~

~~Companies are faced with masses of data of which they need to make sense in order to make a real-time impact and own the decisive moments of customer interactions.~~

With our solutions, we intend to continue to address the growing, unmet need to more accurately analyze and extract meaningful information from structured and unstructured data in real time, and to do so from multiple channels in a wide variety of businesses and operational environments. We aim to enable our customers to embed both real-time and offline analytics into their business processes in order to positively impact processes as they occur, which in turn has a positive impact on our customers’ businesses.

We will continue to enhance our abilities around operationalizing Big Data with analytics, decisioning, and guidance. We also intend to continue enabling companies to address the full lifecycle of interactions, transactions, events – ~~i.e. before, during, and after they occur.~~

~~Continue investing and bringing more comprehensive solutions to our existing customers.~~

We believe there are abundant opportunities to up-sell and cross-sell within our existing customer base by increasing our customers’ use of the full breadth of our solutions and by migrating them to our next-generation portfolio.

~~Continue to develop our solution offering through internal innovation and development while pursuing acquisitions.~~

We are committed to internal development and have a history of successful organic growth in all our business areas. We have also complemented this growth with successful acquisitions. We intend to continue augmenting our organic growth with additional acquisitions that broaden our product and technology portfolio, expand our presence in selected vertical markets and geographic areas, broaden our customer base, and increase our distribution channels and vertical market access.

~~Maximize the synergetic potential encompassing our three business areas.~~

We operate in three business areas, in each of which we offer leading solutions to the relevant markets. While serving a diverse set of industries, to each of which we bring deep domain expertise, most of our solutions are based on the same methodology of capturing and analyzing massive amounts of structured and unstructured data, and driving automatic decisioning and guidance in real time. An important pillar of our strategy is to maximize the synergies and cooperation between our business areas.

~~There are many synergies across our organization, including technology, infrastructure, services, and domain expertise, which we leverage to offer new and unique solutions across our customer base.~~

~~Examples of these solutions include:~~

~~NICE Proactive Compliance for Consumer Protection~~, which was recently launched, brings together our speech analytics technology, extensive expertise in trading floor compliance, and total contact center recording with our years of experience in institutional, retail and employee trade surveillance and compliance.

~~NICE Contact Center Fraud Prevention~~Real-time analytics capabilities~~, which was recently launched, brings together NICE Actimize’s expertise in fraud detection with our expertise in the contact center interactions~~ – Deriving real-time insights over growing amounts of data is becoming essential for multiple business cases. Real-time analytics capabilities are adopted to operationalize Big Data and ~~recording.~~realize business value. These capabilities include:

~~NICE Actimize Enterprise Risk Case Manager~~ Customer interaction analytics~~is leveraged~~ for mining insights from multiple channels (such as phone, email, chat, social media, etc.), transactional data (usage, action taken in the ~~company’s~~account, etc.), and personal information (demographics, segmentations, etc.).

Transactional analytics for preventing internal and external fraud, and for mitigating other forms of financial ~~crime, risk, and compliance segment of the business, as well as in support of our security and customer interactions businesses.~~risk.

~~Public Safety Emergency Communications~~ ~~solutions have long leveraged our~~Cloud technologies and ~~expertise~~SaaS business models – Cloud delivery is becoming increasingly popular in ~~contact center interaction recording~~providing flexible and ~~voice analytics.~~cost-effective deployment models for enterprise systems. These include SaaS, Infrastructure as a Service, Platform as a Service, Contact Center as a Service, and other cloud-based solutions. There are several market needs driving this trend, such as the pressure to continually improve operational efficiency and innovate, a reduced total cost of ownership (“TCO”), and the ease of implementation.

~~Shared hosting operations~~Automation and Machine Learning - Smart and self-learning machines allow for ~~all~~the automated enhancement of ~~our cloud-based solutions enable efficient resource utilization~~real-time guidance and ~~lowered capital expenditure.~~analytics-based insights (including speech and text analytics), behavior analytics and technique focused on profiling, trending and pattern detection.

~~Shared infrastructures,~~ ~~best practices, processes, joint corporate support leveraging global presence.~~

Strategy

~~Introducing joint offerings, combining go-to-market efforts~~Market leadership and ~~leveraging~~expansion

We intend to increase our market-leading position by continuing to offer and expand our comprehensive portfolio of solutions, differentiated by the ability to use analytics to drive decisions and actions addressing multiple business needs. Our brand, global reach, financial resources, extensive domain expertise ~~technological know-how, capabilities~~ and ~~developments may enable us~~ability to ~~grow~~deliver solutions for large organizations will also contribute to increasing our ~~business through additional cross-sell and up-sell opportunities.~~market-leading position.

The ~~synergetic approach reflects a core NICE value for nurturing a winning culture that is focused on delivering high-quality customer service.~~expansion of our delivery model to Cloud and SaaS increases the flexibility we provide to existing customers as well as our attractiveness to new customers. We intend to continue to evolve our delivery model. We also intend to use the Cloud and SaaS models to facilitate adoption of our more sophisticated solutions to the mid-market.

~~Our Business Strategies~~We intend to drive additional growth by continuing to develop our direct relationship with customers, nurturing our partner ecosystem, and ~~Solutions~~

~~I. Customer Interactions Business~~

~~Introduction~~creating growth in each of our business areas. Additionally, we intend to ~~the Customer Interactions Solutions~~

~~The NICE Customer Interactions~~lead in new product categories, as we introduce novel solutions ~~enable businesses to improve operational efficiency, increase revenues, enhance the customer experience,~~ and ensure compliance. They capture customer interactions, transactions, and feedback; analyze them in real time and offline to reveal business insights; uncover the context of each customer interaction, across channels and time, mapping the customer journey; and apply these insights in real time and offline.enter additional market segments.

Our products and technologies can provide value in markets that are adjacent to our existing markets, such as back-office operations, alternative payment service providers, and others. We plan to expand our market reach into such adjacencies, by adapting our products and leveraging technology as well as our customer relationships and brand to expand our addressable market.

Customer Interactions Business Strategy

Our strategy is to ~~maintain~~extend our ~~leadership~~market leading position in ~~this~~the customer service and experience space, while ~~expanding~~continuing to expand beyond the contact center to the ~~management of~~different customer ~~experience.~~

~~Our broad portfolio of~~experience channels and touch points. We will do that by providing solutions ~~supports this strategy on three levels, providing benefits beyond the agent, beyond the contact center, and beyond customer service, namely:~~that focus on:

●

~~From~~·

Covering all customer touch points by providing solutions ~~that focus on agent performance optimization, to providing~~implemented in the contact center, as well as solutions that ~~deliver~~benefit back office operations, retail branches, and self-service channels

Understanding the voice of the customer, across all touch points, and taking action to address the needs of Customer Experience Officers and stakeholders in the marketing department.

Driving customer experience in each channel, and across channels.

Analyzing individual customer journeys and operationalizing the insights extracted to create business value in real-time for customer experience and marketing stakeholders.

Optimizing employee engagement and performance, coupled with a better understanding of customer needs and ~~the ability~~how to ~~meet them;~~address them.

●	~~From providing solutions that are implemented in the contact center, to solutions that benefit retail branches, back office operations, mobile interactions, and online channels; and~~

Financial Crime and Compliance Business Strategy

We plan to continue extending our market leading position by focusing on:

●

~~From providing~~·

Delivering integrated financial crime and compliance solutions that ~~focus on improving customer service,~~help financial services organizations to ~~solutions that also benefit other business needs, such as improving sales~~identify issues faster and ~~customer retention.~~earlier.

Providing solutions to many branches of the global financial services industry while constantly attempting to engage new customers, both in tier 1 financial services organizations and in smaller financial services organizations.

~~Our Solutions~~’ ~~Core Capabilities~~

Continuing to cross-sell and up-sell into our existing customer base around the world. Many of our customers, for instance, buy our solutions as part of their Financial Intelligence Unit strategy.

~~Cross-channel Interaction Management:~~ Enables organizations to capture, either directly or indirectly, unstructured and structured interaction and transaction data from multiple customer interaction channels, including phone calls, chat, emails, customer feedback, web sessions, and social media postings. The NICE solution aggregates this data along with data from third party systems such as CRM and ERP for correlation and analysis.

~~Cross-channel Analytics:~~ Analyzing customer interactions in real time and offline, across multiple communication channels. It provides automated business insight and root-cause analysis based on speech analytics, text (chat, e-mail, and social media) analytics, desktop analytics, feedback analytics, and call flow analytics, and integrates and correlates data from external business systems such as CRM. It also provides insight to the context of different interactions, compiling a picture of what the customer did on other channels and at different times, to reveal the full customer journey, as well as hot topics that are revealed from analyzing mass amounts of interactions.

Continuing to focus on tier-1 clients, providing them with solutions to meet their needs via both cloud and on-premise models.

~~Real-time Decisioning and Guidance:~~ A real-time decisioning engine which draws on business rules and predictive analytics models to process insights derived from analytics during the interaction in real time. It monitors agents’ desktop activity across a large number of desktop applications and automates complex processes. This combination enables organizations to make the right decision for individual interactions and across mass amounts of interactions and drive the best action in real time.

~~The combination of the above capabilities also enables organizations to operationalize customer insights into processes across service, sales, and marketing.~~

~~Addressing Strategic Business & Operational Needs~~

The NICE Customer Interactions portfolio addresses the following needs: ensuring compliance and mitigating risk, improving operational efficiency, enhancing customer experience, and increasing sales and retention.

~~The solution suites include:~~

Leverage cloud and SaaS to expand the reach of our high-end solutions to tier-2 customers, which provide us an opportunity to significantly enhance our addressable market.

1.·

Increasingly selling holistic solutions, combining Financial Crime and Compliance ~~and Risk~~, ~~comprised of:~~

offerings with Customer Interactions offerings.

Offering our solutions to verticals outside of the traditional financial services, such as energy, insurance, healthcare, industry regulators, government agencies, and alternative payments providers.

~~Compliance Recording~~ ~~proactively captures~~

Continuing to deliver more comprehensive solutions to our existing customers

One of our main assets is our customer base. We believe there are opportunities to up-sell and ~~retains all~~cross-sell within our existing customer ~~interactions~~base. This includes increasing our customers’ exposure to the full breadth of our solutions, migrating them to our next-generation portfolio, and providing them the benefits of our new and expanded offerings.

Continuing organic innovation and development, while also pursuing acquisitions

We intend to continue investing in innovation and development and plan to continue augmenting our organic growth with additional acquisitions that broaden our product and technology portfolio, expand our presence in selected vertical markets and geographic areas, broaden our customer base, and increase our distribution channels.

Maximizing the synergetic potential across ~~multiple touch points~~some of our businesses

While we bring deep domain expertise to ~~help ensure compliance with government regulations, such as Dodd-Frank, SEC 17a-4, HIPAA, SOX, PCI-DSS, FSA~~a diverse set of industries, most of our solutions are based on the same methodology of capturing and ~~MIPPA,~~analyzing massive amounts of structured and ~~internal policies,~~unstructured data, and driving automatic decisioning and guidance in real time. Thus, an important pillar of our corporate strategy is to maximize the synergies and cooperation between our business areas, where possible.

Introducing joint offerings and combining go-to-market efforts, as well as ~~resolve disputes, perform investigations,~~leveraging extensive complementary domain expertise, technological know-how, capabilities and ~~verify sales.~~development, are expected to enable us to grow our business through additional cross-sell and up-sell opportunities. Moreover, this synergetic approach reflects a core NICE value of nurturing a corporate culture focused on delivering encompassing and high-quality customer service.

~~Proactive Compliance for Consumer Protection~~ ~~is an end-to-end solution that we recently introduced, and which includes speech~~Providing innovative, real-time analytics and real-time agent guidance. It monitors calls and directs agents to communicate the right information to customers. It also provides call capture, agent desktop recording, and automated monitoring and reporting.cross-channel solutions with significant impact for our customers’ businesses

~~Contact Center Fraud Prevention~~ ~~also recently introduced, leverages NICE~~’~~s voice biometrics~~Our solutions address the growing, unmet need to more accurately analyze and ~~real-time decisioning~~extract meaningful information from structured and guidance engines, along with Interaction Analytics and the NICE Actimize Risk Case Manager, to identify fraudsters by their voice patterns, uncover social engineering tactics, assess call risk, guide agents to appropriately handle high-risk interactions, and effectively open and manage an investigation ticket.

~~Real-time Authentication, a recently introduced solution, leverages a NICE patent-pending innovation that utilizes voice biometrics for authenticating customers~~unstructured data in real ~~time with no customer effort. It also helps agents expedite time~~time; and to ~~service~~do so across multiple channels, in a wide variety of businesses and ~~significantly reduces fraud risk for all customers.~~operational environments. We enable our customers to embed both real-time and offline analytics into their business processes, positively impacting these processes as they occur, which in turn has a positive impact on their businesses.

We plan to continue to enhance our capabilities in operationalizing Big Data with analytics, behavior prediction, decisioning and guidance. We also plan to continue enabling companies to address the full lifecycle of interactions, transactions and events (i.e., before, during, and after they occur).

Offering an enterprise software business model

Our strategy is to offer our solutions in alignment with both on-premise and cloud-based enterprise software business models. Currently, the largest portion of our license sales is based on the perpetual license model, under which customers purchase a license to use our software indefinitely, while also purchasing related professional services and annual software maintenance. We also offer some of our solutions under a term license, according to which customers purchase a license to use our software for a fixed period of time.

Growth in maintenance revenues (which is primarily a result of high maintenance contract renewal rates and the growth of our on-premises client base) is driving an increase in our recurring revenue. An increase in the proportion of recurring revenue, out of our overall revenue mix, is expected to provide increasingly predictable revenue streams.

As an alternative to on-premise deployments, our strategy is to offer many of our solutions in cloud-based models - either as a hosted license or as SaaS, providing our customers a lower TCO. Some customers prefer these models, as they lower the costs of deployment and allow them to scale the solutions faster, while reducing capital investments. We see a growing demand for these models and they could enhance our penetration into the smaller business market segment, as well as enable our existing customers to broaden their use of our products. We intend to continue offering our solutions in a variety of models, which enables us to be flexible in effectively addressing our customers’ needs. This, in turn, will enable us to focus on growth and improving profitability.

Our Solutions

I. Customer Interactions

Our Solutions’ Core Capabilities

~~Trading Floor Compliance Solutions~~Multi-Channel Recording and Interaction Management ~~enable~~enables organizations to capture ~~monitor,~~structured and ~~analyze interactions~~unstructured customer interaction and ~~transactions in real time to proactively minimize risks, detect potential regulatory breaches, counter fraudulent activities,~~transaction data from multiple channels, including: phone calls, chats, emails, videos, customer feedback, web sessions, social media postings, and improve investigative capabilities. These solutions deliver comprehensive, integrated capabilities to effectively manage the complex, ongoing, high-risk exchange of interactions and transactions between traders, firms, and their counterparties.walk-in centers.

~~Essential Compliance~~Cross-Channel, Real-time Interaction Analytics ~~is a set~~enables companies to uncover the valuable data and insights hidden in customer interactions. It uses advanced technology for analyzing speech, text, call flow, customer sentiment and employee desktop activity, in order to understand the root cause of ~~solutions that enable trading floors~~service issues and to record and store transactions and interactions in any media, and flexibly and securely manage and access archived material on demand. Essential Compliance helps financial and energy trading firms ensure compliance with the strict recordkeeping requirements of today’~~s regulatory environment. The solutions include: NICE Trading Recording, NICE Distributed Recording, NICE Trader Replay, and NICE Trading Replay Authorization.~~drive business results.

~~Proactive Compliance for Trading Floors~~Employee Engagement ~~, which we recently introduced,~~enables organizations to improve agent productivity, identify performance gaps, deliver targeted coaching, and effectively forecast workloads and schedule staff. It fosters performance-driven operations and culture, leverages ~~Compliance Recording~~the power of advanced analytics, and Interaction Analytics to monitor trading activity across trading turrets, fixed and mobile phones, email, text and instant messaging, chat and social media. It automatically detects potential risks and enables compliance officers to see emerging trends so that future compliance breaches and fraud can be averted. It offers tools to support investigation on mass structured and unstructured media, and to accurately reconstructembeds the ~~chain of events related to a trade. This helps decrease penalties by implementing an automated risk management and analyzing system. It also enables firms to meet the requirements~~voice of the ~~new regulatory environment established with the introduction of the Dodd-Frank Act Wall Street Reform related regulation.~~

~~Workforce Optimization~~ is a suite of solutions that enables every individual in the organization to understand their impact on customers, own their schedule development, and use best practices and coaching to constantly increase their effectiveness, providing customers greater flexibility, lower upfront costs, and faster implementations. It is offered on-premise, Hosted, or as SaaS, and is comprised of:

~~Performance Management~~ ~~maps enterprise business objectives~~customer into daily operations to group and individual goals and tracks and reports performance against these goals. It also automates critical managerial activities, including employee coaching, recognition, and performance improvement to allow front-line managers to become more effective and efficient in developing their teams. As a result, customer-facing operations are able to substantially improve productivity, boost revenue and increase customer satisfaction.

~~Workforce Management~~ forecasts customer interactions, schedules agents across multiple sites with appropriate skills to manage and optimize the level of customer service resources in multi-skilled environments. It measures agent and team performance and provides real-time change management to proactively respond to changing conditions.

~~Quality Management~~ enables Key Performance Indicators (KPI)-based management, automatically tracking telephony and analytics-based KPIs. It automates quality processes and selection of calls for evaluation based on performance data. The solution facilitates root-cause evaluation with easy drill down to interactions that are missing KPI targets to improve quality across voice, email, chat, and social media interactions channels.engage employees.

~~Back Office Workforce Optimization~~ Customer Journey Solutions automates manual processes, integrates data from employees’ desktops, improves forecast accuracy, enables managers to view and manage resource capacity, and empowers employees to improve their performance. It also provides tools to ensure regulatory compliance and fulfillment accuracy, and ultimately, elevate the level of service customers receive across the entire enterprise.

~~Operational Efficiency~~, ~~comprised of~~:

~~Call Volume Reduction, recently introduced, combines the following two solutions:~~

~~First Contact Resolution~~enables organizations to ~~measure~~analyze the ~~rate at which~~entire customer ~~issues are resolved during~~journey across various transactions and events. These solutions allow our customers to have a comprehensive view of customer intents and actions throughout their journey with the ~~first contact~~organization. These solutions leverage Big Data infrastructure and predictive analytics models to identify ~~why others result in repeat contacts. By analyzing~~and sequence individual customer interactions across time and touch points. With this ~~data,~~analysis, organizations can ~~take actions to increase first~~understand the context of each contact, ~~resolution, improve operational efficiency~~uncover patterns, predict needs and ~~increase customer satisfaction.~~

~~Next Call Prevention~~ uses a unique combination of speech analytics, text analytics, contact analytics, and prediction capabilities to identify repeat contact patterns, correlate one contact reason to another or to a customer lifecycle event, and enables agents to handle common secondary issues during the first call. It also identifies triggers, such as self-service weaknesses, customer lifecycle events, faulty processes, ineffective documentation and system inefficiencies, that generate first-time calls. It enables organizations to take action to fix the issues and eliminate resulting calls.

~~Handle Time Optimization~~ leverages real-time speech analytics, call topic analysis, voice biometrics, and web interaction analytics, among others, to help companies understand what drives high average handle times and then take actionpersonalize interactions in real ~~time to mitigate it, while preserving quality and customer service.~~time.

Real-time ~~Service Optimization~~Decisioning and Guidance ~~automatically monitors agent activity in real time, enabling~~is a real-time decisioning engine, which draws on business rules and predictive models to process insights derived from analytics that are applied as an interaction is taking place. This combination enables organizations to ~~identify~~make the right decision during individual interactions and across a mass number of interactions, which in turn drives future next-best-action guidance through process ~~bottlenecks and implement best practices; navigates agents through complex processes with on-screen guidance; and automates routine tasks to shorten handle time and eliminate manual processes.~~automation.

~~Customer Experience~~, ~~comprised of:~~

~~Voice~~The combination of the ~~Customer~~ collects and analyzes the Voice of the Customer (VoC) from all interaction touchpoints and channels; analyzes interactions in real time and provides guidance on the next-best-action; proactively engages customers for feedback immediately following an interaction; and leverages social media analyticsabove capabilities enables organizations to ~~monitor social networks and address customers’ issues. This enables companies to drive operations by~~operationalize customer ~~perspective and deliver~~ insights across ~~departments.~~

~~Real-time Customer Feedback~~ (NICE Fizzback) is part of the VoC family of solutions, also available separately. It uses a unique automated engagement mechanism to create a conversation with customers through their feedback channel of choice. Immediately following a retail, call center, or online experience, the solution reaches out for customer feedback from any touch point, including text message, email, web, social media, IVR, mobile app,service, sales and ~~forms. It uses Natural Language Processing to accurately categorize verbatim comments and quickly locate the key drivers of customer satisfaction.~~marketing processes.

Addressing Business and Operational Needs

1. ~~Mobile Reach~~, which we recently introduced, enables organizations to offer a smart customer experience to its mobile consumers. It bridges mobile-apps on smart devices with live agents by identifying when consumers need assistance; recommending the next-best-channel for completing a transaction; seamlesslyCompliance and effectively transitioning the interaction to other channels when necessary; transferring the interaction context to the agent’s desktop; and facilitating multimedia communication between customers and agents during the interaction.Risk

Solution	5.Description
Compliance Recording	Proactively captures and retains all customer interactions across multiple touch points to help ensure compliance with government regulations, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Security Exchange Commission Rule 17a-4, the Health Insurance Portability and Accountability Act, the Sarbanes–Oxley Act, the Payment Card Industry Data Security Standard, the Financial Services Authority and Medicare Improvements for Patients and Providers Act, as well as with internal policies. Compliance Recording is also an invaluable tool to resolve disputes, perform investigations and verify sales, as well as provide redundancy and disaster recovery capabilities to meet business continuity requirements.
Contact Center Fraud Prevention	Identifies fraudsters by their voice patterns, uncovers social engineering tactics and assesses call risk, as well as guides agents to appropriately handle high-risk interactions, and effectively open and manage an investigation ticket.
Trading Floor Compliance Solutions	Enables organizations to capture, monitor and analyze interactions and transactions in real time, in order to proactively minimize risks, detect potential regulatory breaches, counter fraudulent activities, and improve investigative capabilities. These solutions deliver comprehensive, integrated capabilities to effectively manage the complex, ongoing, high-risk exchange of interactions and transactions between traders, firms and their counterparties.
Essential Compliance	Enables trading floors to record and store transactions and interactions in any media, as well as securely manage and access archived material on demand and in a flexible manner. Essential Compliance helps financial and energy trading firms ensure compliance with the strict recordkeeping requirements of today’s regulatory environment.
Communication Surveillance	Monitors trading activity across trading turrets, fixed and mobile phones, email, text and instant messaging, chat and social media. It automatically detects potential risks and enables compliance officers to see emerging trends, so that compliance breaches and fraud can be averted. It also enables firms to meet the requirements of the regulatory environment established with the introduction of the Dodd-Frank Act, and related rules and regulations.
Complaint Management	Enables organizations to use analytics to identify interactions at risk, and manage the process of handling the complaint.
~~Sales & Retention~~, ~~comprised of:~~Compliance and Script Adherence	Operationalizes historical data analytics to quantify and measure current agent adherence. Monitors agent interactions, searches for any phrase, at any time, and utilizes the phrases in issue resolution and training exercises. Incorporates real-time monitoring and alerting to guide towards required behaviors. Knows which calls are contained in the audio and helps ensure reading for an audit.

~~Service-to-Sales~~ identifies sales opportunities during a service call by leveraging NICE’s Cross Channel Analytics, correlated with transactional and feedback analytics. This combination delivers a real-time understanding of who the customer is (demographics, past transactions and interactions, past responses to sales offers, etc.), who the customer service rep is (profile, skills, past sales performance, etc.), and what are the customer’s needs and intent. With real-time decisioning and guidance, the solution provides service reps on-screen call-outs with scripts for making the best offer, and increasing sales conversion rates.

~~Incentive Compensation Management~~ provides the end-to-end ability to create, manage and distribute all aspects of a commissions program. It automates the process of commission, bonus, and incentive administration in support of any type of variable pay strategy to deliver a pay-for-performance system which rewards employees for achieving targets that align with business strategy.

~~Customer Retention~~ leverages NICE’s cross channel analytics and transaction-driven contact analytics to identify customers at risk before they churn. It analyzes the cross-channel customer experience and provides retention agents with real-time guidance, helping them tailor retention offers to each customer during the interaction.

~~Vertical Implementations~~

NICE Customer Interactions solutions are implemented by contact centers of all sizes, retail branches, and back office operations, across multiple verticals, including: Communication Service Providers, Retail Banks, Insurance, Healthcare, Outsourcing, Utilities, and Travel and Entertainment.

~~II. Financial Crime & Compliance~~

~~Introduction to the Solutions~~

The NICE Financial Crime & Compliance solutions monitor billions of financial transactions daily, transactional Big Data, enabling clients to mitigate financial crime risk, improve compliance, and reduce operational costs. The solutions are based on a scalable, proprietary software platform and flexible applications that address hundreds of compliance, fraud, and money-laundering scenarios in real-time.

