As part of our growth strategy, we have made a significant number of acquisitions over the past few years, including a total of ~~six~~seven acquisitions ~~in 2010 and~~during the years 2011 through 2013 (see Item 5, “Operating and Financial Review and Prospects—Recent Acquisitions” in this annual ~~report)~~report for a description of certain of these acquisitions), and expect to continue to make ~~acquisitions.~~acquisitions and investments in the future. We frequently evaluate the tactical or strategic opportunity available related to complementary businesses, products or technologies. The process of integrating an acquired company’s business into our operations and/or of investing in new technologies, (1) may result in unforeseen operating difficulties and large expenditures and (2) may 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.

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There can be no assurance that we will be successful in making additional acquisitions. 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 may also compete with others to acquire companies, and such competition may result in decreased availability of, or an increase in price for, suitable acquisition candidates. In addition, we 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 addition, 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 such necessary financing, it could have an impact on our ability consummate a substantial acquisition or investment and execute our growth strategy. Alternatively, we may issue a significant amount of ordinary shares as consideration for an acquisition, which would have a dilutive effect on our existing shareholders.

Other risks commonly encountered with acquisitions include the effect of the acquisition on our financial and strategic position, the inability to 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 timely attract 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 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)~~(“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 failure to successfully implement our growth strategy could affect our ability to sustain growth and could materially adversely affect our results of operations.

~~Our evolving business strategy could adversely affect our business.~~

Historically we have supplied the hardware and some software for implementing multimedia recording solutions. Our shift towards providing business solutions 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 model, including customer installations. 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. All of the above factors could result in a delay in revenue recognition and materially adversely affect our results of operations.

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~~We depend on the success of our recording solutions.~~

Our recording solutions are based on a computer telephony integrated multi-channel voice recording and retrieval system. We are dependent on the success of our recording solutions to maintain profitability. Our recording solutions currently generate, and in recent years have generated, a large portion of our product revenues, and we will continue to be dependent on the sales of our recording solutions in the next several years. However, there can be no assurance that the recording market will continue to grow. Also, switch manufacturers, such as Avaya and Cisco, have announced their intent to offer recording at the switch, which could result in a significant decline in sales of our recording solutions, which could also result in a decline in sales of related applications, or a significant decrease in the profit margin on such solutions, that could have a material adverse effect on our business, financial condition or results of operations.

In addition, the trend of customers of enterprises moving from voice to other means of communication with the enterprise (such as e-mail, instant messaging and chat), may result in a reduction in the demand for our voice recording platform and applications. Furthermore, if such trend continues, our customers may cease to record voice and switch to recording other means of communication. This may have a material adverse affect on our business, financial condition or results of operations.

~~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 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. ~~Looking forward, given the lead-time required by~~In addition, our ~~contract manufacturer, if a large portion of sales orders~~revenues are ~~received late~~typically highest in the ~~quarter, we may not be able to deliver products within the~~fourth quarter and ~~thus such sales will be deferred to a future quarter. There can be no assurance that such deferrals will result in sales~~lowest in the ~~near term, or at all. Thus, delays~~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 ~~executing client orders may affect~~ our ~~revenue and cause our operating results~~overall sales mix continues to ~~vary widely.~~increase. Additionally, as a high percentage of our expenses, particularly employee compensation, isare 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 platforms and related applications, 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. 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. .

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.~~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.

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We operate with certain 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 impacted 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 ~~might recognize a loss with respect~~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 ~~investments~~business, and competition for highly qualified and experienced managers in our industry is intense. In 2014, Zeevi Bregman, our former CEO, retired, and Mr. Barak Eilam assumed this role. In February 2015, we announced that Ms. Dafna Gruber, our CFO, will be retiring from her position, and be replaced by Ms. Sarit Sagiv following a transition period. 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.

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, 2014, approximately 24% of our employees were devoted to research and product development and approximately 23% 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.

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 ~~instruments.~~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.

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 or that our relationship with any such supplier is terminated, 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, financial condition and results of operations.

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 ~~invest most~~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 or develop new software.

We integrate and utilize various third party software products as components of our ~~cash in a variety~~products and solutions to enhance their functionality. Our business could be disrupted if functional versions of ~~financial instruments. If the obligor of any of the instruments we hold defaults~~these 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 may be produced. 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~~Undetected errors or ~~develop new software.~~

We integrate various third party software products as components of our products. We utilize third party software products to enhance the functionality of our products. Our business could be disrupted if functional versions of this software were either no longer available to us or no longer offered 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 availablemalfunctions in our ~~current~~products 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.

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 in our software applications and will likely continue to do so in the future.~~weaknesses. 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.

~~Inadequate intellectual property protections~~

Risks Relating to Our Finances

We face foreign exchange currency risks.

We are impacted by exchange rate fluctuations. 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 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 ~~prevent us from enforcing or defending~~adversely impact our ~~intellectual property~~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 provide protection against risk, but may entail a loss of opportunity for favorable gain. Therefore, we may be unable to benefit from a favorable gain that may result from such currency fluctuations. 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 ~~liability~~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 ~~event~~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. If we are assessed additional taxes, it could have a material adverse effect on our results of operations and financial condition.