~~Solutions are delivered on premise, as well as some in the cloud, enabling clients to be highly responsive to challenging regulatory timelines and deploy solutions in a more cost-efficient manner.~~2. Operational Efficiency

~~Financial Crime & Compliance Business Strategy~~

Solution	Description
Contact Center Recording	Provides comprehensive call recording technology that adapts easily to the unique operational requirements of any contact center. It supports virtually any telephony environment and hybrid networks. This enables a seamless transition during technology migrations as the contact center grows and evolves. It supports thousands of concurrent IP streams in a single platform: capturing, forwarding streams in real time, recording and archiving. It also captures non-voice interactions such as video, chat and email, and stores them in a single recording platform, ensuring regulatory adherence and standardized cross-channel workforce optimization.
Performance Management	Maps enterprise business objectives to group and individual goals, and tracks and reports performance. It also automates critical managerial activities, including employee coaching, recognition, and performance improvement, allowing front-line managers to become more effective and efficient in developing their teams. Performance Management also includes unique capabilities, such as gamification, to engage and motivate and align employees around common business goals.
Workforce Management	Forecasts an organization’s interactions load, schedules agent shifts across multiple sites with appropriate skills to manage and optimize the level of customer service resources in multi-skilled environments. It measures agent and team performance, and provides real-time change management to proactively respond to changing conditions.
Quality Management	Automates quality assurance processes and selection of calls for evaluation based on performance data. The solution facilitates root-cause evaluation, with easy drill down to interactions missing their Key Performance Indicator targets. Quality improvement is thus managed across voice, email, chat, and social media channels.
Interaction Analytics	Analyzes large quantities of customer interactions across multiple channels to identify hot topics and root causes quickly, and to produce actionable insights. These insights are then leveraged to improve processes, increase sales, optimize marketing campaigns and reduce operational costs.
Back Office Workforce Optimization	Automates manual processes, integrates data from employees’ desktops, improves forecast accuracy, enables managers to view and manage resource capacity, and empowers employees to improve their own performance. It also provides tools to ensure regulatory compliance and accuracy, elevating the level of service customers receive across the entire enterprise.
Real-time Authentication	Leverages voice biometrics for authenticating customers in real time. The technology helps organizations to seamlessly enroll customers, expedites agent service, and significantly reduces the risk of fraud for all customers.
Call Volume Optimization	Leverages Big Data infrastructure and advanced predictive analytics to help organizations resolve customer needs in one contact, to predict and preempt follow-up calls, and to enable customers to effectively use self-service tools.
Real-time Service Optimization-	Automatically monitors agent activity in real time, enabling organizations to identify process bottlenecks and implement best practices. With this information, the solution navigates agents through complex processes using on-screen guidance, and automates routine tasks to shorten handle time and eliminate manual processing errors.
Interactive Voice Response (“IVR”) Optimization	The IVR Optimization solution enables customers to reduce customer effort by increasing IVR containment rate, reducing IVR repeat calls, agent transfers, drop-offs and deflections and dramatically improving call center efficiency.
Robotic Automation	Robotic solution for the automation of routine back office and contact center processes. Installed on virtual servers, these robots handle end-to-end processes, essentially performing any routine task which the human user would otherwise do manually.

3. Customer Experience

~~We will continue to try to build the most exhaustive risk and financial crime solutions enterprise-wide platform.~~

Solution	Description
Voice of the Customer (“VoC”)	Collects and analyzes comprehensive data from multiple interaction touch points and channels; analyzes interactions in real time and provides guidance on the next-best-action; proactively engages customers for feedback immediately following an interaction; and leverages social media analytics to monitor social networks and address customer issues. This enables companies to drive operations and deliver insights across departments by incorporating the customer’s perspective.
Real-time Customer Feedback	Uses a unique, automated engagement mechanism to create a conversation with customers through their feedback channel of choice. Immediately following a retail, call center, or online experience, the solution reaches out for customer feedback from any touch point, including text message, email, IVR, mobile app, and online forms. It uses Natural Language Processing to accurately categorize verbatim comments and quickly locate the key drivers of customer satisfaction.
Customer Journey Optimization	Helps organizations optimize their overall customer interactions process across multiple touch points. The solution automatically constructs a cross-channel map of the customer journey, providing insights into trends and focus areas. It automatically assigns contact reasons to every interaction and reveals customer behavior patterns, helping to predict the customer’s next action and to respond accordingly. The solution highlights opportunities for self-service channel containment and offers real-time guidance for an improved customer experience.
Customer Satisfaction	Understands the business practices and behaviors that drive customer satisfaction. Simplifies the customer experience, through methods such as quicker caller identification. Attracts new customers by offering an easier path to service than the competition. Statistically determines which business processes and agent behaviors have the greatest impact on customer behavior.
Cost Management	Identifies the root cause of issues that cause long talk times or repeat calls. Understands technical calls and ensures agents follow the correct troubleshooting steps before issuing a service call. Determines gaps in workflow to eliminate redundant processes. Monitors problems resulting in high volumes and identify areas for more effective call routing.
Customer Churn	Analyzes historic defection data to create models for predicting future churn. Understands causes and effects of customer churn and how to design procedures to reduce the defection rate. Prioritizes at-risk customers based on search results combined with customer data. Collects information to refine retention marketing offers that are better tailored to customer types and demographics.

4. Sales Optimization

~~We will also continue to be focused on tier-1 clients, attempting to provide them with best in class solutions to meet their needs via both cloud~~

Solution	Description
Incentive Compensation Management	Provides the end-to-end ability to create, manage and distribute all aspects of a commissions program. It automates the process of commission, bonus and incentive administration, in support of any type of variable pay system that rewards employees for achieving targets aligned with the business strategy.
Real-time Web Engagement	Uses customer intelligence, predictive models and machine learning to make insightful, real-time decisions during customer interactions over the Web. The solution helps organizations improve customer retention, increase online conversion rates, and deliver better service by taking the next-best-action.
Sales Effectiveness	Helps organizations optimize their campaigns. Locates and quantifies specific events by building the right metrics to align with corporate objectives such as offers made versus up-sell opportunities. Correlates data points such as customer spend and purchase history to build predictive models, prioritizing customers with a propensity to buy and create the next-best offer. Identifies high-performing agents and base best practices off their behavior. Establishes thresholds and works with agents, measuring performance against sales driven metrics.

5. Public Safety

Incident Debriefing and on premises models. In addition, due to reduced TCO, some of our high-end solutions have become affordable to mid-market players. We plan to take advantage of this opportunity to expand our presence in the mid-market segment leveraging our SaaS offering.Investigation

Solution	Description
NICE Inform	Assists public safety agencies and organizations across various industries to consolidate and chronologically manage multimedia incident information efficiently and effectively. It captures and processes event information from a variety of media: audio, video, text, Computer-Aided Dispatch systems, Geographic Information Systems, and others.

Public Safety Emergency Response Optimization

Solution	Description
NICE Audio Recording	Addresses the needs of command-and-control centers and air traffic control operations. The wide range of recording platforms automatically record, analyze, store, quickly retrieve and instantly replay Telephony, radio and IP voice calls. TDM and VoIP recordings can be used to ensure compliance with regulations, provide audio evidence, and manage and improve departmental quality and productivity.
NICE Inform	Helps emergency centers manage multimedia incident information efficiently and effectively. It captures available data, providing the facts as they unfold and increasing the likelihood that all vital evidence is available for review.

II. Financial Crime and Compliance

Our Solutions’ Core Capabilities

~~Our Solutions~~’Core ~~Capabilities~~platform:

Financial Crime and Compliance solutions (also known as NICE Actimize ~~solutions~~solutions) share a single, flexible and scalable core ~~risk~~ platform that ~~provides organizations the ability~~enables financial institutions to expand ~~usage~~the use of the company’s solutions over ~~time, as the need of the organization dictate, which~~time. This eases implementation and lowers total cost of ownership.

~~Customization:~~ Flexible analytics and tools:The core platform provides ~~modeling~~dozens of out-of-the-box analytical models with each specific solution, as well as flexible tools that can be used to develop and customize analytical models, data sources, and business processes at both the business and IT levels.

Multi-channel transaction management: The solutions are proven to capture and analyze thousands of financial transactions a second from a variety of sources and channels.

~~Domain specific~~Domain-specific analytics: Comprehensive, ~~domain specific~~domain-specific solutions detect anomalous customer or employee behavior in ~~real-time,~~real time, leveraging industry-proven analytics.

Real-time decisioning and enforcement: A real-time decisioning engine draws on analyzed data to trigger alerts that enable optimal enforcement and resolution. Built-in capabilities for comprehensive workflow and investigation ~~management~~ allow effective alert management.

Addressing ~~Strategic~~ Business Needs

~~The NICE Financial Crime & Compliance portfolio is comprised of four solution families that address the following needs.~~

~~Enterprise Risk Management~~, ~~comprised of:~~

1. Enterprise Risk ~~Case Manager~~Management enables firms to better manage and mitigate organizational risk by providing a single view of risk across the business. The solution centralizes and correlates information from existing detection systems, turning multiple flows of information into actionable insights. It serves as a central platform for managing alerts, cases, investigations, link analysis, regulatory reporting, financial losses, oversight and more across multiple lines of business, channels, products, and regions.

~~Anti-Money Laundering,comprised of solutions available individually or as an integrated whole, as follows~~:

~~Suspicious Activity Monitoring~~ ~~leverages transaction analytics to identify and report suspicious transactions related to known and unknown money laundering and terrorist financing.~~

~~Watch List Filtering~~ provides enterprise-wide customer and transaction screening against multiple watch lists. It identifies and manages sanctioned or high-risk individuals and entities, with real-time name recognition capabilities.

~~Customer Due Diligence~~ ~~provides integrated risk-based rating and continuous monitoring of accounts throughout the entire customer life cycle, from initial applicant onboarding to periodic rescreening of existing customers.~~

~~CTR Processing & Automation~~ ~~provides seamless automated Currency Transaction Reporting (CTR) processing to ensure compliance with Bank Secrecy Act standards and optimize CTR processes for efficiency and cost-effectiveness.~~

~~FATCA Compliance~~ helps U.S. and non-U.S. companies establish a structured Foreign Account Tax Compliance Act program – from identifying U.S. owners and customers and managing documentation to generating reports to meet the U.S. Internal Revenue Service requirements.

Solution

3.Description

Enterprise Risk Case Manager

~~Fraud Prevention,comprised~~Enables firms to better manage and mitigate organizational risk by providing a single view of ~~solutions available individually or~~risk across the business. It serves as ~~an integrated whole, as follows~~:

a central platform for managing alerts, cases, investigations, link analysis, regulatory reporting, financial losses, oversight and more, across multiple lines of business, channels, products, and regions, turning them into actionable insights.

~~Card Fraud~~ ~~enables card issuers, acquirers and processors to detect fraudulent transactions, covering ATM, PIN, signature point-of-sale, and where physical cards are not present.~~

~~Remote Banking~~ ~~provides cross-channel analytical models for retail online and mobile banking, call center, and IVR channels to enable real-time detection of fraudulent monetary and non-monetary transactions.~~

~~Commercial Banking~~ enables multi-channel monitoring and analytics for commercial banking transactions (e.g. wires, ACH, payroll) and non-monetary transactions (e.g. template creation, transaction approval) with user, account, and company-level profiling.

~~Employee Fraud~~ ~~provides proven rules and analytics, combined with proactive investigation tools, to detect theft of customer and bank assets, self-dealing, embezzlement, collusion, and identity shielding.~~

~~Cybercrime Protection~~ ~~provides complex device identification, malware detection, navigation-based behavioral analysis, and predictive analytics to detect and mitigate cyber threats while improving the customer experience.~~

~~Contact Center Fraud Prevention~~2. Anti-Money Laundering - ~~leverages NICE~~’s voice biometrics and real-time decisioning and guidance engines, along with Interaction Analytics and the NICE Actimize Risk Case Manager, to identify fraudsters by their voice patterns, uncover social engineering tactics, assess call risk, guide agents to appropriately handle high-risk interactions, and effectively open and manage solutions available individually or as an ~~investigation ticket.~~integrated whole

Solution	4.Description
Suspicious Activity Monitoring	~~Brokerage~~Leverages transaction analytics to offer end-to-end coverage for detection, scoring, alerting, workflow processing and reporting of suspicious activity to make sure nothing slips through the cracks. It supports the full investigation life cycle and, with NICE’s integrated case management platform, improves staff productivity, helping meet regulatory obligations in a cost-efficient manner.
Watch List Filtering	Provides enterprise-wide customer and transaction screening against multiple watch lists, for end-to-end sanctions list coverage. It identifies and manages sanctioned or high-risk individuals and entities, with real-time name recognition capabilities, providing customers the ability to conduct accurate name matching to prevent non-compliance occurrences.
Customer Due Diligence	Provides integrated risk-based rating and continuous monitoring of accounts throughout the entire customer life-cycle, from initial applicant onboarding to periodic re-screening of existing customers. It is an open, flexible platform that can adapt to unique requirements across business segments, regions, and jurisdictions.
CTR Processing and Automation	Provides seamless automated Currency Transaction Reporting (“CTR”) processing to ensure compliance with U.S. Bank Secrecy Act standards, and to optimize CTR processes for efficiency and cost-effectiveness. This allows for the reduction in manual intervention and errors. Built-in validation tools and flexible capabilities enhance the quality and timeliness of completed reports while letting organizations adapt to changing regulatory and business needs.
FATCA Compliance~~comprised of solutions available individually or as an integrated whole, as follows~~:	Helps U.S. and non-U.S. companies establish a structured FATCA program – from identifying U.S. owners and customers, and managing their documentation, to generating reports to meet United States Internal Revenue Service requirements. The solution enables complete life cycle assessment for FATCA-status identification, management and reporting, ensuring compliance while minimizing operational and customer impact.

~~Institutional Trade Surveillance~~ provides scenario management for market manipulation and abuse, fair dealings with customers, and insider trading across asset classes such as equities, fixed income, swaps and futures. It includes specific tools for desk supervision, control room surveillance, and trade reporting practices, to ensure comprehensive oversight and sales and trading compliance.

We also deliver a real-time, cloud-based, institutional trade surveillance solution, following our acquisition of Redkite Financial Markets in October 2012. Furthermore, by leveraging core capabilities from our Enterprise division’s Proactive Compliance for Consumer Protection solution, we now have the capability to combine trade surveillance with interaction surveillance including voice, email, chat and more.

~~Retail Trade Surveillance~~ addresses organization-wide compliance across a broad range of retail sales practices relating to Know Your Customer and Suitability requirements. It enables local and regional branch management to effectively delegate supervision across products and provides automated desk supervision with electronic access and sign-off on individual trades.

~~Employee Trade Surveillance~~ provides Conflicts of Interest and Rogue Trading detection. It completely automates the submission, review, and approval process for employees’ personal trades, including post-trade reconciliation. It analyzes transactions against rules mapped to the organization’s employee trading policies and procedures.

~~Vertical Implementations~~

NICE Financial Crime & Compliance solutions are implemented by financial institutions of all kinds such as retail banks, commercial banks, and brokerages, as well as industry regulators, government agencies, insurance companies and energy firms.

~~III. NICE Security, Safety & Operations Solutions~~

~~Introduction to the Solutions~~

~~NICE~~’s Security Solutions help organizations capture, analyze, and operationalize Big Data to anticipate, manage, and mitigate security and safety risks, improve operations, and ensure the safety of the general public. The NICE solutions provide valuable insights that enable enterprises and governments to take the next-best-action at the right time by correlating structured and unstructured data from multiple sensors and channels, detecting irregular patterns, and recognizing trends.

~~Security Business Strategy~~

~~An important part of our Security Business strategy is to drive deployment of end-to-end security solutions.~~

We are in a unique position to deliver a comprehensive solution: an integrated portfolio consisting of our proven IP video surveillance management system, video analytics suite, public safety and multimedia reconstruction capabilities, and an advanced security management solution that offers complete situational awareness, integrating information from multiple sensors.

We intend to leverage this broad solution portfolio to strengthen our leading position and accelerate the penetration into public transportation, airports, financial services, critical facilities, city centers, public safety agencies, government institutes and corporate facilities markets, while expanding the offering to our existing installation base.

It is also our strategy to continue to address security, safety and operational risks in three main areas: Cross-time, Cross-organizational Roles, and Cross-domain. Cross-time impacts the entire lifecycle of an event—before, during and after, for planning, real-time situational awareness and management, investigation and improvement. Cross-organizational Roles means solutions for the operator in the control room, the investigator, as well as tools for decision makers. Cross-domain refers to our offering which expands beyond the traditional domain of security and safety into the domain of operations.

We also plan to address organizations looking to adopt tools that are adequate not only for the management of their security and safety situations, but such that can contribute to operational gains such as increased efficiency and service-level.

~~Our Solutions~~’ ~~Core Capabilities~~

~~Multi-sensor event management:~~ An open architecture that integrates data from third-party devices and systems and delivers real-time alerts and information from and about these systems for complete situational awareness and management.

~~Real-time analytics and correlation:~~ Proprietary, field-proven algorithms on security data, such as CCTV video feed and audio communications, analyze in real time and correlate data from multiple security sensors to identify security situations or threats.

~~Real-time decisioning and resolution:~~ Following analysis, NICE technology highlights decision data and trends, initiates alerts, and provides adaptive workflows to decision makers, enabling the next-best-action for effectively resolving situations.

~~Multimedia reconstruction:~~ ~~The ability to integrate text, video, voice recordings, and others into holistic incident timelines for complete investigation and debriefing capabilities.~~

~~Trend analysis and reporting:~~ ~~Data analytics, reporting, and trend analysis that transforms Big Data into operational intelligence for defining and improving best practices, and predicting and preventing future events.~~

~~Addressing Strategic Business & Operational Needs~~

~~The NICE Security portfolio is comprised of five solution families that correlate and address the following needs:~~

~~Incident Debriefing and Investigation~~, ~~comprised of:~~

~~NICE Inform~~, helping public safety agencies and organizations across various industries consolidate and manage multimedia incident information efficiently and effectively. It captures and processes event information from a variety of media: audio, video, text, Computer-Aided Dispatch (CAD) systems, Geographic Information Systems (GIS), and others. It combines data from multiple sources for a complete, chronological timeline to accurately and efficiently reconstruct and investigate events.

~~Public Safety Emergency Response Optimization~~, ~~comprised of~~:

~~NICE Audio Recording~~, a wide range of recording platforms that address the needs of command and control centers and Air Traffic Control operations. These solutions can automatically record, analyze, store, quickly retrieve, and instantly replay Time-Division Multiplexing (TDM) and IP voice calls. TDM and VoIP recordings can be used to ensure compliance with regulations, provide audio evidence, and manage and improve departmental quality and productivity.

~~NICE Inform~~ helps emergency centers manage multimedia incident information efficiently and effectively. It captures all available data, providing all the facts as they unfold and increasing the chances that all vital evidence is available to review.

~~Video Surveillance & Analytics~~, ~~comprised of~~:

~~NiceVision Net~~, a complete, end-to-end IP video surveillance management solution. The solution includes Smart Video Recorders (SVRs), high-performance encoders and decoders, an advanced video analytics suite, and feature-rich event management and control room visualization. Each component of the solution is managed from the central NiceVision Control Center.

~~NiceVision Video Analytics~~3. Fraud Prevention - , ~~fully~~solutions available individually or as an integrated into the video recording infrastructure, it includes field-proven applications for intrusion management, crowd management, and situation indication. The solution also presents alerts, highlights decision data, and facilitates complex surveillance operations.whole

Solution	4.Description
Card Fraud	~~Situation Management~~Enables card issuers, acquirers and processors to detect fraudulent transactions, whether ATM, PIN, signature point-of-sale, or without a physical card. The Actimize Digital & Mobile Wallet Fraud solution protects customers from digital account takeover, and protects companies from fraud liability and negative brand reputation. Monitors and protects a full range of wallet activity, including card/account provisioning, card present and not present purchases, person-to-person transfers, bill payments, and account-service events. The Actimize Pre-Paid Card Fraud solution identifies and prevents fraud in the pre-paid sector. From ATM to point-of-sale (POS) and Card-Not-Present (CNP), ~~comprised~~ all transactions can be identified, interdicted on and alerted in real time. Market leading profile based behavioral analytics takes into account all available transaction, reference and location data to provide holistic coverage of: card and account takeover.
Remote Banking	Provides end-to-end protection against account takeover from online, mobile, IVR, and contact center transactions. Unique industry-leading analytic models accurately detect anomalies and patterns in real time and Actimize open analytics offer the flexibility to develop in-house models and strategies. A central “risk hub” enables the sharing of internal and third-party data from multiple channels for fraud and cyber detection, operations, and investigations. By accurately and efficiently coordinating customer lifetime value, transaction amounts and service history, the solution optimizes fraud prevention by offering greater insight into cross-channel authentication and facilitates interdiction strategies.
Commercial Banking	Specifically designed to address the complexities facing commercial banks, applying targeted analytics to identify fraudulent payments among the high volume of legitimate transactions processed by commercial clients each day. The solution protects payments from origination through approval and processing, allowing organizations to interdict in real time to address suspicious activity and ensure an excellent customer experience.
Employee Fraud	Offers advanced analytic monitoring capabilities and flexible configuration options to detect fraudulent employee activity and violation of corporate policy across the enterprise, business lines, and channels. Comprehensive investigation tools are supported by multichannel data ingest, multi-country data and policy requirement configurations, secure and auditable user access levels, and automated configurable workflows, enabling banks to efficiently sift through employee audit reports and build cases to support fraudulent employee activity.
Deposit Account Fraud	Helps institutions minimize deposit fraud losses by providing comprehensive account activity monitoring. The solution analyzes risk across silos of data and lines of business, consolidates suspicious activity notifications into account and customer level alerts, and allows real-time decisioning to safely accelerate fund availability and enhance customer satisfaction.

~~NICE Situator~~, enabling automatic, real-time situation planning, response, and analysis to improve situational awareness and incident handling. It integrates, analyzes, and correlates information from a wide array of sensors and systems into a common operating picture. It then applies standard operating procedures and automated response plans, ensuring that everyone in the operational chain is aware of what is happening and what needs to be done.

~~Intelligence & Law Enforcement~~, ~~comprised of~~:

The NiceTrack Target 360° suite provides end-to-end solutions for communication interception, analysis and investigation. The solutions support the entire intelligence production cycle both in real-time and offline, and helps law enforcement and intelligence agencies, national and internal security agencies, and Signals Intelligence (SIGINT) organizations fight organized crime, drug trafficking, terrorist activities and other threats to national security. The solutions are designed to provide full, 360° target monitoring by addressing the dynamic and complex nature of communications and the Internet arena.

To provide a comprehensive intelligence picture, NiceTrack offers a unified platform for the interception, collection, processing and analysis of telephony and internet communications and data from of all types of networks and applications. It includes various products and modules:

~~Advanced IP and voice monitoring for simplifying the work of the intelligence analyst and generating meaningful intelligence products;~~

~~3D accurate positioning for locating high value targets in real-time;~~

~~Open Source Intelligence (OSINT) for harvesting data from the World Wide Web and social networks;~~

~~Speech and text analytics for creating effective intelligence production;~~

~~Pattern analysis for automatically uncovering hidden communication patterns within billions of daily intercepted interactions; and~~

4. Financial Markets Compliance - comprised of solutions available individually or as an integrated whole

Solution	·Description
Institutional Trade Surveillance	~~Satellite interception~~ As a real-time, cloud-based, institutional trade surveillance solution, it provides scenario management for ~~collection, retention~~identifying market manipulation and ~~analysis~~abuse, fair dealings with customers, and insider trading across asset classes (such as equities, fixed income, swaps and futures). It includes specific tools for desk supervision, control room surveillance, and trade reporting practices, to ensure comprehensive oversight and sales and trading compliance. By leveraging communication surveillance capabilities from NICE’s Customer Interactions business, customers benefit from holistic and integrated surveillance solutions that include trade, voice, email, chat and more.
Retail Trade Surveillance	Addresses organization-wide compliance across a broad range of ~~voice, fax, video, email~~retail sales practices relating to Know Your Customer (“KYC”) and ~~other data transmitted via fixed~~Suitability requirements. It enables local and ~~mobile satellite communication networks.~~regional branch management to effectively delegate supervision across products and provides automated desk supervision, with electronic access and sign-off on individual trades.
Employee Trade Surveillance	Detects Conflicts of Interest and Rogue Trading. It completely automates the submission, review and approval process for employees’ personal trades, including post-trade reconciliation. It analyzes transactions against rules mapped to the organization’s employee trading policies and procedures.
Enterprise Conflicts Management	Offers a unified approach to maintain controls and detect conflicts of interest before they occur on a global, enterprise-wide scale. Enables organizations to effectively manage employee requests for personal trades by evaluating details of the proposed trade in real time and automatically determining if the request should be approved, rejected, or escalated to a supervisor for approval. The solution includes detection models that compare executions with the employee’s trade request history to determine whether the trade was pre-cleared and approved and to reconcile the trade details with the terms and conditions of the approved trade request.
Sales Practices and Suitability	Provides coverage for a broad range of sales practices and issues, helping firms meet current and future global regulatory requirements and ensure investment recommendations are consistent with each client’s investment objectives and suitability profiles. It also includes a comprehensive toolset to automate sales practice compliance processes. By automating oversight and supervision, firms can ensure consistency and maintain a consolidated audit trail, lowering regulatory risk while improving productivity and efficiency.

~~Vertical Implementations~~

NICE ~~delivers proactive maintenance and upgrades for installed systems and~~ offers flexible service level agreements ~~(SLAs)~~ to meet ~~the level of service~~ our ~~customers need.~~

customers’ needs. Our solutions are generally sold with a warranty for repairs of hardware and software defects ~~and~~or malfunctions. ~~Our customers may renew maintenance agreements from our dealers or directly from us.~~ Software maintenance includes an enhancement ~~support~~ program with ongoing delivery of “like-for-like” ~~unspecified~~ upgrade releases, service packs and hot fixes.

Proactive Maintenance addresses issues before they can significantly impact our customers’ businesses. These offerings include:

Proactive Health Checks – Technical experts perform system-level audits to ensure ongoing compliance with operational specifications.

Network Operations Center – A 24/7 function that proactively monitors NICE-hosted and customer-premises environments with triage, resolution and escalation of system alarms.

Manufacturing and Source of Supplies

~~Our products~~The vast majority of our solutions are ~~built in accordance with industry standard infrastructure~~software-based and are ~~PC compatible. The~~deployed by customers on standard commercial servers.

There is a small portion of our products that have certain hardware elements ~~in our products~~that are based primarily on standard commercial off-the-shelf components and utilize proprietary in-house developed circuit cards and algorithms, ~~and~~ digital processing techniques and software. ~~We also have “software only” solutions for use on standard commercial servers.~~These products are IT-grade compatible.

We manufacture those of our products that contain hardware elements through subcontractors, with the exception of our CSS product line (formerly CyberTech) which is manufactured by us. Under manufacturing agreements with Flextronics Israel Ltd. ("Flextronics"), a subsidiary of a global electronics manufacturing services provider, with Bynet Communications Ltd. (“Bynet”), and with EMET Computing Ltd. (“EMET”), Flextronics, Bynet, and EMETsubcontractors. Our manufacturers provide us with turnkey manufacturing solutions including order receipt, purchasing, manufacturing, testing, configuration, inventory management and delivery to ~~customers. These agreements cover~~customers for all of our product lines (with the exception of our CSS product line), including our voice recording family of products, our video product lines, our upgrade lines and our spare parts and return material authorization (RMA).lines. NICE is entitled to, and exercises, various control mechanisms and supervision over the entire production process. In addition, ~~Flextronics,~~ the manufacturer of a significant portion of ~~our~~such products, which is a subsidiary of a global electronics manufacturing service provider, is obligated to ensure the readiness of a back-up site in the event that the main production site is unable to operate as required. We believe these outsourcing agreements provide us with a number of cost advantages due to ~~Flextronics’~~such manufacturer's large-scale purchasing power, and greater supply chain flexibility.

Some of the components we use have a single approved manufacturer while others have two or more options for purchasing. In addition, we maintain an inventory for some of the components and subassemblies in order to limit the potential for interruption. We also maintain relationships directly with some of the more significant manufacturers of our components. Although certain components and subassemblies we use in our existing products are purchased from a limited number of suppliers, we believe that we can obtain alternative sources of supply in the event that such suppliers are unable to meet our requirements in a timely manner.

Quality control is conducted at various stages at our manufacturing outsourcers’ facilities and at their subcontractors’ facilities. We generate reports to monitor our operations, including statistical reports that track the performance of our products from production to installation. This comprehensive data allows us to trace failure and to perform corrective actions accordingly.

We have qualified for and received the ISO-9001:~~2000~~2008 quality standard for all of our products, as well as the ISO ~~27001~~27001:2013 and ISO 14001:2004 certifications.

Research and Development

We believe that the development of new products and the enhancement of existing products are essential to our future success. Therefore, we intend to continue to devote substantial resources to research and new product development, and to continuously improve our systems and design processes in order to reduce the cost of our products. Our research and development efforts have been financed through our internal funds and programs sponsored through the Government of Israel and the European community. We believe our research and development effort has been an important factor in establishing and maintaining our competitive position. Gross expenditures on research and development in ~~2010, 2011,~~2013, 2014 and ~~2012~~2015 were approximately ~~$102.2~~$117.9 million, ~~$113.7~~$126.0 million, and ~~$126.6~~$132.0 million respectively, of which approximately ~~$3.8~~$2.1 million, ~~$3.4~~$2.5 million, and ~~$4.1~~$2.2 million, respectively, were derived from third-party funding, and ~~$1.3~~$0.4 million, ~~$1.2~~$0.4 million, and ~~$1.1~~$1.4 million, respectively, were capitalized software development costs.

In ~~2012,~~2015, we were qualified to participate in 158 programs funded by the ~~Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor ("OCS")~~OCS to develop generic technology relevant to the development of our products. Such programs are approved pursuant to the Law for the Encouragement of Industrial Research and Development, 1984, or the Research and Development Law, and the regulations promulgated thereunder. We were eligible to receive grants constituting between 40% and 66% of certain research and development expenses relating to these programs. Some of these programs ~~are members of~~were approved as programs ~~approved~~ for companies with large research and development activities and some of these programs are ~~members~~in the form of membership in certain Magnet consortiums. Accordingly, the grants under these programs are not required to be repaid by way of royalties. However, the restrictions of the Research and Development Law described below apply to these programs. In ~~2010, 2011,~~2013, 2014, and ~~2012~~2015 we received a total of ~~$3.5~~$1.6 million, ~~$3.1~~$2.2 million, and ~~$2.5~~$2.1 million from the OCS programs, respectively, and we anticipate receiving approximately ~~$1.4~~$0.5 million in ~~2013~~2016 from ~~2012~~2014 and 2015 approved programs.

The Research and Development Law generally requires that the product incorporating know-how developed under an OCS-funded program be manufactured in Israel. However, upon the approval of the OCS (or notification in the event set forth below, as the case may be), some of the manufacturing volume may be performed outside of Israel, provided that the grant recipient pays royalties at an increased rate, which may be substantial, and the aggregate repayment amount is increased, which increase might be up to 300% of the grant (depending on the portion of the total manufacturing volume that is performed outside of Israel). Following notification (rather than approval) to the OCS (and provided the OCS did not object), up to 10% of the grant recipient’s approved Israeli manufacturing volume, measured on an aggregate basis, may be transferred out of Israel, subject to payment of the increased royalties referenced above. The OCS is also authorized to approve the transfer of manufacturing rights outside of Israel in exchange for an import of different manufacturing into Israel as a substitute, in lieu of the increased royalties. The Research and Development Law also allows for the approval of the program in cases in which the applicant declares that part of the manufacturing will be performed outside of Israel or by non-Israeli residents and the OCS is convinced that doing so is essential for the execution of the program. This declaration will be a significant factor in the determination of the OCS whether to approve a program and the amount and other terms of benefits to be granted. The increased royalty rate and repayment amount may be required in such cases.

The Research and Development Law also provides that know-how developed under an approved research and development program may not be transferred to third parties without the approval of the OCS. Such approval is not required for the sale or export of any products resulting from such research or development. The OCS, under special circumstances, may approve the transfer of OCS-funded know-how outside Israel, including, in the ~~following cases: (a)~~event of a sale of the know how or sale of the grant recipient, provided that the grant recipient pays to the OCS a portion of the sale price paid in consideration for such OCS-funded know-how or in consideration for the sale of the grant recipient itself, as the case may be, which portion will not exceed six times the amount of the grants received plus interest (or three times the amount of the grant received plus interest, in the event that the recipient of the know-how has committed to retain the R&D activities of the grant recipient in Israel after the transfer); (b) the grant recipient receives know-how from a third party in exchange for its OCS-funded know-how; (c) such transfer of OCS-funded know-how arises in connection with certain types of cooperation in research and development activities; or (d) if such transfer of know-how arises in connection with a liquidation by reason of insolvency or receivership of the grant recipient..

The Research and Development Law imposes reporting requirements with respect to certain changes in the ownership of a grant recipient. The law requires the grant recipient and its controlling shareholders and non-Israeli interested parties to notify the OCS of any change in control of the recipient, or a change in the holdings of the means of control of the recipient that results in ~~a non-Israeli~~ becoming an interested party directly in the recipient, and if the interested party is non-Israeli, requires the ~~new non-Israeli interested~~ party to undertake to the OCS to comply with the Research and Development Law. In addition, the rules of the OCS may require prior approval of the OCS or additional information or representations in respect of certain of such events. For this purpose, “control” is defined as the ability to direct the activities of a company other than any ability arising solely from serving as an officer or director of the company. A person is presumed to have control if such person holds 50% or more of the means of control of a company. “Means of control” refers to voting rights or the right to appoint directors or the chief executive officer. An “interested party” of a company includes a holder of 5% or more of its outstanding share capital or voting rights, its chief executive officer and directors, someone who has the right to appoint its chief executive officer or at least one director, and a company with respect to which any of the foregoing interested parties owns 25% or more of the outstanding share capital or voting rights or has the right to appoint 25% or more of the directors. Accordingly, any non-Israeli who acquires 5% or more of our ordinary shares or ADSs will be required to notify the OCS that it has become an interested party and to sign an undertaking to comply with the Research and Development Law. Furthermore, the Research and Development Law imposes reporting requirements in the event that proceedings commence against the grant recipient, including under certain applicable liquidation, receivership or debtor's relief law or in the event that special officers, such as a receiver or liquidator, are appointed to the grant recipient.

Failure to satisfy the Research and Development Law’s requirements may subject us to mandatory repayment of grants received by us (together with interest and penalties), as well as expose us to criminal proceedings. In addition, the Government of Israel may from time to time audit sales of products which it claims incorporates technology funded through OCS programs which may lead to additional royalties being payable on additional products.

The funds available for OCS grants out of the annual budget of the State of Israel were reduced in recent years, and the Israeli authorities have indicated in the past that the government may further reduce or abolish OCS grants in the future. Even if these grants are maintained, we cannot presently predict what would be the amounts of future grants, if any, that we might receive.

We may participate from time to time in the European Community Framework ~~Programme~~Program for Research, Technological Development and Demonstration, which funds and promotes research. There are no royalty obligations associated with receiving such funding. From time to time we may apply for new grants under the Framework Programme. During 2010 and 2011 we were selected to participate in four FP-7 programs. The programs will continue for three and half years, with a total expected grant of approximately EUR 1.6 million. In addition, we were selected to coordinate one of these programs.

47Intellectual Property

~~Intellectual Property~~

We currently rely on a combination of trade secret, patent, copyright and trademark law, together with non-disclosure and non-compete agreements, to establish and/or protect the technology used in our systems.

We currently hold ~~110~~135 U.S. patents and 7450 patents issued in additional countries covering substantially the same technology as the U.S. patents. We have over ~~103~~72 patent applications pending in the United States and other countries. We believe that the improvement of existing products and the development of new products are important in establishing and maintaining a competitive advantage. We believe that the value of our products is dependent upon our proprietary software and hardware continuing to be “trade secrets” or subject to copyright or patent protection. We generally enter into non-disclosure and non-compete agreements with our employees and subcontractors. However, there can be no assurance that such measures will protect our technology, or that others will not develop a similar technology or use technology in products competitive with those offered by us. In most of the areas in which we operate, third parties also have patents which could be found applicable to our technology and products. Such third parties may include competitors, as well as large companies, which invest millions of dollars in their patent portfolios, regardless of their actual field of business. Although we believe that our products do not infringe upon the proprietary rights of third parties, there can be no assurance that one or more third parties will not make a contrary claim or that we will be successful in defending such claim.

~~From~~In the past we received, from time to time, ~~we receive~~ “cease and desist” letters claiming patent infringements. ~~However,~~Although there are currently no formal infringement claims or other actions ~~have been filed with respect~~pending against us, in the event that we are required to defend ourselves against any such ~~alleged infringement, except for past claims which have since been settled or dismissed. Defending infringement~~ claims or ~~other claims~~actions, we could ~~involve~~be subject to substantial costs and diversion of management resources.

In addition, to the extent we are not successful in defending such claims, we may be subject to injunctions with respect to the use or sale of certain of our products or to liabilities for damages and may be required to obtain licenses which may not be available on reasonable terms. Any of these may have a material adverse impact on our business or financial condition.

We own the following trademarks and/or registered trademarks in different countries: ACTIMIZE, Actimize logo, ~~Alpha,~~Adaptive WFO, Customer Engagement Analytics, Decisive Moment, eGlue Interact, ~~FAST, FAST alpha Silver,~~ Fortent, Fortent Logo, IEX, Insight from Interactions, Intent. Insight. Impact., Know More Risk Less, Last Message Replay, ~~Mass Detection Center,~~ Mirra, NICE, NICE Analyzer, NICE Engage, NICE Engage Platform, NICE Interaction Management, NICE Sentinel, NICE Inform, NICE Inform Lite, NICE Inform Media Player, NICE Inform Verify, NICE Logo, NICE Perform, NICE ~~Security~~Work Force Management, NICE Incentive Compensation Management, NICE Real Time Solutions, NICE Trading Recording, NICE ~~Situator,~~Proactive Compliance, NICE Seamless, NICE Security Recording, NICE SmartCenter, NICE Systems, NiceLog, NiceTrack, NiceTrack IP Probe, NiceTrack Location Tracking, NiceTrack Mass Detection Center, NiceTrack Monitoring Center, NiceTrack Pattern Analyzer, NiceTrack Traffic Analysis, NiceVision, NiceVision Alto, NiceVision Analytics, NiceVision Control Center, NiceVision Digital, NiceVision Net, NiceVision NVSAT, NiceVision Pro, Open Situation Management, Own the Decisive Moment, Scenario Replay, ~~Searchspace,~~ Syfact, Syfact Investigator and TotalView.

Seasonality

~~Our~~The majority of our business ~~is in the process of transitioning to~~operates as an enterprise software model, which is characterized, in part, by uneven business cycles throughout the year and under which a significant number of our licenses are entered into in the fourth quarter of each calendar year. We believe that seasonality in our business may become more prominent as the proportion of advanced software applications out of our overall sales mix continues to increase. We believe that these seasonal factors primarily reflect customer spending patterns and budget cycles. While seasonal factors such as these are common in the software and technology industry, this pattern should not be considered a reliable indicator of our future revenue or financial performance. Many other factors, including general economic conditions, also have an impact on our business and financial results. See “Risk Factors” under Item 3, "Key Information" of this annual report for a more detailed discussion of factors which may affect our business and financial results.

Regulation

Export Restrictions

The export of certain defense products from Israel, such as our NiceTrack line of products, requires a permit from the Israeli Ministry of Defense (MOD). In addition, the sale of products to certain customers, mostly armed forces, also requires a permit from the Israeli Ministry of Defense. In 2012, the vast majority of our sales were not subject to such permit requirements. To date, we have encountered no difficulties in obtaining such permits. However, the MOD notifies us from time to time not to conduct business with specific countries that are undergoing political unrest, violating human rights or exhibiting hostility towards Israel, or imposes certain requirements as a condition to NICE being permitted to export products which are under the control of the MOD. We may ~~be unable to obtain permits for our intelligence products we could otherwise sell in particular countries in the future.~~

~~We may also~~ be subject to applicable export control regulations in ~~other~~ countries from which we export goods and services, including the United States. Such regulations may apply with respect to product components that are developed or manufactured in, or shipped from, the United States, or with respect to certain content contained in our products. There are restrictions that apply to software products that contain encryption functionality, especially in the United States and Israel. In the event that our products and services are subject to such controls and restrictions, we may be required to obtain an export license or authorization and comply with other applicable requirements pursuant to such regulations.

European Environmental Regulations

Our European activities require us to comply with Directive 2002/95/EC of the European Parliament on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (“RoHS 1”), ~~which came into effect on July 1, 2006,~~ and ~~the new~~ Directive 2011/65/EU of the European Parliament on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment ~~which came into effect on January 1, 2013~~ (together with RoHS 1, “RoHS”). RoHS provides, ~~inter alia~~,among other things, that producers of electrical and electronic equipment may not place new equipment containing ~~lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls and polybrominated diphenyl ethers,~~certain materials, in amounts exceeding certain maximum concentration values, on the market in the European Union. We are also required to comply with the European Community Regulation on chemicals and their safe use (EC 1907/2006) that deals with the Registration, Evaluation, Authorization and Restriction of Chemical substances (“REACH”), Currently SVHC-168), which ~~came into effect on June 1, 2007. REACH~~ requires producers to manage the risks from chemicals used in their products and to provide safety information on the substances found in their products.

Our products meet the requirements of the RoHS and REACH directives and we are making every effort in order to maintain compliance, without adversely affecting the quality and functionalities of our products. If we fail to maintain compliance, including by reason of failure of our suppliers to comply, we may be restricted from conducting certain business in the European Union, which could adversely affect our results of operations.

Our European activities also require us to comply with Directive 2002/96/EC of the European Parliament on Waste Electrical and Electronic Equipment (“WEEE”). The WEEE directive covers the labeling, recovery and recycling of IT/Telecommunications equipment, electrical and electronic tools, monitoring and control instruments and other types of equipment, devices and items, and ~~already partly came into effect on August 13, 2005. Our products fall within the scope of the WEEE directive, and~~ we have set up the operational and financial infrastructure required for collection and recycling of WEEE, as stipulated in the WEEE directive, including product labeling, registration and the joining of compliance schemes. We are taking and will continue to take all requisite steps to ensure compliance with this directive. If we fail to maintain compliance, we may be restricted from conducting certain business in the European Union, which could adversely affect our results of operations.

Similar regulations are being formulated in other parts of the world. We may be required to comply with other similar programs that might be enacted outside Europe in the future.

Competition

The Customer Interactions Management market is highly competitive and includes numerous companies offering a broad range of features and capabilities. As the market is still developing, we anticipate the introduction of new and enhanced products by the players in the market.

We believe that our solutions have aseveral competitive ~~advantage based on~~advantages (as set forth above in this Item 4 – “Business Overview”) as well as: their ~~ability to serve large, multi-site, multi-channel, multi-touch point customer service organizations~~scale, performance and ~~their holistic integration~~accuracy, comprehensiveness of solutions and ~~capture of various structured and unstructured data sources, their ability to extract insight with a multi-dimensional approach, and to drive cross-departmental action to impact business results.~~

~~In the WFO suite domain we are facing competition from vendors such as Aspect, Avaya, Software Inc., Callabrio, Genesys, Interactive Intelligence Inc. and Verint Systems.~~ broad functionality.

In Customer Interactions space, we are seeing more CRM and Business Intelligence companies offer solutions that compete with our Customer Interactions analytics offerings. Also, with the ~~Real-time Cross-channel Analytics arena~~shift to cloud, CCaaS providers are offering complete solutions that include several of our WFO capabilities. In this market, we ~~face competition from~~compete against WFO vendors, as well as contact center infrastructure vendors that expand their offering to include some WFO or analytics capabilities, such ~~as Hewlett-Packard(through its acquisition of Autonomy Corp.), CallMiner, ClickFox, Infor, Mattersight (formerly eLoyalty), Nexidia, Pegasystems,~~vendors include Aspect Technology, Genesys and ~~Utopy (now Genesys). Some of these vendors provide solutions which are not Real-time in nature and some provide solutions focused on one channel analytics (e.g. speech analytics).~~Verint Systems,

In ~~the Real-Time Decisioning and Guidance market we face competition from vendors such as Oracle ATG, Jacada and OpenSpan.~~

Following our recent acquisition of Fizzback, we introduced our Voice of the Customer solution for holistic view of the customer in the Customer Experience Management market. In this domain we are facing competition from vendors such as Medallia and ResponseTek.

~~We recently launched our Contact Center Fraud Prevention solution, which complements our cross divisional offering. We now face competition against vendors that offer Voice Biometrics such as Victrio.~~

As we are expanding our Software as a Service (SaaS) offering we are facing competition from some of our traditional competitors mentioned above, offering their solution in a SaaS model as well as competition from specific WFO providers offering their solution in a SaaS model only such as Interactive Intelligence and InContact.

A competitive advantage in the Customer Interactions Management market can be achieved through differentiation in product offering or business model. With respect to products, we consider breadth of offering, application functionality, system performance and reliability, the ability to integrate with a variety of external systems and ease of use as key factors. With respect to the business model, we consider marketing and distribution capacity, price and global service and support capacity as key factors. We believe that NICE established a competitive advantage in the market based on our ability to service large, multi-site, multi-channel, multi-touch point customer service organizations and their holistic integration and our solutions capabilities to capture various structured and unstructured data sources, to extract insight with a multi-dimensional approach, and to drive cross-departmental action to impact business results. Furthermore, we believe the strength of our installed customer base alongside the size and capabilities of our global distribution network, our business partners, and our global service and support capacity provide us a significant differentiation factors in the market.

~~The driving forces of the~~ Financial Crime and Compliance ~~software solutions market are the introduction~~we compete against niche vendors that provide one subset of ~~new regulations~~functionality to protect against a specific risk and ~~financial crime patterns~~against vendors that impact the entire financial services industry. The competitive landscape is highly fragmented. We face no single competitor that competes with us across all our solution areas. That being said, we face significant competition for each solution that we offer. We believe that our focus on the financial services (and related) market provides us deep domain expertise that combined with our fast time to market, ability to provide service across the enterprise using one core platform and our ability to serve specific “point” solutions, all serve as levers to establish dominance in the market. Our software solutions face competition from custom solutions developed internally by financial services institutions, as well as software and other solutions offered by commercial competitors thata more comprehensive offering. Such vendors include ~~ACI Worldwide,~~ BAE Systems, FICO, Oracle ~~Corporation, Progress Software,~~and SAS Institute ~~Inc. and Sungard Data Systems.~~

In the public safety voice recording for emergency calls market our ability to deliver an integrated recording system that can capture voice, video, data and meta-data information from trunk radio systems and computer aided dispatch systems, provide us a superior market position in respect to our competitors mainly in the large high-end emergency centers. Another differentiating factor can be found in our applications for scenario reconstruction connecting multiple multimedia sources, including voice, video, data, GIS and meta-data together. Some of our competitors in the public safety market include ASC Telecom, Redbox Recorders, Ultra Electronics AudioSoft and Verint Systems.

In the video platform, applications and analytics market we compete against, amongst others, Bosch Security Systems, Genetec Inc., IndigoVision Group, Milestone Systems A/S, On-Net Surveillance Systems, Schneider Electric (formerly Pelco) and Verint Systems. In this fragmented market we offer a full solution based on our self-developed recording, management software, networking devices and real-time content analysis. This solution provides open interfaces to third party devices and applications and creates a competitive advantage for us in this market.

There are a few competitors who have products in the Physical Security Information Management (PSIM) market that compete with our Situator platform. These include, amongst others, ADT Security Services (formerly Proximex), CNL Software, Verint Systems and VidsSys. We offer a comprehensive and open solution that integrates with dozens of systems and sensors. This has spelled into a significant advantage for us in the market. Furthermore, the domain expertise we have gained across each of our verticals means that we can tailor business logic (such as workflows and rules), specifically to the customer requirements.

There are a number of competitors in the telecommunications monitoring market, having products competing with our NiceTrack family of solutions. The primary ones are Atis, BAE Systems, JSI Telecom, Pen-link Ltd., SS8 Networks, Inc., Trovicor and Verint Systems. We believe that our solutions offer innovations that provide law enforcement agencies and intelligence organizations the tools and capabilities they require to meet the challenges of today’s advanced telecommunications world.

Moreover, major enterprise software vendors, such as those from the traditional enterprise business intelligence and business analytics sector, Customer Relationship Management (or CRM), or infrastructure players (mostly telephony or switch vendors), may decide to enter our market space and compete with us in this emerging opportunity, either by internal development of comprehensive solutions or through acquisition of any of our existing competitors.

Organizational Structure

The following is a list of our significant subsidiaries, including the name and country of incorporation or residence. Each of our significant subsidiaries is wholly-owned by us.

Name of Subsidiary		Country of Incorporation or Residence

Nice Systems Australia PTY Ltd.		Australia
NICE Systems Technologies Brasil LTDA		Brazil
NICE Systems Canada Ltd.		Canada
Nice Systems China Ltd.		China
Nice Systems S.A.R.L.		France
NICE Systems GmbH		Germany
NICE APAC Ltd.		Hong Kong
NICE Systems Kft		Hungary
Nice Interactive Solutions India Private Ltd.		India
Nice Technologies Ltd.		Ireland
Actimize Ltd.		Israel
Nice Japan Ltd.		Japan
NICE Technologies Mexico S.R.L.		Mexico
~~CyberTech B.V.~~		~~Netherlands~~
~~IEX Corporation~~NICE Systems B.V.		Netherlands
Nice Systems (Singapore) Pte. Ltd.		Singapore
Nice Switzerland AG		Switzerland
Actimize UK Limited		United Kingdom
~~CyberTech~~NICE Systems Technologies UK ~~Limited~~		~~United Kingdom~~
~~Fortent Limited~~		~~United Kingdom~~
~~Merced Systems~~ Limited		United Kingdom
NICE Systems UK Ltd.		United Kingdom
~~Redkite Financial Markets Ltd.~~ ~~River Projects International Limited~~		~~United Kingdom~~ ~~United Kingdom~~
~~The Fizzback Group Limited~~		~~United Kingdom~~
Actimize ~~Inc.~~		~~United States~~
~~Cybertech North America L.L.C.~~		~~United States~~
~~IEX Corporation~~		~~United States~~
~~Merced Systems~~ Inc.		United States
Nice Systems Inc.		United States
Nice Systems Latin America, Inc.		United States
Nice Systems Technologies Inc.		United States

Property, Plants and Equipment

Our executive offices and engineering, research and development operations are located in North Ra’anana, Israel. The offices ~~include three buildings, which occupy: (i)~~occupy approximately ~~116,000~~320,811 square feet (which are partially sub-leased as detailed below), with an annual rent and maintenance fee of approximately $3.15 million, paid in NIS and linked to the Israeli consumer price index, (ii) approximately 64,000 square feet, with an annual rent and maintenance fee for this facility of approximately $1.58 million, paid in NIS and linked to the Israeli consumer price index, and (iii) a new building completed during August 2012, of approximately 118,000 square feet, with an annual rent and maintenance fee for this facility of approximately $2.6$11.7 million, paid in NIS and linked to the Israeli consumer price index. The lease for these ~~three buildings~~offices in our Northern Ra’anana facilities will expire in ~~December 2022~~October 2022.

Due to the sale of our Cyber and ~~fully replaced~~Intelligence and Physical Security business units during 2015, some of our office space was sub-leased and our portion of the ~~Ra’anana Central Offices~~annual rent and maintenance fee is now approximately $9.0 million, paid in ~~January 2013.~~NIS and linked to the Israeli consumer price index.

We have leased various other offices and facilities in several other countries. Our ~~material leased facilities~~headquarters in each region consist of the ~~following:~~following facilities:

Our ~~new~~ North American headquarters in Paramus, New Jersey ~~which~~ occupies approximately ~~34,500~~34,416 square feet and includes training and lab facilities. We also have an additional office in New York, which occupies an aggregate ~~48,000~~of approximately 36,674 square ~~feet; both~~feet. Both locations are used as office space. In 2016 we plan to consolidate our North American locations into new leased offices in Hoboken, New Jersey.

Our EMEA headquarters in Southampton, U.K., occupies approximately 11,151 square feet. We also have an additional office in London, which occupies approximately 22,504 square feet. Both locations are used as office space and include a lab; and

Our APAC headquarters in Singapore occupies approximately 7,788 square feet and is used as office space.