In recent years we have seen changes in tax laws resulting in an increase in applicable tax rates, in part stemming from public pressure to increase tax liabilities of corporations and to limit the ability to gain from strategic tax planning, with a focus 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. In Israel specifically, we have experienced in recent years an increase in corporate tax rate, as well as reduction in favorable tax treatment, which has resulted in an increase in our effective tax rate. Such trend, which is partly attributable to political and public pressure, may continue and may results in a higher effective tax rate, which will negatively impact our results of operation.

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 these investments defaults or undergoes reorganization in bankruptcy, we may lose a portion of such investment and our financial income may decrease. In addition, a downturn in the credit markets could adversely affect our financial income, the liquidity of our investments, or the downgrading of the credit rating of our investments 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.

Risks Relating to Regulatory Environment, Intellectual Property and Data Protection

We may face risks relating to inadequate intellectual property protection and liability resulting from 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 87150 U.S. patents and 7563 patents issued in additional countries covering substantially the same technology as the U.S. patents. We have over 9789 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 time to time, we receive “cease and desist” letters alleging patent infringements. However, no formal claims or other actions have been filed with respect to such alleged infringement, except for past claims which have since been settled and dismissed, and a claim filed by Fair Isaac Corporation (for further information please see Item 8, “Financial Information—Legal Proceedings” in this annual report). We cannot assure you, however, that we will be successful in defending against the pending claim that has been asserted or ~~any other claims that may be asserted. We also cannot assure you that such claim will not have a material adverse effect on our business, financial condition, or operations.~~dismissed. Defending infringement claims or other claims could involve substantial costs and diversion of management resources.

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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 which 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.

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We depend upon outsourcers for the manufacture of our products. The failure of our product manufacturers to meet our quality or delivery requirements would likely have a material adverse effect on ourOur business, results of operations and financial ~~condition.~~condition could be materially adversely affected by changes in the legal and regulatory environment.

Pursuant to our manufacturing agreement with Flextronics Israel Ltd., a subsidiary of Flextronics, a global electronics manufacturing services provider, Flextronics provides us with a comprehensive manufacturing solution that covers all aspects of the manufacture of our products from order receipt to product shipment, including purchasing, manufacturing, testing, configuration, and delivery services. Although in recent years we made a shift towards an enterprise software business model, we still sell certain hardware based products that are covered by this agreement. As a result of this arrangement, we are dependent on Flextronics to process orders and manufacture our hardware products. Consequently, the manufacturing process of our products is not in our direct control.

We may from time to time experience delivery delays due to the inability of Flextronics or any other manufacturers to consistently meet our quality or delivery requirements and we may experience production interruptions if Flextronics or another manufacturer is for any reason unable to continue the production of our products. Should we have on-going performance issues with our contract manufacturers, the process to move from one contractor to another is a lengthy and costly process that could affect our ability to execute customer shipment requirements and/or might negatively affect revenue and/or costs. If this manufacturer or any other manufacturer were to cancel contracts or commitments with us or fail to meet the quality or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders and have significantly decreased quarterly revenues and earnings, which would have a material adverse effect on ourOur business, results of operations and financial ~~condition.~~

~~If we lose our key suppliers,~~condition could be materially adversely affected if laws, regulations or standards relating to our business ~~may suffer.~~

~~Certain components~~ and ~~subassemblies that~~products, us or our employees (including labor laws and regulations) are ~~used~~newly implemented or changed. Among these laws and regulations, we are seeing requirements in the ~~manufacture~~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 ~~our existing products are purchased from a single or a limited number~~hazardous substances, disposal of ~~suppliers. In the event that any~~waste and use of ~~these suppliers are unable~~conflict minerals). While we make every effort to ~~meet our~~comply with such 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, 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 may suffer.~~

~~Due to growth, or as a result of regular recruitment,~~ we will be ~~required~~fully successful in our efforts, and that our business will not be harmed. Failure to ~~hire~~comply with applicable laws and ~~integrate new employees. Recruiting~~regulations could results in fines, damages, civil liability and ~~retaining qualified engineers~~criminal sanctions against us, our officers and ~~computer programmers to perform research~~our employees, prohibitions on the conduct of our business and ~~development and to commercialize our products, as well as qualified personnel to market and sell those products, are critical~~damage to our ~~success. As~~reputation.

We are seeing a global trend for adoption and enforcement of ~~December 31, 2011, approximately 23%~~privacy and information security 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 ~~employees were devoted~~solutions to ~~research~~comply with such legislation and product development and approximately 22% 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 employeesregulations, cause a reduction in the ~~technology industry. We have suffered~~use of our solutions and services or subject us or our customers to liability resulting from ~~attrition~~a breach of such regulations. If we are unable to comply with these specific requirements or guidelines, or privacy and information security legislation 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. 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 whomgeneral, it could materially adversely affect our business ~~financial condition~~ and results of operations.