We also have additional material leased facilities, consisting of the following:

Our office in Denver, Colorado ~~which~~ occupies approximately 27,063 square feet and is used as office space and includes a training facility and lab;

Our office in Richardson, Texas ~~which~~ occupies approximately 37,564 square feet and is used as office space;

Our office in ~~Southampton, U.K., which~~Pune, India occupies 26,878 square feet and includes a training center; and

Our office in the Netherlands occupies approximately ~~23,428~~10,452 square feet and is used as office space and includes a ~~training facility and lab;~~

·	~~Our offices in London, U.K., which occupies approximately 21,500 square feet and is used as office space and includes a lab;~~

·	~~Our office in Berkshire, U.K., which occupies approximately 10,158 square feet and is used as office space;~~

·	~~Our office in Redwood Shores California, which occupies approximately 27,776 square feet and is used as office space and includes a lab;~~

·	~~Our office in the Netherlands, which occupies approximately 32,290 square feet and is used as office space and includes a training facility,~~test lab, and a production ~~area; and~~

·	~~Our office in Singapore, which occupies approximately 5,591 square feet and is used as office space.~~area.

We believe that our existing facilities are adequate to meet our current and foreseeable future needs.

Item 4A. Unresolved Staff Comments.

None.

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Item ~~4A.~~ ~~Unresolved Staff~~ Co~~mments~~.

~~None.~~

~~Item~~ 5. Operating and Financial Review and Prospects.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes and other financial information included elsewhere in this annual report. This discussion contains certain forward-looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those set forth under Item 3, “Key Information - Risk Factors” and elsewhere in this annual report, our actual results may differ materially from those anticipated in these forward-looking statements. For more information about forward-looking statements, see the Preliminary Note that precedes the Table of Contents of this annual report.

Overview

~~We are~~

NICE is a leading global enterprise software provider ~~of software solutions~~ that ~~enable~~enables organizations ~~to take the next-best-action in order~~ to improve customer experience, ~~and~~drive business ~~results,~~performance, ensure compliance and fight financial ~~crime,~~crime.

Our mission is to provide organizations with the confidence in making the right business decisions based on accurate, relevant and ~~safeguard people~~insightful information.

We help companies understand their customers and ~~assets.~~predict their needs, optimize their workforce to drive greater efficiency, and identify suspicious behaviour to prevent financial crime.

~~Consumers transact~~

Our advanced technologies and ~~interact with~~core competencies around data capture and ~~about organizations through various measures, including, among others, by phone – landline and mobile, face to face~~the application of advanced analytics in ~~the branch or store,~~real-time were developed organically and through ~~social media. Through these many channels and touchpoints, consumers are generating mass amounts of data. Organizations are faced with the task of having~~multiple acquisitions.

We rely on several key assets to ~~analyze and understand all this data in real time, so that they can take the right action and make an immediate and positive impact.~~drive our growth:

·Our end-to-end solutions enable organizations to capture either directly or indirectly, analyze, and operationalize, both off-line and in real time, mass quantities of structured and unstructured data (Big Data) from multipleloyal customer ~~interaction channels, including phone calls, web activity, mobile apps, emails, chat, social media, video, radio transmission, physical sensors, and transactions.~~

~~We operate in three business areas. Our Customer Interactions business serves customer-centric~~base. Today, more than 20,000 organizations in ~~Business-to-Consumer enterprises, such as~~over 150 countries, including 80 of the Fortune 100 companies, are using NICE solutions.

· Our market leadership makes us a well-recognized brand, and creates top-of-mind awareness for our solutions in ~~the financial services, telecommunications,~~our areas of operation.

· Our products and ~~healthcare industries,~~market leading data capture and ~~others. Our Financial Crime & Compliance business serves financial institutions and regulatory agencies. Our Security, Safety & Operations business addresses the needs~~analytics technologies, which are protected by a broad array of ~~security sensitive organizations, such as banks, airports, mass transit, utilities, and public safety agencies.~~patents.

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· Our ability to quickly drive mainstream adoption for innovative solutions and new technologies, which we introduce to the market through our direct sales force and distribution network.

~~In each of~~

· Our skilled employees and domain expertise in our ~~businesses,~~core markets allows us to bring our customers the right solutions to address key business challenges and build strong customer partnerships.

· Our services and customer support, which enable our customers to ~~best prepare before, act during, and continuously improve interactions, transactions, and events. As a result,~~quickly enjoy the benefits of our solutions, ~~deliver substantial impact on revenue growth, operational efficiency, customer experience, compliance,~~with multiple deployment models and ~~ensuring the safety and security of people and assets.~~support for full value realization.

We ~~are offering our solutions primarily~~have established a leadership position in ~~an on-premise business model. To address growing market demand and customer need for greater operational flexibility with lower upfront costs and faster implementations, we also offer~~ many of our areas of operation through offering comprehensive and innovative enterprise-grade solutions ~~as Hosted or as Software as a Service (SaaS). We intend to continue to expand~~and technologies. Our customers, across all verticals, including banking, telecommunications, healthcare, insurance, retail, travel, public safety and more, are benefiting from the tangible and practical business value that our ~~offering as hosted or in a SaaS model.~~solutions provide.

Recent Acquisitions

The following acquisitions were accounted for by the acquisition method of accounting, and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values. The results of operations related to each acquisition, other than the acquisition of Nexidia (which is expected to occur in 2016) are included in our consolidated statement of income from the date of acquisition.

On ~~October~~March 22, ~~2012,~~2016, we completed the acquisition of ~~RedKite Financial Markets Limited (“RedKite”)~~Nexidia Inc., ~~an emerging~~a leading provider of ~~real-time, cloud-based institutional trade surveillance solutions.~~advanced customer analytics. We acquired ~~RedKite~~Nexidia for total consideration of approximately ~~$11.6~~$135.0 million in cash. The acquisition will allow us to offer a combined offering, featuring analytics capabilities with accuracy, scalability and performance, enabling organizations to expand their analytics usage in critical business use cases. Organizations will benefit from the combined offering, which features a best-in-class, analytics-based solution.

On August 12, 2013, we completed the acquisition of Causata Inc. (“Causata”), a provider of real-time Big Data analytics. We acquired Causata for total consideration of approximately $22.7 million comprised of ~~$9.0~~$21.4 million in cash and ~~$2.6~~$1.3 million representing the fair value of earn-out based on performance milestones, amounting to an additional maximum payment of ~~$5.8 million~~.$2.0 million. The acquisition allows NICE ~~Actimize’s enterprise trading compliance platform, broad library of regulatory coverage modules, market leadership,~~to offer solutions which provide greater visibility into a customer’s activities on the Web and ~~global tier-one client presence, are expected~~apply the insights from that data in real time, across other touch points such as the contact center. Organizations will be better positioned to ~~benefit from~~enhance the ~~RedKite acquisition, with the addition of RedKite’s innovative, front-office based approach to real-time trade surveillance to the Actimize trading compliance solutions suite.~~

On February 7, 2012, we completed the acquisition of Merced Systems, Inc. ("Merced"), the leading provider of performance management solutions that drive business execution in sales and service functions. We acquired Merced for total consideration of approximately $185.9 million. Merced’s performance management solutions help drive sales effectiveness, superior customer experience, increase revenues, and ~~operating efficiency across a range of vertical industries. Merced’s products serve Global 2000 customers, and include advanced~~achieve greater operational efficiency. These solutions are further augmented by Causata’s Web-based predictive analytics and ~~reporting, incentive compensation management, coaching,~~machine learning technologies, which, when applied to terabytes of information, allow organizations to improve real-time decisioning and ~~other performance execution applications. It is expected that integrating Merced~~guidance. NICE benefits from Causata’s real-time Hadoop-based interaction repository, real-time decisioning, dynamic customer profiles, and ~~NICE capabilities will create a closed-loop performance management solution.~~Web personalization.

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On ~~October 26, 2011, we~~March 11, 2016, NICE completed the acquisition of Fizzback Group (Holdings) Ltd. ("Fizzback"), a global provider of Voice of the Customer (VoC) solutions, providing software solutions for real-time customer feedback that drive customer loyalty and employee performance. The Fizzback solution helps companies listen, respond and act in real-time to their customers’ comments. We acquired Fizzback for a total consideration of approximately $80.9 million. The combination of Fizzback and NICE will both improve Customer Experience Management (CEM) as well as operationalize VoC both for the contact center and across the enterprise.

On March 4, 2011, we completed the acquisition of CyberTech Investments (“CyberTech”), a global provider of compliance recording solutions and value-added applications. We acquired CyberTech for total cash consideration of approximately $59.4 million. The addition of CyberTech solutions to the NICE portfolio broadens our offering for financial institutions, strengthens our commitment to the small and medium size business sector, and adds to our public safety solutions.

~~On July 15, 2010, we completed the acquisition of e-Glue Software Technologies,~~Voiceprint International, Inc. ("e-Glue"), a leading provider of real-time decisioning and guidance solutions. The acquisition was for total consideration of approximately $31.4 million, comprised of $25.6 million in cash and $5.8 million representing the fair value of earn out based on performance milestones amounting to additional payment of $6 million.

~~On May 25, 2010, we completed the acquisition of Lamda Communication Networks Ltd. (“Lamda”)~~, a provider of ~~satellite communications interception technology based in Israel. The acquisition was~~workforce optimization software and services for ~~total consideration of approximately $6.9 million, comprised of $5.0 million in cash~~enterprises, contact centers, first responders and ~~$1.9 million representing the fair value of a potential earn out based on performance milestones amounting~~trading floors.

In addition, from time to ~~a maximum additional payment of up to $3 million. Lamda's unique technology addresses the growing demand for satellite communication interception capabilities~~time we complete acquisitions and ~~enables law enforcement, internal security and intelligence agencies to fight crime and terror more effectively.~~

On January 11, 2010, we completed the acquisition of certain assets and liabilities of Orsus Solutions Limited and certain subsidiaries of Orsus (collectively, “Orsus”), a leading provider of Security Management Solutions. The acquisition was for total consideration of approximately $21.5 million in cash. Orsus' flagship solution, Situator, provides a framework for fusing data silos from disparate security and safety systems as well as multiple command and control centers, into a single, holistic operational view and automating security procedures.

We also completed the acquisition of certain assets of Composia Ltd. and MindCite (Israel) Ltd., in 2011 and 2012, respectively. The technologies acquired as part of these acquisitions add to both our Enterprise and Security offerings. These acquisitions wereinvestments that are not considered material to our business and operations.

Discontinued Operations

In order to allow NICE to focus on its core business as an enterprise software company in accordance with its long-term strategic plan, we recently completed the sale of the Physical Security and Cyber and Intelligence business units.

In September 2015, we sold our Physical Security business unit to Battery Ventures for total consideration of $92.5 million, consisting of $74.6 million in cash, notes of $2.9 million and up to a $15.0 million earn out based on future performance. Through NICE’s Physical Security business unit, we previously provided video surveillance technologies and capabilities to security-aware organizations. We previously accounted for the Physical Security unit under the Security Solution segment.

In July 2015, we sold our Cyber and Intelligence business unit to Elbit Systems for total consideration of $151.6 million, consisting of $111.6 million in cash and $40.0 million earn out based on future performance. Through NICE’s Cyber and Intelligence business unit, we previously offered solutions which provide law enforcement agencies, intelligence organizations and signal intelligence agencies with tools for generating intelligence from communications. We previously accounted for the Cyber and Intelligence unit under the Security Solution segment.

Following the sale of these two business units, we have classified their results of operations (including the gain on their disposal) and their assets and liabilities as discontinued operations in accordance with ASC 205-20, “Presentation of Financial Statements - Discontinued Operations”.

The carrying amount used in determining the gain on disposal of the operations included goodwill in an amount calculated based on the relative fair values of the disposed operations and the portion of the operation that was retained within the segment.

Off-Balance Sheet Transactions

We have not engaged in nor been a party to any off-balance sheet transactions, as defined in Item 5 of Form 20-F.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that the significant accounting policies which affect its more significant judgments and estimates used in the preparation of the Consolidated Financial Statements and those that are the most critical to aid in fully understanding and evaluating our reported results include the following:

Revenue ~~recognition~~recognition;

Allowance for doubtful ~~accounts~~accounts;

Impairment of long-lived ~~assets~~assets;

Taxes on ~~income~~income;

~~Contingencies~~Contingencies;

Business ~~combination~~combination;

Stock-based compensation; and

Valuation of ~~investment~~investments in marketable securities.

Revenue Recognition. We ~~derive our~~generate revenues ~~primarily~~ from sales of software products and services, which include support and maintenance, ~~installation,~~implementation, configuration, project management, ~~customization,~~ consulting, training, hosting and ~~hosting,~~SaaS, as well as hardware sales. ~~Revenue related to~~We sell our products directly through our sales force and indirectly through a global network of distributors, system integrators and strategic partners, all of whom are considered end-users.

The basis for our software revenue recognition is substantially governed by the accounting guidance contained in ASC 985-605, “Software-Revenue Recognition.” Revenues from sales of our software products ~~is generally~~are recognized when persuasive evidence of an agreement exists, delivery of the product has ~~been delivered and title and risk of loss have passed to~~occurred, the ~~buyer, the sales price~~fee is fixed or determinable and collectability is probable. ~~Sales agreements which~~In transactions where a customer's contractual terms include a provision for customer acceptance, revenues are ~~not~~ recognized ~~as revenue until~~ either ~~the customer has confirmed that the product or service~~when such acceptance has been ~~accepted~~obtained or as the acceptance provision has lapsed.

For ~~arrangements with~~ multiple ~~elements~~element arrangements within the scope of software revenue recognition guidance, ~~we allocate revenue~~revenues are allocated to the different elements in the arrangement under the ~~residual method~~"residual method" when ~~vendor specific objective evidence~~Vendor Specific Objective Evidence ("VSOE") of fair value exists for all undelivered elements and no VSOE exists for the delivered elements. ~~This means that~~Under the residual method, we defer ~~the arrangement fee equivalent to~~revenue for the fair value of ~~the~~its undelivered elements and recognize revenue for the remainder of the arrangement fee attributable to the elements initially delivered in the arrangement ~~(software licenses)~~ when the basic criteria in ASC 985-605 have been met. Any discount in the arrangement is allocated to the delivered element. Revenues from maintenance and professional services are recognized ratably over the contractual period and as services are performed, respectively.

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Starting January 1, 2011, we adopted the guidance of ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) ("ASU 2009-13") and ASU 2009-14, Certain Arrangements That Include Software Elements, (amendments to FASB ASC Topic 985, Software) ("ASU 2009-14"). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendment eliminates the residual method of revenue allocation and requires revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance in determining whether software deliverables in an arrangementFor arrangements that includes a tangible product are covered by the scope of the software revenue guidance. As such, we prospectively applied these provisions to all revenue arrangements entered into or materially modified after January 1, 2011. This guidance does not generally change the units of accounting for our revenue transactions. Most products and services qualify as separate units of accounting and the revenue is recognized when the applicable revenue recognition criteria are met. Our arrangements generally do not include any provisions for cancellation, termination, or refunds that would significantly impact recognized revenue. While certain of our products with embedded software are now accounted for following ASC 605, other software deliverables which are occasionally sold together with tangible products are not essential for the performance of the tangible products and thus continued to be within the scope of ASC 985-605. As a result, the impact of the adoption of these standards was immaterial.

~~Our revenue recognition policies provide that, when a sales arrangement contains multiple elements, such as~~contain both software and non-software components that function together to deliver the ~~products’~~products' essential functionality, we allocate revenue to each element based on its relative selling price. In such circumstances, the accounting principles establish a hierarchy to determine the selling price ~~hierarchy.~~to be used for allocating revenue to deliverables. The selling price for a deliverable is based on its VSOE, if available, third party evidence ~~("TPE"~~(“TPE”) if VSOE is not available, or best estimated selling price ~~("ESP"~~(“BESP”) if neither VSOE nor TPE isare available. We establish VSOE of ~~selling price~~fair value using the price charged for a deliverable when sold separately and, in rare instances, using the price established by management having the relevant authority. When VSOE cannot be established, we attempt to establish ~~selling price~~fair value of each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately. Generally, our go-to-market strategy differs from that of our peers and our offerings contain a significant level of differentiation such that the comparable pricing of products with similar functionality cannot be obtained. Furthermore, we are unable to reliably determine what similar competitor products’ selling prices are on a standalone basis. Therefore, we are typically not able to determine TPE. The ~~best estimate of selling~~BESP price is established considering several external and internal factors including, but not limited to, historical sales, pricing practices and geographies in which we offer our products. The determination of the ~~ESP~~BESP is subject to discretion.

In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue, as amended.

~~For all periods presented, amounts billed to customers related to shipping and handling are classified as revenue, and our shipping and handling costs are included in cost of sales.~~

Our policy for establishing VSOE of fair value of maintenance services is based on the price charged when the maintenance is renewed separately. Establishment of VSOE of fair value of professional services is based on the price charged when these services are sold separately.

Revenues from ~~maintenance and professional services are recognized ratably over the contractual period or as services are performed, respectively.~~

~~Revenues from~~ fixed price contracts that require significant customization, integration and installation are recognized based on ASC 605-35, “Construction-Type and Production-Type Contracts,” using the percentage-of-completion method of accounting based on the ratio of costs related to contract performance incurred to date to the total estimated amount of such costs. The amount of revenue recognized is based on the total fees under the ~~arrangements~~arrangement and the percentage of completion achieved. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are first determined, in the amount of the estimated loss on the entire contact.

We also generate sales from SaaS offerings which provide our customers access to certain of our software within a cloud-based IT environment that we manage and offer to customers on a subscription basis. Revenues for our ~~software~~ SaaS ~~subscription~~ offerings are recognized ratably over the contract term commencing ~~from~~with the date its service is made available to customers and ~~when~~ all other revenue recognition criteria have been satisfied.

To assess the probability of collection for revenue recognition, we have an established a credit policy that determines the credit limit that reflects an amount that is deemed probably collectible for each customer. These credit limits are reviewed and revised periodically on the basis of new customer financial ~~statement~~statements information, credit insurance data and payment performance.

We ~~record~~maintain a provision for product returns which is estimated ~~sales returns in accordance with ASC 605, "Revenue Recognition" in the same period as the related revenues are recorded. We base these estimates~~based on ~~the historical sales returns ratio~~our past experience and ~~other known factors.~~is deducted from revenues. Actual returns could be different from our estimates.

Deferred revenues include advances and payments received from customers, for which revenue has not yet been recognized.

Allowance for Doubtful Accounts. We regularly review our allowance for doubtful accounts by considering factors such as historical experience, age of the account receivable and current economic conditions that may affect a customer’s ability to pay. We allocate a certain percentage for the provision based on the length of time the receivables are past due.

Impairment of Long-Lived Assets. Our long-lived assets include goodwill, property and equipment ~~In Process Research and Development,~~ and identifiable other intangible assets that are subject to amortization. In assessing the recoverability of our goodwill, property and equipment and other identifiable intangible assets that are held and used, we make judgments regarding whether impairment indicators exist based on legal factors, market conditions and operating performances of our reporting units or asset groups. Future events could cause us to conclude that impairment indicators exist and that the carrying values of these long-lived assets are impaired. Any resulting impairment loss could have a material adverse impact on our financial position and results of operations.

Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350 ~~"Intangible~~“Intangible – Goodwill and Other,"” goodwill is not amortized, but rather is subject to an annual impairment test. ASC 350 requires that goodwill be tested for impairment at the reporting unit level on an annual basis ~~and~~or between annual tests ~~if an event occurs or~~in certain circumstances, change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition or sale or disposition of a significant portion of a reporting unit. We operate in three operation-based segments: Customer Interactions Solutions, Security Solutions and ~~Financial Crime and Compliance Solutions - and these segments comprise our reporting units.~~

In September 2011, the Financial Accounting Standards Board, or FASB issued ASU 2011-08, Testing Goodwill for Impairment, codified in ASC 350 "Intangibles – Goodwill and Other." The revised accounting standard is intended to simplify how an entity tests goodwill for impairment. The amendment allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity is no longer required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. We adopted the new guidance as of January 1, 2012.

written down when impaired. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and determination of the fair value of each reporting unit. The goodwill impairment test is ~~a two-step test. Under~~performed according to the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting units’ goodwill over the implied fair value of that goodwill. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. The fair value of each reporting unit is estimated using a discounted cash flow methodology. This requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our reporting units, the period over which cash flows will occur and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit. We allocate goodwill to reporting units based on the reporting unit’s expected benefit from the acquisition.following principles:

Following the adoption of the new standard described above we performed a qualitative assessment and concluded that for the Customer Interactions Solutions and the Security Solutions, it is not more likely than not that the fair value of the reporting units is less than their respective carrying amounts and accordingly it is not necessary to perform the two-step quantitative goodwill impairment test. For the Financial Crime and Compliance Solutions segment, we concluded that it is more likely than not that the fair value of the reporting unit is less than its carrying amount and accordingly a quantitative goodwill impairment test was performed during the fourth quarter of 2012. Based upon the annual impairment test of the Financial Crime and Compliance Solutions, the estimated fair value of the reporting unit was not substantially in excess of its respective carrying values (exceeded by approximately 13%). Because the estimated fair value did not exceed the carrying value in the quantitative test, no impairment of goodwill existed and the second step of the goodwill impairment test was not required. Therefore in the event of unfavorable changes in forecasted cash flows, terminal value multiples and/or weighted-average cost of capital, the Financial Crime and Compliance Solutions reporting unit is at risk of failing the first step of the goodwill impairment test.

An initial qualitative assessment of the likelihood of impairment may be performed. If this indicates that the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If it does result in a more likely than not indication of impairment, the two-step impairment test is performed. Alternatively, ASC 350 permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly to performing the first step of the goodwill impairment test.

Under the first step of the impairment test, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit exceeds the carrying value of the net assets allocated to that unit, goodwill is not impaired, and no further testing is required. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform the second step of the two-step impairment test to measure the amount of the impairment.

Under the second step, the reporting unit’s fair value is allocated to all the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that simulates the business combination principles to derive an implied goodwill value. If the implied fair value of the reporting unit’s goodwill is less than its carrying value, the difference is recorded as impairment.

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Fair value is determined using discounted cash flows. Significant estimates used in the fair value methodologies include estimates of future cash flows, future growth rates and the weighted average cost of capital of the reporting units.

We ~~are required to assess~~operate in operation-based segments, which also comprise our reporting units: Customer Interactions Solutions and Financial Crime and Compliance Solutions. We performed a qualitative assessment for our reporting units during the fourth quarter of 2015 and concluded that the qualitative assessment did not result in a more likely than not indication of impairment in any of our reporting units, and therefore no further impairment testing is required.

Our long-lived assets ~~tangible~~ and ~~intangible, other than goodwill, under~~identifiable intangibles that are subject to amortization are reviewed for impairment in accordance with ASC 360, ~~"Property,~~“Property, Plant, and Equipment,~~" when~~” whenever events or changes in circumstances indicate that the carrying ~~value~~amount of an asset may not be recoverable. Impairment indicators include any significant changes in the manner of our use of the assets ~~or the strategy of our overall business,~~and significant negative industry or economic ~~trends and significant decline in our share price for a sustained period.~~trends.

Upon determination that the carrying value of a long-lived asset may not be recoverable based upon a comparison of aggregate undiscounted projected future cash flows to the carrying amount of the asset, an impairment charge is recorded for the excess of ~~fair value over~~ the carrying ~~amount.~~amount over fair value. No impairment of long-lived asset was recorded for 2015

Taxes on Income. We record income taxes using the asset and liability method. Management judgment is required in determining our provision for income taxes in each of the jurisdictions in which we operate. The provision for income tax is calculated based on our assumptions as to our entitlement to various benefits under the applicable tax laws in the jurisdictions in which we operate. The entitlement to such benefits depends upon our compliance with the terms and conditions set out in these laws. We have considered future reversal of existing temporary differences, future taxable income, prudent and feasible tax planning strategies and other available evidence in determining the need for a valuation allowance. Although we believe that our estimates are reasonable and that we have considered future taxable income and ongoing prudent and feasible tax strategies in estimating our tax outcome, there is no assurance that the final tax outcome will not be different than those which are reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision, net income and cash balances in the period in which such determination is made.

We implement a two-step approach to recognize and measure uncertain tax positions. 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% (on a cumulative basis) likely to be realized upon ultimate settlement.

We ~~record interest on late tax payments and tax related penalties as a component of our Taxes on Income. Beginning 2012, we revised our accounting policy and now~~ classify interest and penalties ~~related to~~on income taxes (which includes uncertain tax positions) as ~~a component of the provision for income taxes in taxes~~Taxes on income (tax benefit) on the consolidated statements of income. We believe that the classification of interest and penalties in the provision for income taxes is preferable because we believe these interest and penalties are costs of managing taxes payable (as opposed to, for example, interest being the cost of a debt). It is also more consistent with the way in which we manage the settlement of uncertain tax positions as one overall amount inclusive of interest and penalties and will provide more meaningful information to investors by including only interest income related to the our financial assets within financial income, net.

The change in accounting method for presentation of interest and penalties for income taxes was accounted for in accordance with ASC 250, "Accounting Changes and Error Corrections." Accordingly, the change in accounting principle has been applied retrospectively by adjusting the financial statement amounts for the prior periods presented. The change to current or historical periods presented herein due to the change in accounting principle was limited to income statement classification, with no effect on net income.Income.

Contingencies. From time to time, we are a defendant or plaintiff in various legal actions, which arise in the normal course of business. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the accrual required for these contingencies, if any, which would be charged to earnings, is made after careful and considered analysis of each individual action together with our legal advisors. The required reserves may change in the future due to new developments in each matter or changes in circumstances, such as a change in settlement strategy. A change in the required reserves would affect our earnings in the period the change is made.

Business Combination. We apply the provisions of ASC 805, ~~"Business~~“Business Combination,"” and accordingly we are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired, liabilities assumed, as well as in-process research and development based on their estimated fair values. In allocating the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed, we developed the required assumptions underlying the valuation work. Critical estimates in valuing certain of the intangible assets include but are not limited to: future expected cash flows from customer contracts, customer lists, distribution agreements and acquired developed technologies; expected costs to develop the in-process research and development into commercially viable products and estimating cash flows from the projects when completed; the acquired company’s brand awareness and market position, as well as assumptions about the period of time the brand will continue to be used in the combined company’s product portfolio; and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, utilizing a market participant approach, but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur. We were assisted by a third party appraiser in applying the required economic models (such as income approach and cost approach), in order to estimate the fair value of assets acquired and liabilities assumed in the business combination.

Stock-based Compensation. We account for stock-based compensation in accordance with the provisions of ASC 718, ~~"Compensation~~“Compensation - Stock Compensation."” Under the fair value recognition provisions of ASC 718, stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period of the award. We estimate the fair value of stock options granted using the Black-Scholes-Merton option-pricing model and values restricted stock based on the market value of the underlying shares at the date of grant. We recognize compensation costs using the graded vesting attribution method that results in an accelerated recognition of compensation costs.

The fair value of an award is affected by our stock price on the date of grant and other assumptions, including the estimated volatility of our stock price over the term of the awards and the estimated period of time that we expect employees to hold their stock options. Share-based compensation expense recognized in our consolidated statements of income was reduced for estimated forfeitures.

Valuation of ~~investments~~Investments in ~~marketable securities~~Marketable Securities. We review the valuation of our securities for impairment in accordance with ASC 320-10-65. If such assets are considered to be impaired, the impairment charge is recognized in earnings when a decline in the fair value of investments below the cost basis is judged to be other-than-temporary. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and our intent to sell, including whether it is more likely than not that we will be required to sell the investment before recovery of cost basis. For securities with an unrealized loss that we intend to sell, or it is more likely than not that we will be required to sell before recovery of their amortized cost basis, the entire difference between amortized cost and fair value is recognized in earnings. For securities that do not meet these criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while declines in fair value related to other factors are recognized in other comprehensive income (loss).

We apply the provisions of ASC 820, ~~"Fair~~“Fair Value Measurements and Disclosures."” ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, as set forth below, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2 – Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations based on unobservable inputs which are supported by little or no market activity and significant to the overall fair value measurement.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Our marketable securities trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency and accordingly are categorized as Level 2.

We classified foreign currency derivative contracts within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The actual value at which such securities could actually be sold or settled with a willing buyer or seller may differ from such estimated fair values depending on a number of factors, including, but not limited to, current and future economic conditions, the quantity sold or settled, the presence of an active market and the availability of a willing buyer or seller.

~~Adoption of New Accounting Standards~~

~~As discussed above in “ –~~ ~~Impairment of Long-Lived Assets~~,” in September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment, codified in ASC 350 "Intangibles – Goodwill and Other." We adopted the new guidance as of January 1, 2012 and concluded that only for the Financial Crime and Compliance Solutions segment it is more likely than not that the fair value of the reporting unit is less than its carrying amount and accordingly a quantitative goodwill impairment test was performed only for this reporting unit.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, codified in ASC 220 “Comprehensive Income.” The standard requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance also eliminates the option to present the components of other comprehensive income as part of the statement of equity. We adopted the new guidance as of January 1, 2012 and chose to present the Comprehensive Income in two separate but consecutive statements.

Recently Issued Accounting Pronouncements

In ~~February 2013,~~April 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 states that only disposals representing strategic shifts in operations that have, or will have, a major effect on an entity's operations should be reported as discontinued operations when any of the following occurs: the component of an entity or group of components of an entity is classified as held for sale, the component of an entity or group of components of an entity is disposed of by sale, or the component of an entity or group of components of an entity is disposed of other than by sale. A strategic shift could include a disposal of (i) a separate major line of business, (ii) a separate major geographic area of operations, (iii) a major equity method investment, or (iv) other major parts of an entity. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014, which is effective for us for the year ended December 31, 2015. We have considered the sale of the Intelligence and Physical Security operations as a strategic shift and accordingly implemented this guidance in our consolidated financial position and results of operations.

In May 2014, the FASB issued ASU ~~2013-02 Presentation~~2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ~~Comprehensive Income, codified~~ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in ~~ASC 220 “Comprehensive Income.”~~an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in 2018 using either (i) retrospective application of ASU 2014-09 to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09 or retrospective application of ASU 2014-09 with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently in the process of evaluating the impact of the adoption of the update on our consolidated financial statements, implementing accounting system changes related to the adoption and considering additional disclosure requirements.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, related to balance sheet classification of deferred taxes. The ~~standard~~ASU requires that deferred tax assets and liabilities be classified as noncurrent in the statement of financial position, thereby simplifying the current guidance that requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented orseparate deferred assets and liabilities into current and noncurrent amounts. The ASU will be effective beginning in the ~~notes, significant amounts reclassified out~~first quarter of ~~accumulated~~fiscal year 2018, though early adoption is permitted. We have early adopted the ASU as of December 31, 2015 and our statement of financial position as of this date reflects the revised classification of current deferred tax assets and liabilities as noncurrent. There is no other ~~comprehensive income by~~impact on our financial statements of early-adopting the ~~respective line items of net income.~~ASU.

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Results of Operations

The following table sets forth our selected consolidated statements of income for the years ended December 31, ~~2010, 2011,~~2013, 2014, and ~~2012~~2015, expressed as a percentage of total revenues. Totals may not add up due to rounding.

	2010			2011			2012			2013			2014			2015
Revenues
Products		47.2	%		44.8	%		42.0	%		34.1	%		33.2	%		34.3	%
Services		52.8			55.2			58.0			65.9			66.8			65.7
		100.0			100.0			100.0			100.0			100.0			100.0
Cost of revenues
Products*		32.9			32.7			33.3			24.8			22.1			20.9
Services*		44.5			43.6			44.8			42.5			41.1			38.9
		39.0			38.7			40.0			36.5			34.8			32.8

Gross Profit		61.0			61.3			60.0
Gross profit											63.5			65.2			67.2

Operating expenses
Research and development, net		14.1			13.7			13.8			14.1			14.1			13.9
Selling and marketing		25.9			25.1			26.2			26.1			26.5			24.4
General and administrative		11.1			12.0			10.9			10.5			9.6			9.8
Amortization of acquired intangibles		2.8			3.0			3.7			3.6			2.2			1.3
Restructuring expenses		-			-			0.2			0.1			0.6			0.0
Total operating expenses		53.9			53.8			54.8			54.3			53.0			49.3

Operating income		7.1			7.5			5.2			9.2			12.2			17.9
Financial income, net		1.3			1.3			0.9			0.5			0.5			0.7
Other income (expenses), net											0.0			(0.1	)		(0.1	)

Income before taxes		8.4			8.8			6.1			9.7			12.6			18.5
Taxes on income		1.3			1.6			(1.6	)
Taxes on income (Tax benefit)											3.3			1.1			3.3

Net income		7.1			7.2			7.7
Net income from continuing operations											6.4			11.5			15.2

Discontinued operations			0.5				0.6				16.4
Taxes on income on discontinued operations			0.2				0.2				3.7


Net income on discontinued operations			0.3				0.4				12.7


Net income			6.7				11.9				27.9

_______________________

(*) Respective revenues

Comparison of Years Ended December 31, ~~2011~~2014 and ~~2012~~2015

Revenues

Our total revenues increased by approximately ~~10.7%~~6.3% to ~~$879.0~~$926.9 million in ~~2012~~2015 from ~~$793.8~~$872.0 million in ~~2011.~~2014. Revenues from sales of Customer Interactions Solutions ~~were $566.0 million in 2012, an increase of 18.5% from 2011, revenues from sales of Security Solutions were $185.9 million in 2012, a decrease of 3.1% from 2011,~~ and ~~revenues from sales of~~ Financial Crime and Compliance Solutions in 2015 were ~~$127.1~~$688.1 million ~~in 2012,~~and $238.8 million, respectively, an increase of ~~2.2%~~2.0% and 21.1% from ~~2011. Approximately 47% of the~~2014, respectively. The growth in revenues from Customer Interactions Solutions is attributed to the inclusion of Merced results for the first time in 2012, approximately 27% of the growth in revenues from Customer Interactions Solutions is attributable to the inclusion of full year results of Fizzback compared with two months of results included in 2011 and the inclusion of full year results of Cybertech compared with ten months of results included in 2011. The remaining growth in revenues of 26% from Customer Interactions Solutions is attributed to organic growthprimarily driven by ~~accelerated~~increased demand for ~~analytics based applications. The decline in revenues from Security Solutions is attributable primarily~~our portfolio of solutions, as they enable organizations to ~~a decrease in revenues from communication intelligence solutions due to a deferral of a number of major deals into 2013 which has partially been offset by the increase of~~improve operational efficiency and customer experience, enhance compliance and improve sales ~~of our situation management solutions.~~optimization. The increase in revenues from Financial Crime and Compliance Solutions is ~~attributed to organic growth~~primarily driven by ~~increasing regulation~~increased scrutiny by regulatory authorities to ensure that financial institutions across the globe have adequate controls in place to secure financial transactions and ~~the need for compliance, increasing~~prevent fraud attempts and ~~a shift from in-house to best-of-breed shelf solutions.~~complex financial crimes, amplified by the continued evolution of advancements in technology.

Years Ended December 31,
(U.S. dollars in millions)

2011 2012
Dollar Change

Percentage Change

Product Revenues
$ 355.8 $ 369.4 $ 13.6 3.8 %
Service Revenues
438.0 509.6 71.6 16.3
Total Revenues
$ 793.8 $ 879.0 $ 85.2 10.7 %

	Years Ended December 31, (U.S. dollars in millions)
	2014		2015		Dollar Change		Percentage Change

Product revenues	$	289.6	$	317.9	$	28.3		9.8	%
Service revenues		582.4		609.0		26.6		4.6
Total revenues	$	872.0	$	926.9	$	54.9		6.3	%

~~Approximately 54% of the~~The increase in product revenues is ~~due~~attributable to ~~organic growth driven by increased demand for~~an increase of $14.4 million in our ~~analytics based applications and~~revenues from Financial Crime and Compliance Solutions ~~partially offset by a decrease~~and an increase of $13.9 million in ~~revenues from Security~~our Customer Interactions Solutions. ~~Approximately 46% of the increase in product revenues is attributed to the inclusion of Merced results for the first time in 2012.~~

~~Approximately 47% of the~~The increase in service revenues is ~~attributed~~attributable to an increase in professional services, of which 58% of the increase is attributed to installations and integrations services and the rest is attributed in maintenance ~~revenue~~services resulting primarily from an increase in the install base from previous years’ sales and due to the inclusion of Merced results for the first time in 2012. Approximately 40% of the increase in service revenues is attributed to an increase in SaaS and hosting revenues resulting from the inclusion of full year results for Fizzback in 2012 compared to two months in 2011 and the inclusion of Merced results for the first time in 2012. The remaining 13% of the increase in service revenues is attributed to an increase in professional services revenues primarily as a result of the inclusion of Merced results for the first time in 2012.sales.

Revenue by Region

	Years Ended December 31, (U.S. dollars in millions)									Years Ended December 31, (U.S. dollars in millions)
	2011		2012		Dollar Change		Percentage Change			2014		2015		Dollar Change		Percentage Change

United States, Canada and Central and South America (“Americas”)	$	499.2	$	549.6	$	50.4		10.1	%	$	591.1	$	630.1	$	39.0		6.6	%
Europe, the Middle East and Africa (“EMEA”)		196.6		210.4		13.8		7.0			189.2		196.9		7.7		4.1
Asia-Pacific (“APAC”)		98.0		119.0		21.0		21.4			91.7		99.9		8.2		8.9
Total Revenues	$	793.8	$	879.0	$	85.2		10.7	%
Total revenues										$	872.0	$	926.9	$	54.9		6.3	%

In December 2010, ~~we amended~~ the 2008 Plan ~~such that: (i)~~was amended to provide that options ~~are~~would be granted at an exercise price equal to the average of the closing prices of one American Depositary Receipts or ADR, as quoted on the NASDAQ market, during the 30 consecutive calendar days preceding the date of grant, unless determined otherwise by the administrator of the 2008 Plan (including in some cases options granted with an exercise price equal to the nominal value of an ordinary share)~~, and (ii)~~. Prior to the amendment of the 2008 Plan that occurred in 2010, options to acquire ordinary shares were granted ~~with~~at an exercise price ~~equal to~~of not less than the ~~nominal~~fair market value of anthe ordinary ~~share shall have a vesting schedule identical~~shares on the date of the grant, subject to ~~that~~certain exceptions which could be determined by the Company's Board of ~~restricted share units, as indicated above.~~Directors, including in some cases the granting of par value options.

Our ~~board~~Board of ~~directors~~Directors adopted an addendum to the 2008 Plan for Awards granted to grantees who are residents of Israel (the “Addendum”). On June 16, 2008, our ~~board~~Board of ~~directors~~Directors resolved to elect the “Capital Gains Route” (as defined in Section 102(b)(2) of the ~~Israeli Income~~ Tax ~~Ordinance (the “Tax Ordinance”))~~Ordinance) for the grant of Awards to Israeli grantees, which is described ~~above~~below under ~~“1995~~“2003 Stock Option Plan.” The U.S. addendum of the 2008 Plan provides only for non-qualified stock options for purposes of U.S. tax laws.

The 2008 Plan provides that the number of shares that may be subject to Awards granted under the 2008 Plan shall be an amount per calendar year, equal to 3.5% of our issued and outstanding share capital as of December 31 of the preceding calendar year. Out of such quantity, options that are not granted in a particular calendar year will not be allocated during the next calendar years. By setting these terms, our ~~board~~Board of ~~directors~~Directors took into account the need for current employee retention and retention of future employees, including, specifically, the need to retain in certain years employees that join through acquisitions. During ~~2012,~~2015, we granted ~~1,536,145~~1,242,168 options and restricted share units under the 2008 Plan (which constituted ~~2.5%~~1.7% of our issued and outstanding share capital as of December 31, ~~2012)~~2015).

The 2008 Plan is generally administered by our ~~board~~Board of ~~directors~~Directors and compensation committee, which determines the grantees under the 2008 Plan and the number of Awards to be granted. As of March ~~17, 2013,~~10, 2016, options and restricted share units to purchase ~~4,291,268~~3,038,900 ordinary shares were outstanding under the 2008 Plan at a weighted average exercise price of $19.19. On May 14, 2012, we registered, through the filing of registration statements on Form S-8 with the SEC under the Securities Act of 1933, an additional 1,000,000 ADSs, issuable to participants in the 2008 Plan.$19.57.

~~2003 Stock Option Plan~~

In December 2003, we adopted the NICE-Systems Ltd. 2003 Employee Stock Option Plan, or 2003 Plan, to attract, motivate and retain talented employees by rewarding performance and encouraging behavior that will improve our profitability. Under the 2003 Plan, our employees, officers and directors may be granted options to acquire our ordinary shares. The options to acquire ordinary shares are granted at an exercise price of not less than the fair market value of the ordinary shares on the date of the grant, subject to certain exceptions which may be determined by our board of directors. We have registered, through the filing of registration statements on Form S-8 with the SEC under the Securities Act of 1933, 8,962,112 ADSs for issuance under the 2003 Plan.

Generally, under the terms of the 2003 Plan, 25% of the stock options granted become exercisable on the first anniversary of the date of grant and 6.25% becomes exercisable once every quarter during the subsequent three years. Stock options expire six years after the date of grant. Stock options are non-transferable except upon the death of the grantee. For information regarding options granted under the 2003 Plan to our directors, please see Item 6, “Directors, Senior Management and Employees–Compensation” in this annual report.

Pursuant to the tax reform and in order to comply with the provisions of Section 102 of the Tax Ordinance, on January 5, 2004, our board of directors adopted an addendum to our share option plan with respect to options granted as of December 2, 2003, to grantees who are residents of Israel (the “Addendum”). The Addendum does not add to nor modify our share option plan in respect of grantees that are not residents of Israel. On December 19, 2003, the board of directors resolved to elect the “Capital Gains Route” (as defined in Section 102(b)(2) of the Tax Ordinance) for the grant of options to Israeli grantees. Generally, subject to the fulfillment of the provisions of Section 102 of the Tax Ordinance, under the Capital Gains Route gains realized from the sale of shares issued upon exercise of options will mostly be taxed at a rate of only 25% and partially at the marginal income tax rate applicable to the grantee (up to 48% in 2011). In general, all options granted to Israeli grantees, shares issued upon exercise of such options and any bonus shares issued with respect to such shares will be held in trust for the benefit of the grantee for at least a period of 24 months from the date of grant. The options may not be released from the trust prior to the payment of the grantee’s tax liabilities. In the event the requirements of Section 102 for the allocation of options according to the Capital Gains Route are not met, the applicable marginal income tax rates will apply.

The 2003 Plan provides that the number of ordinary shares reserved for issuance thereunder shall increase each year commencing in 2004 by the lesser of (x) 600,000 ordinary shares or (y) two percent (2%) of the total number of outstanding ordinary shares as of December 31 of the immediately preceding calendar year. On September 28, 2005, our shareholders approved the transfer of ordinary shares reserved for issuance under our ESPP (as defined below) to the 2003 Plan. According to such shareholders’ resolution, 1,437,888 ordinary shares remained registered under the ESPP at such time, and the balance of 3,062,112 ordinary shares were transferred to the 2003 Plan, of which 1,062,112 ordinary shares were transferred immediately and an additional 500,000 ordinary shares that were added annually to the pool of ordinary shares were transferred to the 2003 Plan each year until calendar year 2009. In addition, on December 21, 2006, our shareholders approved an increase in the number of ordinary shares reserved for issuance under the 2003 Plan by 1,300,000 shares.

The 2003 Plan is generally administered by our compensation committee, which determines the grantees under the 2003 Plan and the number of options to be granted. As of March 17, 2013, options to purchase 60,000 ordinary shares were outstanding under the 2003 Plan at a weighted average exercise price of $28.28.

~~1999 Amended and Restated Employee Stock Purchase Plan~~

In 1999, we adopted the NICE-Systems Ltd. 1999 Employee Stock Purchase Plan, or ESPP, in order to provide an incentive to our employees and the employees of our subsidiaries by providing them with an opportunity to purchase our ordinary shares through accumulated payroll deductions, and thereby enable such persons to share in the future growth of our business. We amended the ESPP in December 2003 and in December 2005. We have registered, through the filing of registration statements on Form S-8 with the SEC under the Securities Act, 1,737,888 ADSs for issuance under the ESPP. For information on the transfer of ordinary shares reserved for issuance under the ESPP to the 2003 Plan, please see the description under the caption “2003 Stock Option Plan” above.

Under the terms of the ESPP, eligible employees (generally, all our employees and the employees of our eligible subsidiaries who are not directors or controlling shareholders) may, on January 1 and July 1 of each year in which the ESPP is in effect, elect to become participants in the ESPP for that six-month period by filing an agreement with us arranging for payroll deductions of between 2% and 10% of such employee’s compensation for the relevant period. An employee’s election to purchase ordinary shares under the ESPP is subject to his or her right to withdraw from the ESPP prior to exercise, six months after the offering date. The price per ordinary share under the ESPP is 95% of the closing sales price of one ADR as quoted on NASDAQ on the semi-annual purchase date.

Actimize Ltd. 2003 Omnibus Stock Option and Restricted Stock Incentive Plan

Pursuant to the terms of the acquisition of Actimize Ltd. in August 2007, we assumed and replaced the stock options and restricted shares granted by Actimize.

In 2003, Actimize adopted the 2003 Omnibus Stock Option and Restricted Stock Incentive Plan, or the 2003 Actimize Plan, to afford an incentive to employees, officers, office holders, directors, subcontractors and consultants of Actimize or any subsidiary of Actimize, to acquire a proprietary interest in Actimize, to increase their efforts on behalf of Actimize and to provide the success of Actimize’s business. Under the 2003 Actimize Plan, the grantees could be granted options to acquire Actimize’s ordinary shares, restricted shares and shares. Incentive stock options to acquire ordinary shares of Actimize were granted at an exercise price not less than the fair market value of the ordinary shares of Actimize on the date of grant or as determined by Actimize’s ~~board~~Board of ~~directors~~Directors or by a committee thereof. In addition, the options were granted at an exercise price of not less than the par value of the ordinary shares of Actimize.

In September 2007, we registered, through the filing of a registration statement on Form S-8 with the SEC under the Securities Act, an aggregate of 987,104 ADSs, which are comprised of (i) 564,225 ADSs subject to issuance upon the exercise of stock options outstanding under the 2003 Actimize Plan and (ii) 422,879 ADSs representing restricted ordinary shares issued in lieu of restricted shares issued under the 2003 Actimize Plan.

Generally, under the terms of the 2003 Actimize Plan, 25% of the options granted become exercisable on the first anniversary of the date of grant and 6.25% become exercisable following the lapse of every consecutive quarter thereafter during the subsequent three years. Options generally expire ten years after the date of grant. Options are non-transferable except upon the death of the grantee. When applicable, the options are held by, and registered in the name of, a trustee for a period of two years after the date of grant in accordance with Section 102 of the ~~Israeli Income~~ Tax Ordinance.

As of March ~~17, 2013,~~10, 2016, assumed Actimize options to purchase ~~52,735~~7,977 ordinary shares of NICE were outstanding at a weighted average exercise price of ~~$10.08.~~$12.13. No additional grants are being made under this plan following the acquisition of Actimize.

~~Orsus Solutions Limited 2007 Incentive Option Plan~~

In 2007, Orsus adopted the 2007 Incentive Option Plan that was further amended by Orsus on January 10, 2010 (the “2007 Orsus Plan”), to afford an incentive to employees, office holders and service providers of Orsus and its subsidiaries. Under the 2007 Orsus Plan, the grantees could be granted options to acquire Orsus’ ordinary A shares, restricted ordinary A shares or restricted ordinary A share units.

Pursuant to the terms of the Orsus acquisition agreement, we assumed and converted the outstanding stock options and restricted share units granted by Orsus under the Orsus 2007 Plan, into stock options to purchase ordinary shares of NICE or restricted share units of NICE, pursuant to a set formula (the “Assumed Awards”). The Assumed Awards include (i) options or restricted share units granted to certain key employees of Orsus or its subsidiaries (the “Key Employee Awards”); and (ii) retention options granted to certain employees of Orsus or its subsidiaries (the “Retention Options”). Under the terms of the 2007 Orsus Plan and the acquisition agreement, 50% of the Key Employee Awards granted become exercisable and vest after a period of twelve months of continuous employment with NICE (or its applicable subsidiary) commencing on January 11, 2010 and the remaining 50% become exercisable following the lapse of 6 months thereafter. In addition, if employment of a key employee is terminated within a limited time period and under certain circumstances, such key employee’s Options shall become vested immediately. The Retention Options vest over a course of four years as follows: (i) 25% vest and become exercisable at the lapse of 12-month period of continuous employment with NICE (or its applicable subsidiary) commencing on January 11, 2010, and (ii) the balance thereof vests on a quarterly basis during the 36 months period thereafter, such that 6.25% vest and become exercisable at the lapse of each quarter of continuous employment with NICE (or its applicable subsidiary). Options generally expire ten years after the date of grant and restricted share units generally expire seven years after the date of grant. Options are non-transferable except upon the death of the grantee. When applicable, the options are held by, and registered in the name of, a trustee for a period of two years after the date of grant in accordance with Section 102 of the Israeli Income Tax Ordinance.

As of March 17, 2013, assumed Orsus options to purchase 9,292 ordinary shares of NICE were outstanding under the 2007 Orsus Plan, comprised of 7,000 ordinary shares underlying the Retention Options at an exercise price per share of $30.78; and 2,292 ordinary shares underlying the Key Employee Awards at an exercise price per share equal to the nominal value of the ordinary shares of NICE. We have registered, through the filing of registration statements on Form S-8 with the SEC under the Securities Act of 1933, 60,000 ADRs for issuance under the 2007 Orsus Plan.

e-Glue Software Technologies Inc., 2004 Stock Option Plan

In 2004, e-Glue adopted the 2004 Stock Option Plan that was further amended by e-Glue on June 9, 2010 (the “2004 e-Glue Plan”), for the grant of awards to employees, directors and service providers of e-Glue and its subsidiaries. The 2004 e-Glue Plan provides for the grant of options to acquire e-Glue’s stock, for the grant of restricted stock and for the grant of restricted share units.

Pursuant to the terms of the e-Glue acquisition agreement, we assumed the outstanding stock options and restricted share units granted by e-Glue under the 2004 e-Glue Plan that did not expire upon closing of the e-Glue acquisition. Following such assumption, the options represent rights to purchase ordinary shares of NICE or restricted share units of NICE, pursuant to a set formula (such options and restricted share units, together the “Assumed e-Glue Options”). Some of the Assumed e-Glue Options have a three year vesting period, with a third becoming vested and exercisable one year from their date of grant and the remainder vesting and become exercisable in equal installments on an annual basis over the following two years. The remaining portion of the Assumed e-Glue Options vest as follows: 25% vest and become exercisable one year from their date of grant, and the remaining 75% vested and became exercisable on December 31, 2011. Certain Assumed e-Glue Options are subject to acceleration rights if employment is terminated within a limited time period and under certain circumstances. If the grantee ceases to be an employee or service provider of us or one of our subsidiaries, for any reason, the optionee may exercise or be entitled to the Assumed e-Glue Options to the extent they were vested and exercisable on the date of termination of employment or service, as the case may be, but only during the period ending on the earlier of (a) 10 years from the date of grant (unless sooner terminated as provided in a specific award agreement) or (b) three months after the date of termination of employment or service, as the case may be. However, if the optionee dies or becomes disabled prior to the expiration date of his or her Assumed e-Glue Options while still in the employ or service of us or one of our subsidiaries, or during the three month period described in the preceding sentence, or in the event of the retirement of the optionee for reasons of disability (within the meaning of Section 22(e)(3) of the U.S. Internal Revenue Code, 1986), the Assumed e-Glue Options shall remain exercisable until the earlier of their expiration date in accordance with the award agreement or one year from the date of such death or retirement. When applicable, the Assumed e-Glue Options shall be held by, and registered in the name of, a trustee, according to Section 102(b) of the ~~Israeli Income~~ Tax ~~Ordinance [New Version], 5731-1961.~~Ordinance.

9795

As of March ~~17, 2013,~~10, 2016, Assumed e-Glue Options and restricted share unit to purchase ~~32,642~~494 ordinary shares of NICE were outstanding under the 2004 e-Glue Plan. The exercise price per share underlying the options and restricted share units is equal to the nominal value of an ordinary share. We have registered, through the filing of a registration statement on Form S-8 with the SEC under the Securities Act of 1933, 76,035 ADRs for issuance under the 2004 e-Glue Plan.

Fizzback Group (Holdings) Limited Employee Share Option Scheme

In July 2010, Fizzback adopted the Fizzback Group (Holdings) Limited Employee Share Option Scheme, as amended (the "Fizzback Plan"), to grant options to employees, directors and consultants, as applicable, of Fizzback. Under the Fizzback Plan, the grantees could be granted options which are deemed "qualifying options" for the purposes of the EMI Code (as that term is defined in the United Kingdom’s Income Tax (Earnings and Pensions) Act 1993) to acquire Fizzback’s ordinary shares, restricted share units and unapproved options.

Pursuant to the terms of the Fizzback share purchase agreement, we replaced the options and restricted share units originally granted under the Fizzback Plan with stock options to purchase ordinary shares of NICE and restricted share units of NICE, respectively.

Under the Fizzback Plan, the exercise price per option shall be determined by the ~~board~~Board of ~~directors~~Directors in its sole and absolute discretion provided that such price shall not be less than the nominal value per option, or (when applicable) such price as from time to time adjusted pursuant to the Fizzback Plan. If a grantee ceases to be an employee, all options which have not become exercisable or which, having become exercisable, have not been exercised, shall lapse.

Options generally expire, inter alia, ten years after the date of grant, upon an insolvent liquidation of Fizzback or upon the grantee being adjudged bankrupt.

As of March ~~17, 2013,~~10, 2016, assumed Fizzback options and restricted share units to purchase ~~113,457~~10,261 ordinary shares of NICE were outstanding under the Fizzback ~~Plan.~~Plan, at a weighted average exercise price of $0.53. We have registered, through the filing of a registration statement on Form S-8 with the SEC under the Securities Act of 1933, 165,695 ordinary shares for issuance under the Fizzback Plan.

Merced Plans

Merced Systems, Inc. 2001 Stock Plan

In 2001, Merced adopted the Merced Systems, Inc. 2001 Stock Plan, as amended (the "2001 Merced Plan"), to afford an incentive to employees and consultants of Merced and to promote the success of Merced’s business. Under the 2001 Merced Plan, the grantees could be granted options to acquire Merced’s ordinary shares and restricted shares.

Pursuant to the terms of the Merced acquisition agreement, we assumed and converted Merced's options and replaced Merced’s restricted shares that were originally granted under the 2001 Merced Plan into stock options to purchase ordinary shares of NICE, and with restricted shares of NICE, respectively.

Under the 2001 Merced Plan, the exercise price per share of incentive stock options granted to an employee shall be no less than 100% of the fair market value per share on the date of grant, or 110% of the fair market value if the employee was a 10% shareholder of Merced at the date of grant. The exercise price per share of non-statutory stock options granted shall be no less than 85% of the fair market value per share on the date of grant, or 110% of the fair market value if the person was a 10% shareholder of Merced at the date of grant, if required by applicable law and, if not so required, the exercise price per share shall be determined by the plan administrator. Notwithstanding the foregoing, options may be granted with an exercise price per share other than as required above pursuant to a merger or other corporate transaction.

An option granted under the 2001 Merced Plan is exercisable at the rate of at least 20% per year over five years from the date the option was granted. Options generally expire ten years after the date of grant.

Merced Systems, Inc. 2011 Stock Plan

In 2011, Merced adopted the Merced Systems, Inc. 2011 Stock Plan (the "2011 Merced Plan"), to afford an incentive to employees and consultants of Merced and to promote the success of Merced’s business. Under the 2011 Merced Plan, the grantees could be granted options to acquire Merced’s ordinary shares and restricted share units.

Pursuant to the terms of the Merced acquisition agreement, we assumed and converted Merced's options and restricted share units originally granted under the 2011 Merced Plan into stock options to purchase ordinary shares of NICE and restricted share units of NICE, respectively.

Under the 2011 Merced Plan, the exercise price per share of incentive stock options granted to an employee shall be no less than 100% of the fair market value per share on the date of grant, or 110% of the fair market value if the employee was a 10% shareholder of Merced at the date of grant. The exercise price per share of non-statutory stock options shall be no less than 85% of the fair market value per share on the date of grant, or 110% of the fair market value if the person was a 10% shareholder of Merced at the date of grant, if required by applicable law and, if not so required, the exercise price per share shall be determined by the plan administrator. Notwithstanding the foregoing, options may be granted with an exercise price per share other than as required above pursuant to a merger or other corporate transaction.

An option granted under the 2011 Merced Plan is exercisable at the rate of at least 20% per year over five years from the date the option was granted. Options generally expire ten years after the date of grant.

As of March ~~17, 2013,~~10, 2016, assumed Merced options, restricted share units and restricted shares to purchase ~~163,437~~13,954 ordinary shares of NICE were outstanding under the 2001 Merced Plan and the 2011 Merced ~~Plan.~~Plan, at a weighted average exercise price of $14.83. We have registered, through the filing of a registration statement on Form S-8 with the SEC under the Securities Act of 1933, 343,288 ordinary shares for issuance under the 2001 Merced Plan and the 2011 Merced Plan.

9997

Causata, Inc. 2013 Executive Share Option Scheme and 2010 Stock Plan

Causata Inc. Executive Share Option Scheme

On July 31, 2013, Causata adopted the Causata Executive Share Option Scheme (the “Causata Scheme”), to grant options to employees and directors, as applicable, of Causata. Under the Causata Scheme, the participants could be granted options which are deemed “qualifying options” for the purposes of the EMI Code to acquire Causata’s ordinary shares and unapproved options.

Pursuant to the terms of the Causata agreement and plan of merger, we assumed and converted the options originally granted under the Causata Scheme with stock options to purchase ordinary shares of NICE.

Under the Causata Scheme, the option price per share shall be determined by the Board of Directors in its sole and absolute discretion provided that such price shall not be less than the nominal value per share, or (when applicable) such price as from time to time adjusted pursuant to the Causata Scheme. If a participant ceases to be an employee or director, all options which have not become exercisable or which, having become exercisable, have not been exercised, shall lapse.

Options generally expire, inter alia, on the earliest of the following: on July 31, 2023, upon an insolvent liquidation of Causata, upon the participant being adjudged bankrupt or upon the date on which the option shall lapse in accordance with the terms of the option letter.

As of March 10, 2016, assumed Causata options to purchase 10,560 ordinary shares of NICE were outstanding under the Causata Scheme, at a weighted average exercise price of $0.26. We have registered, through the filing of a registration statement on Form S-8 with the SEC under the Securities Act of 1933, 131,316 ordinary shares for issuance under the Causata Scheme.

Causata Inc. 2010 Stock Plan

On October 19, 2010, Causata adopted the Causata Inc. 2010 Stock Plan, to offer an opportunity to employees, outside directors and consultants of Causata to acquire a proprietary interest in the success of Causata. Causata adopted an appendix to such plan for the grant of restricted stock units (together with the Causata Inc. 2010 Stock Plan, the “Causata Plan”). Under the Causata Plan, the grantees can be granted options to acquire Causata’s ordinary shares and restricted stock units.

Pursuant to the terms of the Causata agreement and plan of merger, we assumed and converted Causata's restricted stock units originally granted under the Causata Plan into restricted stock units of NICE to purchase ordinary shares of NICE.

Under the Causata Plan, the exercise price per share of incentive stock options granted to an employee shall be no less than 100% of the fair market value per share on the date of grant, or 110% of the fair market value if the employee was a 10% shareholder of Causata at the date of grant. The exercise price per share of non-statutory stock options shall be no less than 85% of the fair market value per share on the date of grant, or 110% of the fair market value if the person was a 10% shareholder of Causata at the date of grant, if required by applicable law and, if not so required, the exercise price per share shall be determined by the plan administrator. Notwithstanding the foregoing, options may be granted with an exercise price per share other than as required above pursuant to a merger or other corporate transaction.

Each stock option agreement shall specify the date when all or any installment of the option is to become exercisable. Options generally expire ten years after the date of grant.

Under the Causata Plan, the Board of Directors may decide to grant restricted stock units, under certain terms and conditions, for a consideration of no more than the underlying share’s nominal value (the “Consideration”). Upon the lapse of the vesting schedule of a restricted stock unit, such restricted stock unit shall automatically vest into a share (subject to adjustments under the Causata Plan) and the grantee shall pay to Causata the Consideration. The Board of Directors, in its discretion, shall set vesting criteria or performance objectives which, depending on the extent to which they are met, will determine the number of restricted stock units that will vest, all as specified in the applicable restricted stock unit agreement.

As of March 10, 2016, assumed Causata restricted stock units to purchase 8,970 ordinary shares of NICE were outstanding under the Causata Plan at a weighted average exercise price of $0.26.

We have registered, through the filing of a registration statement, on Form S-8 with the SEC under the Securities Act of 1933, dated September 16, 2013, 131,316 ordinary shares for issuance under the Causata Scheme and the Causata Plan.

Option Exchanges and Price Adjustment

On June 23, 2009, we commenced a tender offer to offer eligible employees in Israel, Hong Kong, the United States and the United Kingdom, excluding our directors, Chief Executive Officer and certain other executive officers, the opportunity to tender options granted before September 1, 2008 under the 2003 Plan or the 2003 Actimize Plan (almost all of which had an exercise price per share above $34.00), in exchange for restricted share units (RSUs) or options (depending on the employee’s country of residence) with a per share exercise price or per share purchase price equal to the par value of our ordinary shares, or NIS 1.00 (approximately $0.25). The exchange was on a one-for-three basis, meaning that eligible employees electing to participate received a new RSU or option with respect to one share for every three shares subject to the options tendered for exchange. The new awards ~~vest~~vested in 25% annual increments over a four-year period starting from August 5, 2009 and have a new six-year term. Options surrendered in the exchange were cancelled. On August 5, 2009, the expiration date of the exchange offer, we accepted for exchange eligible options to purchase an aggregate of 1,492,204 ordinary shares that had been granted under the 2003 Plan and the 2003 Actimize Plan, and granted, under the 2008 Plan, new options to purchase 311,454 ordinary shares, and new RSUs representing 185,932 ordinary shares, in exchange for the eligible options tendered and accepted pursuant to the exchange offer.

On June 15, 2009, our ~~board~~Board of ~~directors~~Directors approved the reduction of the exercise price per share of our options to acquire ordinary shares granted on September 2, 2008 under the 2008 Plan held by eligible employees, including certain of our executive officers, based in Israel, Hong Kong, the United States, and the United Kingdom. The exercise price per share of these options was originally $30.25 per share, and was reduced to $22.53 per share, which was the closing price of our ADSs on the NASDAQ Global Select Market on June 15, 2009. Other than the exercise price, no other terms of these options were modified. The aggregate number of our ordinary shares that are subject to the options that have been repriced is 1,020,400.

In addition, on June 15, 2009, our ~~board~~Board of ~~directors~~Directors approved an option exchange with three of our executive officers, in which such executive officers exchanged options to purchase an aggregate of 265,000 ordinary shares, issued in 2007 under the 2003 Plan and having an exercise price between $34.00 and $39.00 per share, for new options to be issued under the 2008 Plan with a per share exercise price equal to $22.53 per share, which was the closing price of our ADSs on the NASDAQ Global Select Market on June 15, 2009. The new options issued in this exchange vest in four equal annual installments (or as nearly as possible) following the new grant date and will expire six years following the new grant date.

Item 7.7. Major ~~Shareholde~~rsShareholders and Related Party Transactions

Major Shareholders

The following table sets forth certain information with respect to the beneficial ownership of our ordinary shares, with respect to each person known to us to be the beneficial owner of 5% or more of our outstanding ordinary shares, reported as of March ~~17, 2013.~~10, 2016. None of our shareholders has any different voting rights than any other shareholder.

Name and Address	Number of Shares			Percent of Shares Beneficially Owned (1)
Janus Capital Management LLC 151 Detroit Street Denver, Colorado 80206, USA		3,826,621	(2)		6.4	%

Psagot Investment House Ltd. 14 Ahad Ha’am Street Tel Aviv 65142, Israel		3,645,806	(3)		6.1	%

IDB Development Corporation Ltd. The Triangular Tower, 44th floor, 3 Azrieli Center, Tel Aviv 67023, Israel		3,481,910	(4)		5.9	%

Massachusetts Financial Services Company 111 Huntington Avenue Boston, Massachusetts 02199		3,356,795	(5)		5.5	%

Migdal Insurance & Financial Holdings Ltd. 4 Efal Street; P.O. Box 3063 Petach Tikva 49512, Israel		3,245,107	(6)		5.4	%

Harel Insurance Investments & Financial Services Ltd. Harel House 3 Abba Hillel Street Ramat Gan 52118, Israel		3,198,207	(7)		5.4	%

100

Name and Address Number of Shares
Percent of Shares Beneficially Owned (1)

Psagot Investment House Ltd.
14 Ahad Ha’am Street
Tel Aviv 65142, Israel
3,432,205 (2) 5.7 %

Migdal Insurance and Financial Holdings Ltd. 3,128,315 (3) 5.2 %

___________

(1) Based upon ~~60,501,102 ordinary~~59,498,331ordinary shares issued and outstanding as of March ~~17, 2013.~~ 10, 2016.

(2) This information is based upon a Schedule 13G filed by Janus Capital Management LLC with the SEC on February 16, 2016.

~~(2)~~(3) These securities are held for members of the public through, among others, portfolio accounts managed by Psagot Securities Ltd., Psagot Exchange Traded Notes Ltd., mutual funds managed by Psagot Mutual Funds Ltd., provident funds managed by Psagot Provident Funds and Pension Ltd., and pension funds managed by Psagot Pension (Haal) Ltd., according to the following segmentation: ~~1,798,162~~1,671,758 ordinary shares are held by portfolio accounts managed by Psagot Securities Ltd., ~~988,321~~1,132,461 ordinary shares are held by Psagot Exchange Traded Notes Ltd., 673,303 ordinary shares are held by provident funds managed by Psagot Provident Funds and Pension Ltd., ~~529,190 ordinary shares are held by Psagot Exchange Traded Notes Ltd., 97,983~~158,575 ordinary shares are held by mutual funds managed by Psagot Mutual Funds Ltd. (of this amount, ~~13,500~~ 26,100 shares may also be considered beneficially owned by Psagot Securities Ltd., but are not included in the shares beneficially owned by Psagot Securities Ltd., as indicated above), and ~~18,549~~9,709 ordinary shares are held by ~~pension funds managed by~~ Psagot ~~Pension (Haal)~~Insurance Company Ltd. Each of the foregoing companies is a wholly-owned subsidiary of Psagot Investment House Ltd. This information is based upon a Schedule 13G/A filed by Psagot Investment House Ltd. with the SEC on February ~~13, 2013.~~15, 2016.

(4) Of these securities, IDB Development Corporation Ltd. (“IDB”) disclaims ownership of 3,479,410 ordinary shares reported as owned by Clal Insurance Enterprises Holdings Ltd. (“Clal”) and 2,500 ordinary shares are reported as held by Bayside Land Corporation Ltd., an indirect subsidiary of IDB. The 3,479,410 ordinary shares reported as beneficially owned by Clal (i) include 139,236 ordinary shares are beneficially held for its own account, and (ii) are held for members of the public through, among others, provident funds and/or pension funds and/or insurance policies, which are managed by subsidiaries of Clal, which subsidiaries operate under independent management and make independent voting and investment decisions. This information is based upon a Schedule 13G/A filed by IDB and Clal with the SEC on February 16, 2016.

~~(3)~~ (5) These securities consist of (i) American Depositary Shares that can be converted to ordinary shares and (ii) ordinary shares. This information is based upon a Schedule 13G/A filed by Massachusetts Financial Service Company with the SEC on February 11, 2016.

(6) Of these securities, (i) 3,110,502 ordinary shares are held for members of the public through, among others, provident funds, mutual funds, pension funds and insurance policies, which are managed by subsidiaries of ~~Migdal Insurance & Financial Holdings Ltd. (“Migdal”),~~Reporting Person, according to the following segmentation: 1,598,555(i) 3,093,237 Ordinary Shares are held for members of the public through, among others, provident funds, mutual funds, pension funds and insurance policies, which are managed by subsidiaries of Migdal, according to the following segmentation: 1,835,852 Ordinary Shares ordinary shares are held by ~~Profit participating~~profit-participating life assurance ~~accounts; 1,091,636 Ordinary Shares~~accounts, 1,164,822 ordinary shares are held by ~~Provident~~provident funds and companies that manage provident funds, and ~~165,749 Ordinary Shares~~347,125 ordinary shares are held by companies for the management of funds for joint investments in trusteeship, each of which subsidiaries operates under independent management and makes independent voting and investment decisions, and (ii) ~~35,078~~134,605 are beneficially held for their own account (Nostro account).This information is based upon a Schedule 13G filed by Migdal ~~Insurance & Financial Holdings Ltd.~~ with the SEC on ~~August 22, 2012.~~February 10, 2016.

As(7) Of these securities, (i) 2,893,491 ordinary shares are held for members of ~~March 18, 2013, we had approximately 60 registered ADS holders~~the public through, among others, provident funds and/or mutual funds and/or pension funds and/or insurance policies, which are managed by subsidiaries of ~~record~~Harel Insurance Investments & Financial Services Ltd. ("Harel"), each of which subsidiaries operates under independent management and makes independent voting and investment decisions; (ii) 172,610 ordinary shares are held by third-party client accounts managed by a subsidiary of Harel as portfolio managers, which subsidiary operates under independent management and makes independent investment decisions and has no voting power in the ~~United States, holding approximately 63% of our outstanding~~securities held in such client accounts and (iii) 132,106 ordinary shares ~~as reported by The Bank of New York Mellon, the depositary~~are beneficially held for ~~our ADSs.~~

~~As of December 31, 2010, The Phoenix Holding Ltd. ("Phoenix") held 3,032,139, or 4.82% of our ordinary shares.~~its own account. This information is based upon a Schedule 13G filed by ~~Phoenix~~Harel with the SEC on March 1, 2011. Based on the Schedule 13G, Phoenix is an indirect majority-owned subsidiary of Delek Investments and Properties Ltd. ("Delek Investments"). Delek Investments is a wholly-owned subsidiary of Delek Group Ltd. The majority of Delek Group Ltd.'s outstanding share capital and voting rights are owned, directly and indirectly, by Itshak Sharon (Tshuva) through private companies wholly-owned by him, and the remainder is held by the public. As of March 1, 2010, Phoenix and Excellence Investments Ltd. ("Excellence") held 3,479,696, or 5.6% of our ordinary shares. This information is based upon information provided to us by Phoenix and Excellence.January 28, 2016.

101

As of March 10, 2016, we had approximately 44 registered ADS holders of record in the United States, with our ADS holders holding in total approximately 45% of our outstanding ordinary shares, as reported by JPMorgan Chase Bank, N.A., the depositary for our ADSs.

To our knowledge, we are not directly or indirectly owned or controlled by another corporation or by any foreign government and there are no arrangements that might result in a change in control of our company.

Related Party Transactions

None.

Item 8. Financial Information.

Consolidated Statements and Other Financial Information

See Item 18, “Financial ~~Statements.”~~Statements” in this annual report.

Legal Proceedings

From time to time we or our subsidiaries may be involved in legal proceedings and/or litigation arising in the ordinary course of our business. While the outcome of these matters cannot be predicted with certainty, we do not believe they will have a material effect on our consolidated financial position, results of operations, or cash flows.

We are not involved in any legal proceedings that we believe, individually or in the aggregate, will have a material adverse effect on our business, financial condition or results of operation, except as noted below.

~~Calyon Dispute~~

In December 2006, Calyon Corporate and Investment Bank filed a suit against us in the District Court of Tel Aviv, demanding repayment of $648,144 plus accrued interest, for a total amount of $740,395. We had deducted this amount in January 2004 from a payment transferred in connection with our acquisition of Thales Contact Solutions ("TCS"). We had notified TCS in 2004 that we had set off such amount with respect to an overdue paymentPatent Lawsuit by TCS to us. The dispute was submitted to mediation, however the mediation process failed and the proceedings were returned to the District Court of Tel Aviv. A trial was held on September 11, 2011, and on May 6, 2012 the Court ruled in our favor, dismissing all claims filed by Calyon and ordering Calyon to pay our expenses. On June 26, 2012, Calyon filed an appeal to Israel’s Supreme Court. The Supreme Court ordered Calyon to submit its written summary by June 18, 2013, and NICE ~~to submit its written summary by August 15, 2013. A hearing is scheduled for November 20, 2013.~~

~~Actimize Former Employee Dispute~~

On ~~October 15, 2007,~~August 27, 2015, we initiated a former employee of Actimize Ltd., a wholly owned subsidiary of ours, filed a claim with the Tel Aviv District Labor Court, seeking a declaration that he is entitled to 0.5% of the outstanding share capital of Actimize Ltd. The preliminary stages of the claim ended and the parties submitted their testimonies by way of written affidavits. The hearing and cross-examination of the testimonies took place on June 16 and June 23, 2010. On July 31, 2011, the court ruled in favor of Actimize, dismissing all claims filed by the former employee and ordering him to pay expenses.

~~102~~

~~Fair Isaac Patent Infringement Lawsuit~~

~~On September 16, 2009 Fair Isaac Corporation (FICO) filed a claim~~lawsuit in the United States District Court for the District of Delaware by filing a complaint against ~~Actimize Inc., a wholly owned subsidiary~~ClickFox for infringement of ~~ours,~~NICE's U.S. Patent No. 8,976,955 (“the ‘955 patent”) entitled “System and ~~NICE, claiming that Actimize~~method for tracking web interactions with real time analytics”. ClickFox moved to dismiss the complaint on October 26, 2015. Subsequently, we filed an amended complaint alleging infringement of additional claims of the 955 patent, and NICE are infringing on two U.S. patents. These patents cover various aspects of fraud detection. FICO requested damages and an injunction. On January 18, 2012, the parties agreed to the terms of settlement proposed by the court. The parties resolved the case andClickFox filed a ~~Stipulation of Dismissal on June 29, 2012, and the court ordered the dismissal on July 2, 2012.~~

~~Nuvation Dispute~~

~~On March 10, 2010, Nuvation Research Corporation (“Nuvation”) filed a lawsuit against us with the Supreme Court of the State of New York.~~renewed motion to dismiss. The ~~lawsuit alleges, among others, that~~motion hearing is scheduled for April 2016. At this preliminary stage we breached a contract with Nuvation and defrauded Nuvation. Nuvation is claiming damages in a total amount of $8 million. On or about September 19, 2011, the parties reached an agreement in principle to settle the dispute through binding arbitration/mediation and also agreed that the mediation outcome will be subject to a minimum payment by NICE to Nuvation of $100,000. The parties had a one-day arbitration/mediation meeting on March 14, 2012, and an award, dated April 25, 2012, was issued and the Judge dismissed all of Nuvation’s claims with prejudice. NICE paid such amount to Nuvation, and the parties also exchanged general releases and executed and filed a Stipulation of Dismissal, with prejudice. The case has been resolved.

~~Tal-Yam Dispute~~

On July 15, 2010, Tal-Yam Engineering Projects Management and Initiation (“Tal-Yam”) filed a suit against us in the Tel Aviv Magistrate’s Court. The suit alleges a breach of contract due to failure to pay for services rendered to us. Tal-Yam is seeking damages in the amount of approximately NIS 1.0 million and disclosure of certain invoices and related documentation. NICE submitted its statement of defense on October 24, 2010. The parties participated in mediation proceedings that were not successful and pre-trial proceedings are ~~currently taking place. Trial hearings took place during January 2013, and summation has yet to be scheduled by the court.~~

~~Discrimination in Employment Disputes~~

On August 20, 2010, a former employee of IEX Corp., a wholly-owned subsidiary of ours, filed a complaint with the District Court of the Northern District of Illinois, alleging that we, and our subsidiary IEX Corp., engaged in prohibited discrimination in terminating his employment. The case was settled in April 2011, and the matter is no longer pending.

On November 7, 2012, a former employee of Actimize Inc. filed a suit in the United States District Court for the Southern District of New York claiming discrimination on the basis of disability. The suit includes a claim for reinstatement as well as compensatory damages and other relief. The parties are scheduled to hold mediation on May 16, 2013, and the estimated demand for settlement by the plaintiff is about $310,000 plus attorney fees. The company is unable to evaluate the probability of a favorable or unfavorable outcome in this dispute.

~~103~~102

Dispute under Sale Agreement

Following the divestiture of one of our business units, the buyer of such business unit made certain demands and allegations, claiming indemnification pursuant to the sale agreement between NICE and such buyer. The parties corresponded regarding these claims, and NICE has denied all demands and allegations made by the buyer. If the parties fail to reach a negotiated resolution, the buyer may initiate legal proceedings against NICE to enforce its indemnification claims. If such buyer is successful in such proceedings, it will result in a reduction of the consideration amount under the sale agreement within the discontinued operation. At this preliminary stage we cannot estimate the probability of a favorable or unfavorable outcome in this dispute.

Dividends

~~On February 13, 2013, we announced that our board~~Our Board of ~~directors has~~Directors approved a dividend plan under which we intend to pay quarterly cash dividends to holders of our ordinary shares and ADRs subject to declaration by the ~~board. We expect the initial~~Board. The annual dividend ~~to be~~amount under the dividend plan is currently $0.64 per share, or $0.16 per share quarterly. The ~~first payment is expected to be made~~total amount of dividends paid in ~~the second quarter of 2013.~~2015 was $0.64 per share. Under Israeli law, dividends may be paid only out of profits and other surplus (as defined in the law) as of our most recent financial statements or as accrued over a period of two years, whichever is higher, provided that there is no reasonable concern that the dividend distribution will prevent us from meeting our existing and foreseeable obligations as they come due. ~~Apart from these dividends, the Company has never declared or paid cash dividends on its ordinary shares.~~

Payment of future dividends, if any, will be at the discretion of our ~~board~~Board of ~~directors~~Directors and will depend on various factors, such as our statutory profits, financial condition, operating results and current and anticipated cash needs. In the event cash dividends are declared by us, we may decide to pay such dividends in Israeli currency. Under current Israeli regulations, any cash dividend in Israeli currency paid in respect of ordinary shares purchased by non-residents of Israel with non-Israeli currency may be freely repatriated in such non-Israeli currency, at the rate of exchange prevailing at the time of conversion. For more information regarding the taxation implications of the dividend plan, see “Item 10 - Additional Information - ~~Taxation.”~~Taxation” of this annual report.

Significant Changes

There are no significant changes that occurred since December 31, ~~2012,~~2015, except as otherwise disclosed in this annual report and in the annual consolidated financial statements included in this annual report.

103

Item 9.

The Offer andand Listing.

Trading in the ADSs

Our American Depositary Shares, or ADSs, have been quoted on the NASDAQ Stock Market under the symbol “NICEV” from our initial public offering in January 1996 until April 7, 1999, and thereafter under the symbol “NICE.” Prior to that time, there was no public market for our ordinary shares in the United States. Each ADS represents one ordinary share. The following table sets forth, for the periods indicated, the high and low reported market (sale) prices for our ADSs.

	ADSs
	High		Low
Annual
2011		38.49		27.17
2012		40.04		29.51
2013		42.12		33.63
2014		51.75		37.08
2015		68.38		47.95

Quarterly

Quarterly 2014
First Quarter	$	45.00	$	37.79
Second Quarter		46.07		37.08
Third Quarter		41.55		37.84
Fourth Quarter		51.75		38.60

Quarterly 2015
First Quarter	$	61.92	$	47.95
Second Quarter		68.38		58.15
Third Quarter		67.56		53.06
Fourth Quarter		64.92		54.54

Quarterly 2016
First Quarter (through March 22, 2016)		65.06		54.12

Monthly
September 2015	$	61.32	$	53.06
October 2015		62.50		54.54
November 2015		64.92		60.00
December 2015		63.00		56.55
January 2016		60.58		55.10
February 2016		63.62		54.12
March 2016 (through March 22, 2016)		65.06		59.34

On March 22, 2016, the last reported price of our ADSs was $64.05 per ADS.

JPMorgan Chase Bank, N.A. is the depositary for our ADSs. Its address is 4 New York Plaza, Floor 12, New York, New York 10004.

104

ADSs
High Low
Annual
2008 $ 35.87 $ 16.11
2009 33.42 18.04
2010 35.20 25.10
2011 38.49 27.17
2012 40.04 29.51

Quarterly
Quarterly 2011
First Quarter $ 37.35 $ 32.01
Second Quarter 38.49 32.60
Third Quarter 37.50 27.17
Fourth Quarter 37.82 27.61

Quarterly 2012
First Quarter $ 40.04 $ 33.66
Second Quarter 39.84 35.52
Third Quarter 37.34 29.51
Fourth Quarter 34.95 30.64

Quarterly 2013
March 2013 (through March 24)
$ 38.28 $ 34.02

Monthly
September 2012 $ 33.49 $ 30.07
October 2012 34.95 30.64
November 2012 34.35 31.54
December 2012 34.50 32.14
January 2013 38.28 34.02
February 2013 37.56 34.88
March 2013 (through March 24)
37.44 35.24

~~On March 24, 2013, the last reported price of our ADSs was $37.17 per ADS.~~

~~The Bank of New York Mellon is the depositary for our ADSs. Its address is 1 Wall Street, New York, New York 10286.~~

~~105~~

Trading in the Ordinary Shares

Our ordinary shares have been listed on the Tel-Aviv Stock Exchange, or TASE, since 1991. Our ordinary shares are not listed on any other stock exchange and have not been publicly traded outside Israel (other than through ADSs as noted above). The table below sets forth the high and low reported market (sale) prices of our ordinary shares (in NIS and dollars) on the TASE. The translation into dollars is based on the daily representative rate of exchange published by the Bank of Israel.

	Ordinary Shares
	High				Low
	NIS		$		NIS		$
Annual

2011		139.00		37.45		97.25		27.12
2012		150.00		38.82		117.80		30.29
2013		149.10		42.21		122.10		33.27
2014		203.30		51.94		130.60		36.90
2015		262.6		68.76		189.4		47.95

Quarterly 2014
First Quarter		155.00		44.45		133.70		36.90
Second Quarter		158.70		45.71		130.60		37.73
Third Quarter		152.30		41.74		132.70		37.70
Fourth Quarter		203.30		51.94		145.20		38.85

Quarterly 2015
First Quarter		246.7		61.58		189.4		47.95
Second Quarter		262.6		68.76		228.8		58.25
Third Quarter		259.0		67.93		209.3		53.35
Fourth Quarter		252.0		64.86		211.1		54.99

Quarterly 2016
First Quarter (through March 22, 2016)		250.7		65.00		207.2		53.29
Monthly
September 2015		240.8		61.66		209.3		53.35
October 2015		241.9		62.30		211.1		54.99
November 2015		252.0		64.86		231.2		59.42
December 2015		244.3		62.85		217.6		56.27
January 2016		239.0		60.34		216.9		55.09
February 2016		249.5		63.08		207.2		53.29
March 2016 (through March 22, 2016)		250.7		65.00		233.2		59.88

Ordinary Shares
High Low
NIS $ NIS $
Annual
2008 133.80 35.54 63.00 16.72
2009 125.00 33.70 74.05 18.18
2010 129.70 34.66 97.20 25.08
2011 139.00 37.45 97.25 27.12
2012 150.00 38.82 117.80 30.29

Quarterly 2011
First Quarter 131.50 37.45 114.50 32.12
Second Quarter 131.70 38.68 110.50 32.18
Third Quarter 139.00 37.45 97.25 27.12
Fourth Quarter 135.10 37.32 105.30 27.98

Quarterly 2012
First Quarter 148.90 40.08 127.70 34.00
Second Quarter 150.00 38.82 134.00 34.90
Third Quarter 145.90 37.29 119.80 30.12
Fourth Quarter 136.20 35.07 117.80 30.29

Quarterly 2013
First Quarter (through March 24)
144.00 38.69 124.20 33.27

Monthly
September 2012 130.50 33.25 121.60 31.10
October 2012 136.20 35.07 117.80 30.29
November 2012 131.80 34.04 125.50 31.76
December 2012 132.00 34.69 121.60 32.46
January 2013 144.00 38.69 124.20 33.27
February 2013 138.20 37.38 128.60 34.88
March 2013 (through March 24) 137.90 37.32 131.50 35.32

As of ~~March 24, 2013,~~22, 2016, the last reported price of our ordinary shares on the TASE was NIS ~~137.20~~245.7 (or ~~$37.42)~~$63.80) per share.

(1)

Audit fees are for audit services for each of the years shown in this table, including fees associated with the annual audit for ~~2012~~2015 (including audit in accordance with section 404 of the Sarbanes-Oxley Act) and certain procedures regarding our quarterly financial results submitted on Form 6-K, consultations concerning financial accounting and various accounting issues and performance of local statutory audits.

(2)

Audit-related fees relate to assurance and associated services that traditionally are performed by the independent auditor, including: ~~accounting consultation and consultation concerning financial accounting, reporting standards and government approvals and~~ due diligence ~~investigations.~~investigations and audit services provided in connection with other statutory or regulatory filings.

(3)	Tax fees are for professional services rendered by our auditors for tax compliance, tax advice on actual or contemplated transactions, tax consulting associated with international transfer prices and global mobility of employees.

~~135~~133

Policies and Procedures

Our audit committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our external auditors, Kost, Forer, Gabbay & Kasierer, a member of Ernst & ~~Young.~~Young Global. The policy, which is designed to ensure that such services do not impair the independence of our auditors, requires pre-approval from the audit committee on an annual basis for the various audit and non-audit services that may be performed by our auditors. If a type of service, that is to be provided by our auditors, has not received such general pre-approval, it will require specific pre-approval by our audit committee. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by our audit committee. The policy prohibits retention of the independent auditors to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act of 2002 or the rules of the SEC, and also considers whether proposed services are compatible with the independence of the public auditors.

Item 16D. Exemptions from the L~~istin~~gListing Standards for Audit Committees.

Not applicable.

134

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

During ~~2012,~~2015, we repurchased our ordinary shares as described in the table below.

Period	(a) Total number of shares purchased		(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Maximum number (or approximately dollar value) of shares that may yet be purchased under the plans or programs		(a) Total number of shares purchased		(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Maximum number (or approximately dollar value) of shares that may yet be purchased under the plans or programs
									(In U.S. dollars, except share amounts)

January 1 – January 31		395,950		34.83		395,950		89,952,528		3,417		47.99		3,417		23,401,540
February 1 - February 28		367,772		35.32		367,772		76,964,054		-		-		-		23,401,540
March 1 - March 31		281,791		36.70		281,791		66,621,402		122,601		59.73		122,601		16,078,382
April 1 - April 30		110,755		38.20		110,755		62,390,822		183,071		-		183,071		5,187,292
May 1 - May 31		483,831		37.28		483,831		44,353,511		-		-		-		105,187,292
June 1 - June 30		182,469		36.41		182,469		37,710,675		-		-		-		105,187,292
July 1 - July 31		202,456		34.68		202,456		30,689,400		-		-		-		105,187,292
August 1 - August 31		326,601		31.33		326,601		20,456,953		195,096		62.31		195,096		93,030,803
September 1 - September 30		332,829		31.57		332,829		9,948,799		298,054		59.84		298,054		75,196,688
October 1 - October 31		315,432		33.07		315,432		99,518,163		-		-		-		75,196,688
November 1 - November 30		-		-		-		99,518,163		134,068		62.52		134,068		66,814,194
December 1 - December 31		99,973		33.07		99,973		96,211,625		198,208		58.58		198,208		55,203,027
Total		3,099,859		34.69		3,099,859				1,134,515		60.26		1,134,515

On February ~~15, 2011,~~5, 2014, we announced that our ~~board~~Board of ~~directors~~Directors authorized a program to repurchase up to $100 million of our issued and outstanding ordinary shares and ADRs. Repurchases may be made from time to time in the open market or in privately negotiated transactions and will be in accordance with applicable securities laws and regulations. The timing and amount of the repurchase transactions will be determined by management and may depend on a variety of factors, including market conditions, alternative investment opportunities and other considerations. The program does not obligate us to acquire any particular amount of ordinary shares and ADRs and the program may be modified or discontinued at any time without prior notice.

On ~~November 3, 2011,~~May 7, 2015, we announced that our ~~board~~Board of ~~directors~~Directors authorized a ~~new~~ program to repurchase up to $100 million of our issued and outstanding ordinary shares and ADRs. Repurchases may be made from time to time in the open market or in privately negotiated transactions and will be in accordance with applicable securities laws and regulations. The timing and amount of the repurchase transactions will be determined by management and may depend on a variety of factors, including market conditions, alternative investment opportunities and other considerations. The program does not obligate us to acquire any particular amount of ordinary shares and ADRs and the program may be modified or discontinued at any time without prior notice.

~~136~~135

On February 14, 2012, our board of directors authorized the cancellation of our ordinary shares and ADRs repurchased during 2011 within the framework of the repurchase program. On February 13, 2013, our board of directors cancelled its prior authorization. None of the ordinary shares and ADRs repurchased were cancelled.

On October 31, 2012, we announced that our board of directors authorized a program to repurchase up to $100 million of our issued and outstanding ordinary shares and ADRs. Repurchases may be made from time to time in the open market or in privately negotiated transactions and will be in accordance with applicable securities laws and regulations. The timing and amount of the repurchase transactions will be determined by management and may depend on a variety of factors, including market conditions, alternative investment opportunities and other considerations. The program does not obligate us to acquire any particular amount of ordinary shares and ADRs and the program may be modified or discontinued at any time without prior notice.

Item 16F. Change in ~~Registrant’s~~Registrant’s Certifying Accountant.

None.

Item 16G. Corporate Governance.

We follow the Israeli Companies Law, the relevant provisions of which are summarized in this annual report, rather than comply with the NASDAQ requirements relating to: (i) the quorum for shareholder meetings (see Item 10,~~“Additional~~ “Additional Information – Memorandum and Articles of Association – Meetings of Shareholders” in this annual report); (ii) shareholder approval with respect to issuance of securities under equity based compensation plans (see Item 10,~~“Additional~~ “Additional Information – Memorandum and Articles of Association – Approval of Certain Transactions” and “Approval of Office Holder Compensation” in this annual report); and (iii) sending annual reports to shareholders (see Item 10,~~“Additional~~ “Additional Information – Documents on Display” in this annual report).

Item 16H. Mine Safety Disclosure.

Not Applicable.

136

PART III

~~Safety~~Item ~~Disclosure~~17. Financial Statements.

Not Applicable.

~~PART III~~

Item ~~17.~~ ~~Financial State~~m~~ents~~.

~~Not Applicable.~~

~~Item~~ 18. Financial Statements.

See pages F-1 through ~~F-61~~F-51 of this annual report attached hereto.

137

Item 19.

Ex~~hibits~~Exhibits.

Exhibit No.		Description
1.1		Amended and Restated Memorandum of Association, as approved on December 21, 2006 (English translation) (filed as Exhibit 1.1 to NICE-Systems Ltd.’s Annual Report on Form 20-F filed with the SEC on June 13, 2007, and incorporated herein by reference).
1.2		Amended and Restated Articles of Association, as amended on September 19, 2011 (filed as Exhibit 4.2 to NICE-Systems Ltd.’s Registration Statement on Form S-8 (Registration No. 333-177510) filed with the SEC on October 26, 2011, and incorporated herein by reference).July 9, 2015.
2.1		Form of Share Certificate (filed as Exhibit 4.1 to Amendment No. 1 to NICE-Systems Ltd.’s Registration Statement on Form F-1 (Registration No. 333-99640) filed with the SEC on December 29, 1995, and incorporated herein by reference).
2.2		Form of Deposit Agreement including Form of ADR Certificate (filed as Exhibit 1 to NICE-Systems Ltd.’s Registration Statement on Form F-6 (Registration No. ~~333-157371)~~333-203623) filed with the SEC on ~~February 17, 2011,~~April 24, 2015, and incorporated herein by reference).
4.1	Share Purchase Agreement, dated as of March 4, 2011, among NICE-Systems Ltd., IEX Corporation B.V. and CyberTechBeheer B.V. and StichtingAdministratiekantoorCybertech (filed as Exhibit 4.5 to NICE-Systems Ltd.’s Annual Report on Form 20-F filed with the SEC on March 31, 2011, and incorporated herein by reference).
~~4.2~~	~~Share Purchase Agreement dated as of September 18, 2011, by and among NICE-Systems Ltd. and shareholders of Fizzback Group (Holdings) Ltd.. (filed as Exhibit 4.5 to NICE-Systems Ltd.’s Annual Report on Form 20-F filed with the SEC on March 29, 2012, and incorporated herein by reference).~~
~~4.3~~	~~Agreement and Plan of Merger dated as of December 1, 2011, by and among NICE-Systems, Inc., Moneyball Acquisition Corporation, Merced Systems, Inc. and shareholders of Merced Systems, Inc.~~ ~~(filed as Exhibit 4.6 to NICE-Systems Ltd.’s Annual Report on Form 20-F filed with the SEC on March 29, 2012, and incorporated herein by reference).~~
~~4.4~~	NICE Systems Ltd. 2003 Stock Option Plan, as amended (filed as Exhibit 4.4 to NICE-System Ltd.’s Annual Report on Form 20-F (File No. 000-27466) filed with the SEC on April 6, 2009, and incorporated herein by reference).
~~4.5~~4.2	NICE Systems Ltd. Amended and Restated 1999 Employee Stock Purchase Plan (filed as Exhibit 4 to NICE-System Ltd.’s Registration Statement on Form S-8 (Registration No. 333-111113) filed with the SEC on May 22, 2006, and incorporated herein by reference).
~~4.6~~	Actimize Ltd. 2003 Omnibus Stock Option and Restricted Stock Incentive Plan (filed as Exhibit 4.4 to NICE-System Ltd.’s Registration Statement on Form S-8 (Registration No. 333-145981) filed with the SEC on September 11, 2007, and incorporated herein by reference).
~~4.7~~4.3		NICE Systems Ltd. 2016 Share Incentive Plan.
4.4		NICE Systems Ltd. 2008 Share Incentive Plan, as amended (filed as Exhibit ~~4.4~~99.1 to ~~NICE-System Ltd.’s Registration Statement~~NICE’s Immediate Report on Form ~~S-8 (Registration No. 333-171165)~~6-K filed with the SEC on ~~December 15, 2010,~~May 28, 2015, and incorporated herein by reference).
~~4.8~~4.5	Orsus Solutions Limited 2007 Incentive Option Plan, as amended (filed as Exhibit 4.10 to NICE-Systems Ltd.’s Annual Report on Form 20-F filed with the SEC on March 31, 2010, and incorporated herein by reference).
~~4.9~~	e-Glue Software Technologies, Inc. 2004 Stock Option Plan, as amended (filed as Exhibit 4.4 to NICE-Systems Ltd.’s Registration Statement on Form S-8 (Registration No. 333-168100) filed with the SEC on July 14, 2010, and incorporated herein by reference).
~~4.10~~4.6		Fizzback Group (Holdings) Limited Employee Share Option Scheme (filed as Exhibit 4.4 to NICE-Systems Ltd.’s Registration Statement on Form S-8 (Registration No. 333-177510) filed with the SEC on October 26, 2011, and incorporated herein by reference).
~~4.11~~4.7		Merced Systems, Inc. 2001 Stock Plan (filed as Exhibit 4.4 to NICE-Systems Ltd.’s Registration Statement on Form S-8 (Registration No. 333-179408) filed with the SEC on February 7, 2012, and incorporated herein by reference).
~~4.12~~4.8		Merced Systems, Inc. 2011 Stock Plan (filed as Exhibit 4.5 to NICE-Systems Ltd.’s Registration Statement on Form S-8 (Registration No. 333-179408) filed with the SEC on February 7, 2012, and incorporated herein by reference).
4.9		The Causata Inc. Executive Share Option Scheme (filed as Exhibit 4.4 to NICE-Systems Ltd.’s Registration Statement on Form S-8 (Registration No. 333-191176) filed with the SEC on September 16, 2013, and incorporated herein by reference).
4.10		Causata Inc. 2010 Stock Plan (filed as Exhibit 4.5 to NICE-Systems Ltd.’s Registration Statement on Form S-8 (Registration No. 333-191176) filed with the SEC on September 16, 2013, and incorporated herein by reference).
4.11		NICE System Ltd.’s Executives & Directors Compensation Policy (filed as Annex A in Exhibit 99.1 of NICE’s Immediate Report on Form 6-K filed with the SEC on June 1, 2015 and incorporated herein by reference).

138

8.1		List of significant subsidiaries.
12.1		Certification by the Chief Executive Officer of NICE-Systems Ltd., pursuant to Section 302 of the Sarbanes-Oxley Act 2002.
12.2		Certification by the Chief Financial Officer of NICE-Systems Ltd., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1		Certification by the Chief Executive Officer of NICE-Systems Ltd., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2		Certification by the Chief Financial Officer of NICE-Systems Ltd., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1		Consent of Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global.
101		The following financial information from NICE-Systems Ltd.’s Annual Report on Form 20-F for the year ended December 31, ~~2012,~~2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, ~~2012~~2015 and ~~2011;~~2014; (ii) Consolidated Statements of Income for the years ended December 31, ~~2012, 2011~~2015, 2014 and ~~2010;~~2013; (iii) Statements of Changes in Shareholders’ Equity and Comprehensive Income for the years ended December 31, ~~2012, 2011,~~2015, 2014, and ~~2010;~~2013; (iv) Consolidated Statements of Cash Flows for the years ended December 31, ~~2012, 2011,~~2015, 2014, and ~~2010;~~2013; and (v) Notes to Consolidated Financial Statements.

~~138~~139

NICE SYSTEMS ~~LTD~~.LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, ~~2012~~2015

IN U.S. DOLLARS

~~INDEX~~

INDEX

	Page

Reports of Independent Registered Public Accounting Firm	F-2 - F-4

Consolidated Balance Sheets	F-5 - F-6

Consolidated Statements of Income	F-7

Consolidated Statements of Comprehensive Income	F-8

Statements of Changes in Shareholders' Equity	F-9 - ~~F-11~~F-10

Consolidated Statements of Cash Flows	~~F-12~~F-11 - ~~F-13~~F-12

Notes to Consolidated Financial Statements	~~F-14~~F-13 - ~~F-56~~F-51

Kost Forer Gabbay & Kasierer

3 Aminadav St.

Tel-Aviv 6706703, Israel

Tel: +972-3-6232525

Fax: +972-3-5622555

ey.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

NICE SYSTEMS LTD.

We have audited the accompanying consolidated balance sheets of NICE Systems Ltd. ("the Company") and its subsidiaries as of December 31, ~~2012~~2015 and ~~2011,~~2014, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, ~~2012.~~2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, ~~2012~~2015 and ~~2011,~~2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2012,~~2015, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, ~~2012,~~2015, based on criteria established in Internal ~~Control–Integrated~~Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March ~~25, 2013~~23, 2016 expressed an unqualified opinion thereon.

Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
March ~~25, 2013~~ 23, 2016	A Member of Ernst & Young Global

F - 2 -

Kost Forer Gabbay & Kasierer

3 Aminadav St.

Tel-Aviv 6706703, Israel

Tel: +972-3-6232525

Fax: +972-3-5622555

ey.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

NICE SYSTEMS LTD.

We have audited NICE Systems Ltd.'s ("the Company") internal control over financial reporting as of December 31, ~~2012,~~2015, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) ("the COSO criteria"). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on internal control over financial reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A 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. A company's 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 the assets of the company; (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 receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

F - 3 -

Kost Forer Gabbay & Kasierer

3 Aminadav St.

Tel-Aviv 6706703, Israel

Tel: +972-3-6232525

Fax: +972-3-5622555

ey.com

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.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2012,~~2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company and its subsidiaries as of December 31, ~~2012~~2015 and ~~2011,~~2014, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, ~~2012~~2015 and our report dated ~~March 25, 2013~~April 3, 2015 expressed an unqualified opinion thereon.

Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
March ~~25, 2013~~ 23, 2016	A Member of Ernst & Young Global

F - 4 -

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

~~CONSOLIDATED~~ ~~BALANCE~~ ~~SHEETS~~

U.S. dollars in thousands

	December 31,
	2015		2014
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	325,931	$	187,497
Short-term investments		99,195		65,744
Trade receivables (net of allowance for doubtful accounts of $ 5,315 and $ 4,900 at December 31, 2015 and 2014, respectively)		177,323		155,628
Prepaid expenses and other current assets		43,561		40,257
Current assets of discontinued operations		9,142		36,351

Total current assets		655,152		485,477

LONG-TERM ASSETS:
Long-term investments		403,249		246,721
Other long-term assets		17,175		18,921
Property and equipment, net		39,213		40,170
Deferred tax assets		14,130		18,853
Other intangible assets, net		69,582		109,799
Goodwill		651,112		659,657
Long-term assets of discontinued operations		-		53,354

Total long-term assets		1,194,461		1,147,475

Total assets	$	1,849,613	$	1,632,952

December 31,
2012 2011
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 98,596 $ 204,437
Short-term investments 199,955 144,003
Trade receivables (net of allowance for doubtful accounts of $ 6,374 and $ 4,671 at December 31, 2012 and 2011, respectively) 155,426 126,981
Other receivables and prepaid expenses 37,626 43,941
Inventories 13,897 13,404
Deferred tax assets 15,564 10,405

Total current assets
521,064 543,171

LONG-TERM ASSETS:
Long-term investments 146,154 214,136
Other long-term assets 28,676 28,890
Property and equipment, net 41,278 28,299
Other intangible assets, net 228,746 158,153
Goodwill 695,027 609,187

Total long-term assets
1,139,881 1,038,665

Total assets
$ 1,660,945 $ 1,581,836

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

F - 5 -

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share and per share data)

	December 31,
	2015			2014
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade payables	$	11,719		$	9,088
Deferred revenues and advances from customers		151,345			122,528
Accrued expenses and other liabilities		223,255			192,414
Current liabilities of discontinued operations		12,744			54,357

Total current liabilities		399,063			378,387

LONG-TERM LIABILITIES:
Accrued severance pay		17,952			18,830
Deferred tax liabilities		15,040			14,176
Long-term liabilities of discontinued operations		2,409			8,103

Total long-term liabilities		35,401			41,109

COMMITMENTS AND CONTINGENT LIABILITIES

SHAREHOLDERS' EQUITY:
Share capital-
Ordinary shares of NIS 1 par value:
Authorized: 125,000,000 shares at December 31, 2015 and 2014; Issued: 71,158,401 and 69,749,722 shares at December 31, 2015 and 2014, respectively; Outstanding: 59,526,506 and 59,252,342 shares at December 31, 2015 and 2014, respectively		17,977			17,615
Additional paid-in capital		1,234,206			1,171,424
Treasury shares at cost - 11,633,783 and 10,499,268 Ordinary shares at December 31, 2015 and 2014, respectively		(445,021	)		(376,637	)
Accumulated other comprehensive loss		(24,205	)		(10,546	)
Retained earnings		632,192			411,600

Total shareholders' equity		1,415,149			1,213,456

Total liabilities and shareholders' equity	$	1,849,613		$	1,632,952

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

F - 6

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

December 31,
2012 2011
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade payables $ 20,553 $ 19,014
Deferred revenues and advances from customers 150,424 160,242
Accrued expenses and other liabilities 212,452 190,372

Total current liabilities
383,429 369,628

LONG-TERM LIABILITIES:
Accrued severance pay 24,327 23,728
Deferred tax liabilities 58,341 27,766
Other long-term liabilities 3,760 2,070

Total long-term liabilities
86,428 53,564

COMMITMENTS AND CONTINGENT LIABILITIES

SHAREHOLDERS' EQUITY:
Share capital-
Ordinary shares of NIS 1 par value:
Authorized: 125,000,000 shares at December 31, 2012 and 2011; Issued: 66,346,119 and 64,804,730 shares
at December 31, 2012 and 2011, respectively; Outstanding: 60,248,699 and 61,807,169 shares at
December 31, 2012 and 2011, respectively
16,666 16,273
Additional paid-in capital 1,045,733 988,076
Treasury shares at cost – 6,097,420 and 2,997,561 Ordinary shares at December 31, 2012 and 2011, respectively (203,907 ) (96,318 )
Accumulated other comprehensive income (loss) 12,194 (1,895 )
Retained earnings 320,402 252,508

Total shareholders' equity
1,191,088 1,158,644

Total liabilities and shareholders' equity
$ 1,660,945 $ 1,581,836
U.S. dollars in thousands (except share and per share data)

	Year ended December 31,
	2015			2014			2013
Revenues:
Products	$	317,900		$	289,560		$	280,140
Services		608,967			582,435			541,375

Total revenues		926,867			871,995			821,515

Cost of revenues:
Products		66,363			63,919			69,335
Services		237,219			239,592			230,279

Total cost of revenues		303,582			303,511			299,614

Gross profit		623,285			568,484			521,901

Operating expenses:
Research and development, net		128,485			123,141			115,431
Selling and marketing		225,817			231,097			214,579
General and administrative		90,349			83,360			86,467
Amortization of acquired intangibles		12,528			19,157			29,438
Restructuring expenses		-			5,435			527

Total operating expenses		457,179			462,190			446,442

Operating income		166,106			106,294			75,459
Financial income and other, net		5,304			3,765			3,927

Income before taxes on income		171,410			110,059			79,386
Taxes on income		(30,832	)		(9,909	)		(26,915	)

Net income from continuing operations	$	140,578		$	100,150		$	52,471
Discontinued operations:
Gain on disposal and income (loss) from operations		152,459			4,965			4,294
Taxes on income		(34,206	)		(2,040	)		(1,490	)

Net income on discontinued operations		118,253			2,925			2,804

Net income	$	258,831		$	103,075		$	55,275

Basic earnings per share from continuing operations	$	2.36		$	1.69		$	0.87
Basic earnings per share from discontinued operations	$	1.99		$	0.05		$	0.05
Basic earnings per share	$	4.35		$	1.74		$	0.92

Diluted earnings per share from continuing operations	$	2.29		$	1.64		$	0.85
Diluted earnings per share from discontinued operations	$	1.93		$	0.05		$	0.04
Diluted earnings per share	$	4.22		$	1.69		$	0.89

Weighted average number of shares used in computing:
Basic earnings per share		59,552			59,362			60,388

Diluted earnings per share		61,281			60,895			61,830

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

~~F - 6 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~CONSOLIDATED STAT~~EM~~ENTS OF INCOME~~

~~U.S. dollars in thousands (except per share data)~~

Year ended December 31,
2012 2011 2010
Revenues:
Products $ 369,381 $ 355,760 $ 325,429
Services 509,631 438,071 364,022

Total revenues
879,012 793,831 689,451

Cost of revenues:
Products 122,917 116,256 107,190
Services 228,306 191,049 161,885

Total cost of revenues
351,223 307,305 269,075

Gross profit 527,789 486,526 420,376

Operating expenses:
Research and development, net 121,387 109,127 97,083
Selling and marketing 230,162 199,044 178,407
General and administrative 96,134 95,650 76,345
Amortization of acquired intangibles 32,590 23,677 19,489
Restructuring expenses 1,884 - -

Total operating expenses
482,157 427,498 371,324

Operating income 45,632 59,028 49,052
Financial income and other, net 8,268 10,621 9,185

Income before taxes on income 53,900 69,649 58,237
Tax benefit (Taxes on income) 13,994 (12,386 ) (9,530 )

Net income $ 67,894 $ 57,263 $ 48,707

Net earnings per share:
Basic $ 1.11 $ 0.91 $ 0.78

Diluted $ 1.09 $ 0.89 $ 0.76

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

F - 7 -

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

U.S. dollars in thousands (except share and per share data)

Title of Each Class	Name of Each Exchange On Which Registered
American Depositary Shares, each representing one Ordinary Share, par value one New Israeli Shekel per share	NASDAQ Global Select Market

	~~Page~~
PART I			Page
Item 1.	Identity of Directors, Senior Management and Advisers	1
Item 2.	Offer Statistics and Expected Timetable	1
Item 3.	Key Information	1
Item 4.	Information on the Company	2526
Item 4A	Unresolved Staff Comments	5552
Item 5.	Operating and Financial Review and Prospects	5553
Item 6.	Directors, Senior Management and Employees	7976
Item 7.	Major Shareholders and Related Party Transactions	100
Item 8.	Financial Information	102
Item 9.	The Offer and Listing	104
Item 10.	Additional Information	~~107~~106
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	~~129~~126
Item 12.	Description of Securities Other than Equity Securities	~~132~~129
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	~~134~~132
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	~~134~~132
Item 15.	Controls and Procedures	~~134~~132
Item 16.	[Reserved]	~~135~~
Item 16A.	Audit Committee Financial ~~Expert.~~Expert	~~135~~133
Item 16B.	Code of Ethics	~~135~~133
Item 16C.	Principal Accountant Fees and Services	~~135~~133
Item 16D.	Exemptions from the Listing Standards for Audit Committees	~~136~~134
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	~~136~~135
Item 16F.	Change in Registrant’s Certifying Accountant	~~137~~136
Item 16G.	Corporate Governance	~~137~~ 136
Item 16H.	Mine Safety Disclosure	~~137~~ 136
PART III
Item 17.	Financial Statements	137
Item 18.	Financial Statements	137
Item 19.	Exhibits	138
Index to Financial Statements		F-1

	At December 31,
	2008		2009		2010		2011		2012

BALANCE SHEET DATA:
Working capital	$	217,511	$	184,460	$	173,909	$	173,543		$	137,635
Total assets		1, 283,015		1,399,677		1,534,418		1,581,836			1,660,945
Shareholders’ equity		970,822		1,062,754		1,160,760		1,158,644			1,191,088

	At December 31,
	2011		2012		2013		2014		2015

BALANCE SHEET DATA*:
Working capital	$	163,398	$	122,108	$	61,023	$	107,090	$	256,089
Total assets		1,575,344		1,649,676		1,646,030		1,632,952		1,849,613
Shareholders’ equity		1,158,644		1,191,088		1,204,796		1,213,456		1,415,149

	Years Ended December 31, (U.S. dollars in millions)											Years Ended December 31, (U.S. dollars in millions)
	2011			2012			Dollar Change		Percentage Change			2014			2015			Dollar Change		Percentage Change

Gross profit on product revenues	$	239.5		$	246.5		$	7.0		2.9	%	$	225.7		$	251.5		$	25.8		11.4	%
as a percentage of product revenues		67.3	%		66.7	%							77.9	%		79.1	%
Gross profit on service revenue		247.0			281.3			34.3		13.9	%
Gross profit on service revenues													342.8			371.8			29.0		8.4	%
as a percentage of service revenues		56.4	%		55.2	%							58.9	%		61.0	%
Total gross profit	$	486.5		$	527.8		$	41.3		8.5	%	$	568.5		$	623.3		$	54.8		9.6	%
as a percentage of total revenues		61.3	%		60.0	%							65.2	%		67.2	%

	Year Ended December 31,
	2008			2009			2010			2011			2012
	(U.S. dollars in thousands, except per share data)
OPERATING DATA:
Revenues
Products	$	351,680		$	281,783		$	325, 429		$	355,760		$	369,381
Services		272,482			301,332			364,022			438,071			509,631
Total revenues		624,162			583,115			689,451			793,831			879,012
Cost of revenues
Products		95,861			88,030			107,190			116,256			122,917
Services		142,885			149,175			161,885			191,049			228,306
Total cost of revenues		238,746			237,205			269,075			307,305			351,223
Gross profit		385,416			345,910			420,376			486,526			527,789
Operating expenses:
Research and development, net		78,445			77,382			97,083			109,127			121,387
Selling and marketing		147,879			141,526			178,407			199,044			230,162
General and administrative		97,378			72,791			76,345			95,650			96,134
Amortization of acquired intangible assets		14,493			16,012			19,489			23,677			32,590
Restructuring expenses		-			-			-			-			1,884
Settlement and related expenses		9,870			-			-			-			-
Total operating expenses		348,065			307,711			371,324			427,498			482,157
Operating income		37,351			38,199			49,052			59,028			45,632
Financial income, net		11,644			8,094			9,339			10,783			6,738
Other expenses, net		(53	)		(115	)		(154	)		(162	)		1,530
Income before taxes on income		48,942			46,178			58,237			69,649			53,900
Taxes on income		9,835			3,422			9,530			12,386			(13,994	)
Net income		39,107			42,756			48,707			57,263			67,894

Basic earnings per share	$	0.65		$	0.70		$	0.78		$	0.91		$	1.11
Weighted average number of shares used in computing basic earnings per share (in thousands)		60,088			61,395			62,652			62,924			60,905
Diluted earnings per share	$	0.64		$	0.68		$	0.76		$	0.89		$	1.09

Weighted average number of shares used in computing diluted earnings per share (in thousands)		61,268			62,490			64,132			64,241			62,261

	Payments Due by Period										Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1- 3 years		3-5 years		More than 5 years		Total		Less than 1 year		1- 3 years		3-5 years		More than 5 years
Operating Leases		113,927		16,835		29,552		23,733		43,807		68,580		15,743		24,033		17,603		11,201
Unconditional Purchase Obligations		13,591		7,195		6,396		-		-		19,619		13,083		6,536		-		-
Severance Pay*		24,327										17,952
Total Contractual Cash Obligations		151,845		24,030		35,948		23,733		43,807		106,151		28,826		30,569		17,603		11,201
Uncertain Income Tax Positions **		37,965										18,236

			Amount of Commitment Expiration Per Period
Other Commercial Commitments	Total Amounts Committed		Less than 1 year		1- 3 years		3-5 years		More than 5 years
Guarantees – Continuing operations		3,159,420		3,109,011		-		50,410		-
Guarantees – Discontinued operations*		24,298,737		4,868,198		18,266,633		1,163,906		-
Total Guarantees		27,458,157		7,977,209		18,266,633		1,214,316		-

Name	Age	Position	Audit Committee Member	Compensation Committee Member	Internal Audit Committee Member	Mergers and Acquisitions Member	Nominations Committee Member	Outside Director*
David Kostman~~(1)(4)(5)~~	48 51	Chairman of the Board of Directors	X			X	X
~~Joseph Atsmon(1)(3)~~ Rimon Ben-Shaoul	64 71	~~Vice-Chairman of the Board of Directors~~ Director	X			X
~~Rimon Ben-Shaoul(2)(4)~~ Dan Falk	68 71	Director	X	X	X	X	X	X
~~Yoseph Dauber(2)(3)~~ Yocheved Dvir	77 63	Director	X	X	X			X
~~Dan Falk(1)(2)(3)(4)(5)(6)~~ Yehoshua Ehrlich	68 66	Director				X
~~Yocheved Dvir(1)(2)(3)(6)~~ Leo Apotheker	60 62	Director		X		X
~~Yehoshua Ehrlich(4)~~ Joe Cowan	63 67	Director		X		X
~~Zeev Bregman~~Zehava Simon	57	Director	X	X	X			X

Name	51 Age	~~President,~~ Position
Barak Eilam	40	Chief Executive Officer ~~and Director~~
~~Yochai Rozenblat~~ Miki Migdal	51 55	President, Enterprise Product Group
~~Yaron Tchwella~~ Joseph Friscia	52 61	President, ~~Security Group and Executive Vice President Business Operation~~ NICE-Actimize
~~Amir Orad~~ Sarit Sagiv	37 47	~~President and Chief Executive Officer, NICE-Actimize~~
~~Dafna Gruber~~	48	Chief Financial Officer
Yechiam Cohen	56 59	Corporate Vice President, General Counsel and Corporate Secretary
Eran Porat	5053	Corporate Vice President, Finance
Eran Liron	45 48	Executive Vice President, Marketing and Corporate Development
~~Benny Einhorn~~ Tom Dziersk	52	President, NICE Americas
John O’Hara	57	President, NICE EMEA ~~and Chief Marketing Officer~~
~~Barak Eilam~~ Raghav Sahgal	3753	President, NICE ~~Americas~~ APAC
~~Raghav Sahgal~~ Christopher Wooten	50	Executive Vice President, ~~NICE APAC~~ Vertical Markets
Sigal ~~Gillmore~~ Gill-more	4346	Executive Vice President, Human Resources

	At December 31,						At December 31,
Category of Activity	2010		2011		2012		2013		2014		2015*

Operations		122		147		110		110		108		86
Customer Support		1,018		1,204		1,291		1,393		1,343		1,374
Sales & Marketing		604		677		809		840		811		682
Research & Development		705		728		803		865		890		801
General & Administrative		345		373		387		368		361		352
Total		2,794		3,129		3,400		3,576		3,513		3,316

Geographic Location
Israel		1,212		1,200		1,206		1,285		1,256		946
Americas		1,009		1,095		1,298		1,365		1,344		1,263
Europe		352		564		607		631		607		564
Asia Pacific		221		270		289		295		306		543
Total		2,794		3,129		3,400		3,576		3,513		3,316

	In U.S. dollars in millions:
	U.S. Dollars		British Pound			Euro		New Israeli Shekel			Swiss Frank		Canadian Dollar			Hong Kong Dollar			Japanese Yen			Singapore Dollar			Australian Dollar			Other currencies			Total

Israel		-		13.19			7.56		(40.92	)*		0.87		2.08			(1.80	)		(1.90	)		(1.53	)		1.28			(0.57	)		(21.74	)
European Union		23.85		12.11			14.25		-			0.43		(0.23	)		(0.29	)		0.46			0.19			(0.07	)		(0.28	)		50.42
Switzerland		3.03		(0.09	)		0.37		-			-		-			-			-			-			-			-			3.31
United States of America		0.38		(0.58	)		0.16		-			-		1.06			(0.01	)		2.73			0.02			0.71			0.62			5.09
Canada		2.49		-			-		-			-		-			-			-			-			-			-			2.49
Hong Kong		0.19		-			-		-			-		-			-			-			0.02			-			0.13			0.34
Australia		0.88		-			-		-			-		-			-			-			(0.02	)		-			0.03			0.89

		30.82		24.63			22.34		(40.92	)		1.30		2.91			(2.10	)		1.29			(1.32	)		1.92			(0.07	)		40.80

	NIS/ USD			GBP/ USD		EUR/ USD		CAD/USD		HKD/ USD			CHF/ USD		AUD/USD		CNY/ USD		JPY/ USD		SGD / USD			GBP / EUR		SGD/ EUR		CHF/ EUR		GBP/ CHF		GBP/ JPY		SGD/ HKD		SGD/ AUD			Other/ Other			Total

Net Exposure		(40.92	)*		25.20		19.13		5.63		(1.65	)		4.02		2.87		0.03		0.84		(1.51	)		26.21		0.19		0.37		0.22		0.25		0.02		(0.02	)		(0.07	)		40.80

	Functional currencies
	(In U.S. dollars in millions)
	USD			GBP		EUR		CAD		MXN		CHF			AUD		BRL			Other currencies
Foreign curren-cies
USD		-			22.7		14.5		1.6		0.1		(0.5	)		1.1		(1.0	)		-
GBP		26.6			-		1.0		-		-		0.1			-		-			-
EUR		(4.0	)		25.0		-		-		-		(0.1	)		-		-			-
CAD		1.6			2.2		1.2		-		-		-			-		-			-
AUD		1.9			0.3		0.5		-		-		-			-		-			-
MXN		1.9			-		-		-		-		-			-		-			-
CHF		0.7			0.6		-		-		-		-			-		-			-
JPY		(0.6	)		-		-		-		-		-			-		-			-
INR		(0.6	)		-		-		-		-		-			-		-			-
SGD		(3.5	)		-		0.2		-		-		-			-		-			-
HKD		(3.0	)		-		-		-		-		-			-		-			-
ILS		0.4			-		-		-		-		-			-		-			-
Other currencies		-			0.3		-		-		-		-			0.2		-			(1.7	)

	New Israel Shekel		Other currencies		Total
less than 1 year		6.74		0.07		6.81
1-3 years		13.91		0.04		13.95
3-5 years		14.09		-		14.09
Over 5 years		34.05		-		34.05
Total		68.79		0.11		68.90

	New Israeli Shekels
	Notional Amount		Fair Value
Option contracts to hedge payroll expenses		88.0		2.80

Forward contracts to hedge Israeli Treasury Bills (*)		107.4		(4.1	)

	Amortized Cost										Estimated fair value
	Up to 1 year		1-3 years		4-5 years		6-10 years		Total		Up to 1 year		1-3 years		4-5 years		6-10 years		Total
Corporate debentures		62.08		97.91		30.84		-		190.83		62.22		100.34		32.00		-		194.56
U.S. Government agency debentures		-		0.38		-		-		0.38		-		0.38		-		-		0.38
US treasuries		-		6.21		-		7.01		13.22		-		6.49		-		6.95		13.44
Israeli Treasury Bills(*)		106.33		-		-		-		106.33		106.57		-		-		-		106.57
		168.41		104.50		30.84		7.01		310.76		168.79		107.21		32.00		6.95		314.95

	Amortized Cost										Estimated fair value
	Up to 1 year		1-3 years		4-5 years		6-10 years		Total		Up to 1 year		1-3 years		4-5 years		6-10 years		Total
Corporate debentures		59.0		259.1		134.4		-		452.6		59.0		257.7		133.7		-		450.5
U.S. treasuries		-		-		-		7.0		7.0		-		-		-		6.8		6.8
U.S. govern-ment agencies		-		2.0		3.0		-		5.0		-		2.0		3.0		-		5.0
Total		59.0		261.1		137.4		7.0		464.6		59.0		259.7		136.7		6.8		462.3

Services Rendered	2011 Fees		2012 Fees		2014 Fees		2015 Fees
Audit (1)	$	689,000	$	686,000	$	691,000	$	676,865
Audit-related (2)	$	195,000	$	65,000	$	72,000	$	76,787
Tax (3)	$	576,000	$	609,000	$	399,000	$	146,645
Total	$	1,460,000	$	1,360,000	$	1,162,000	$	900,297

	Share capital		Additional paid-in capital		Treasury shares			Accumulated other comprehensive income (loss)			Retained earnings		Total shareholders' equity

Balance as of January 1, 2012	$	16,273	$	988,076	$	(96,318	)	$	(1,895	)	$	252,508	$	1,158,644
Assumption of restricted share units and options upon acquisition		-		3,763		-			-			-		3,763
Issuance of shares of ESPP		5		594		-			-			-		599
Exercise of share options		388		29,584		-			-			-		29,972
Stock-based compensation		-		23,612		-			-			-		23,612
Excess tax benefit from share-based payment arrangements		-		104		-			-			-		104
Treasury shares purchased		-		-		(107,589	)		-			-		(107,589	)
Other comprehensive income		-		-		-			14,089			-		14,089
Net income		-		-		-			-			67,894		67,894

Total comprehensive income
Balance as of December 31, 2012	$	16,666	$	1,045,733	$	(203,907	)	$	12,194		$	320,402	$	1,191,088

Cash	$	182,105
Options and Restricted Share Units*)		3,763

Total purchase price	$	185,868

	Year ended December 31,
	(* 2015		2014		2013

Revenue	$	68,672	$	139,644	$	127,769
Cost of sales		26,956		72,073		65,333
Operating expenses		36,307		62,041		58,142

Operating income		5,409		5,530		4,294
Other expenses, net		284		565		-
Gain on disposal of the discontinued operations		147,334		-		-

Income before taxes on income		152,459		4,965		4,294
Taxes on income		34,206		2,040		1,490

Total net income on discontinued operations	$	118,253	$	2,925	$	2,804

Cash	$	23,509
Trade receivables		14,116
Other receivables and prepaid expenses		1,201
Current deferred tax assets		1,120
Inventories		85
Long-term deposits		80
Property and equipment		1,714
Intercompany receivable		4,153
Other intangible assets		139,583
Goodwill		75,599

Total assets acquired		261,160

Trade payables		(858	)
Current deferred tax liabilities		(2,046	)
Accrued expenses and other liabilities		(24,061	)
Long-term deferred tax liabilities		(48,327	)

Total liabilities assumed		(75,292	)

Net assets acquired	$	185,868

	Fair value		%

Core technology	$	91,874		17
Customer relationships		32,310		13
Covenant not to compete		8,009		40
Backlog		7,390		50

Total intangible assets	$	139,583

	%

Computers and peripheral equipment		33	20-33
Office furniture and equipment		6 - 15	20

	%

Core technology		18
Customer relationships and distribution network		18	13
Capitalized software development costs (see lm below)		33
~~Trademarks~~		30
~~Covenant not to compete~~		49

	2012
	Fair value measurements using input type
	Level 1		Level 2			Level 3		Total
Marketable securities:
Corporate debentures	$	-	$	194,553		$	-	$	194,553
U.S. Treasuries		-		13,443			-		13,443
U.S. Government agency debentures		-		375			-		375
Israeli Treasury Bills		-		106,574			-		106,574

Total marketable securities	$	-	$	314,945		$	-	$	314,945

Derivative assets	$	-	$	2,795		$	-	$	2,795

Derivative liabilities	$	-	$	(4,107	)	$	-	$	(4,107	)

	Year ended December 31, 2015
	Unrealized gains (losses) on marketable securities			Unrealized gains (losses) on cash flow hedges			Foreign currency translation adjustment			Total

Beginning balance	$	183		$	(3,625	)	$	(7,104	)	$	(10,546	)

Other comprehensive income (loss) before reclassifications		(2,081	)		(954	)		(14,602	)		(17,637	)
Amounts reclassified from accumulated other comprehensive income		(32	)		4,010			-			3,978

Net current-period other comprehensive income (loss)		(2,113	)		3,056			(14,602	)		(13,659	)

Ending balance	$	( 1,930	)	$	(569	)	$	(21,706	)	$	(24,205	)

	Year ended December 31, 2014
	Unrealized gains (losses) on marketable securities			Unrealized gains (losses) on cash flow hedges			Foreign currency translation adjustment			Total

Beginning balance	$	(60	)	$	1,593		$	10,868		$	12,401

Other comprehensive income (loss) before reclassifications		259			(6,770	)		(17,972	)		(24,483	)
Amounts reclassified from accumulated other comprehensive income		(16	)		1,552			-			1,536

Net current-period other comprehensive income (loss)		243			(5,218	)		(17,972	)		(22,947	)

Ending balance	$	183		$	(3,625	)	$	(7,104	)	$	(10,546	)

	Amortized cost				Gross unrealized gains				Gross unrealized losses				Estimated fair value				Amortized cost				Gross unrealized gains				Gross unrealized losses				Estimated fair value
	December 31,				December 31,				December 31,				December 31,				December 31,				December 31,				December 31,				December 31,
	2012		2011		2012		2011		2012		2011		2012		2011		2015		2014		2015		2014		2015		2014		2015		2014

Level 2:
Corporate debentures	$	190,826	$	201,301	$	3,787	$	3,089	$	60	$	1,556	$	194,553	$	202,834	$	452,556	$	305,046	$	267	$	1,326	$	2,338	$	711	$	450,485	$	305,661
U.S. Agencies																		4,999		-		3		-		2		-		5,000		-
U.S. Treasuries		13,227		18,302		276		1,180		60		-		13,443		19,482		7,010		7,011		-		-		197		207		6,813		6,804
U.S. Government agency debentures		375		10,709		-		40		-		1		375		10,748
Israeli Treasury Bills		106,330		124,679		244		388		-		-		106,574		125,067

	$	310,758	$	354,991	$	4,307	$	4,697	$	120	$	1,557	$	314,945	$	358,131	$	464,565	$	312,057	$	270	$	1,326	$	2,537	$	918	$	462,298	$	312,465

	Amortized		Estimated
	cost		fair value

Due within one year	$	168,409	$	168,791
Due after one year through five years		142,349		146,154

	$	310,758	$	314,945

	December 31, 2015
	Investments with continuous unrealized losses for less than 12 months					Investments with continuous unrealized losses for 12 months or greater					Total Investments with continuous unrealized losses
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses

Corporate debentures	$	242,545	$	(1,750	)	$	113,581	$	(588	)	$	356,126	$	(2,338	)
U.S. Agencies		1,997		(3	)		-		-			1,997		(3	)
U.S. treasuries		-		-			6,813		(196	)		6,813		(196	)

	$	244,542	$	(1,753	)	$	120,394	$	(784	)	$	364,936	$	(2,537	)

	December 31, 2014
	Investments with continuous unrealized losses for less than 12 months					Investments with continuous unrealized losses for 12 months or greater					Total Investments with continuous unrealized losses
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses

Corporate debentures	$	47,575	$	(189	)		86,950	$	(522	)	$	134,525	$	(711	)
U.S. treasuries		-		-			6,804		(207	)		6,804		(207	)

	$	47,575	$	(189	)	$	93,754	$	(729	)	$	141,329	$	(918	)

For the year ended December 31,

2016			31,494
2017			26,059
2018			7,309
2019			4,384
2020			336

			69,582

For the year ended December 31,

2013	$	72,269
2014		50,549
2015		39,987
2016		30,092
2017		23,651
2018 and thereafter		9,696

	$	226,244