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

The occurrence of privacy or ~~perception of occurrence, of~~information security breaches (or the belief that any such 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 or consumer could negatively impact our business. If, in handling this information, we fail to comply with ~~our~~ privacy ~~policies~~legislation or ~~privacy and security laws,~~procedures, 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 could be subject to civil, administrative or criminal liability under the laws of other countries. In addition, third parties may attempt to breach our security or inappropriately use our products through computer viruses, electronic break-ins and other disruptions. If successful, confidential information, including passwords, financial information, or other personal information may be improperly obtained 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.

~~Our business could be materially adversely affected by changes in the legal and regulatory environment.~~

Our business, results of operations and financial condition could be materially adversely affected if laws, regulations or standards relating to our products, us or our employees (including labor laws and regulations) are newly implemented or changed. In addition, our revenues would be harmed 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 securities trading, broker sales compliance and anti-money laundering laws and ~~regulations.~~

regulations, which could have an impact on their need for our products and 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 a breach of such regulations. The adoption of these types of regulations~~compliance and regulatory requirements in the industries in which we operate could materially 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 2010 and 2011 for approximately 18% and 17% of our revenues, respectively. 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.

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

If we fail to prevent information security breaches, our operations, financial condition and reputation may be harmed.

We may hold or have access to sensitive and personal information as a result of the use of our solutions, including our SaaS and hosting services, which could be the target of hackers and other criminals who wish to gain access to such information. The occurrence of ~~catastrophic events,~~information security breaches (or the belief that any such ~~as hurricanes, storms, earthquakes, tsunamis, floods~~breach has occurred) in the internal and ~~other catastrophes that adversely affect the business climate in any~~external operation of our ~~markets~~business or by third parties using our products and solutions could ~~have a material adverse affect on~~harm our business, financial condition and ~~results of operations. Some~~operating results. Cyber security attacks are becoming increasingly sophisticated and in many cases may not be identified until a security breach actually occurs. If we fail to recognize and deal with such security attacks and threats and to update our products and solutions and prevent such threatened attacks in real time to protect our customers’ or other parties’ sensitive information, whether retained in our systems or by our customers using our products, our business and reputation will be harmed.

Third parties may attempt to breach our security measures or inappropriately take advantage of our ~~operations are located in areas that have been in the past,~~solutions, including our SaaS and hosting services, through computer viruses, electronic break-ins and other disruptions. If successful, confidential information, including passwords, financial information, or other personal information, including information of our customers, partners and vendors, may be inimproperly 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 ~~future, susceptible to such occurrences.~~

perception of security risks, whether or not valid, could inhibit market acceptance of our products and services.

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

The Sarbanes-Oxley Act of 2002 imposes certain duties on us. Our efforts to comply with the requirements of Section 404, which first applied to our financial statements for 2006, have resulted in increased general and administrative expenses and a devotion of management time and attention to compliance activities, and we expect these efforts to require the continued commitment of significant resources. 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. 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.~~

The volume, value, speed, and complexity of financial transactions create an opportunity for criminals to exploit the gaps created by information silos at individual lines of business or regional segmentations. Therefore, as financial crime crosses traditional business boundaries, a multi-dimensional, enterprise-wide financial crime prevention strategy is becoming more effective against complex criminal schemes compared to point solutions. The ability to correlate activity and create a holistic view of activity across the entire organization provides firms the opportunity to significantly mitigate risk and prevent losses. In addition, the ability to centralize financial crime management supports operational consistency and adherence to regulations across the enterprise, further reducing the risk of regulatory scrutiny.Increased Focus on Improving Customer Experience.

Paradigm shift in consumer traits requires a consistent and coherent experience across all touch points. Consumer behavior is significantly changing in terms of expectations and interactions with service providers. Consumers demand perfect experiences that are memorable and meaningful. The definition of a perfect experience has evolved to become consistent, coherent, personalized and in context, and adhere to consumers’ need for instant gratification and lack of lenience to service failures. At the same time, consumers are using multiple channels and traverse channels depending on their task, location, time-of-day or even progress in a certain process. They view all channels as one company and expect the company to view them as one person and a consistent, continuous in context experience.

~~Strong growth in emerging markets~~

Organizations look at big data technologies to analyze wealth of information on their consumers, derive business insights, and act in real-time. Structured and unstructured data, from millions of multi-channel voice and text interactions, open up a world of insight into customers’ preferences and needs. Utilizing innovative big data technologies allows service providers to break down the artificial barriers and see across multiple interaction touch points, channels and time to build a coherent view of every individual customer’s intent. Service providers can then elevate from glimpses of interaction to a meaningful understanding of the behavior and identify a customer’s underlying concerns in real time which is then translated into action - providing the best solution and accurate response.

There continues to be significant opportunities in emerging geographic markets, and in businesses outside the traditional banking vertical. In order to establish themselves as global institutions, financial institutions in emerging economies are increasingly adopting more sophisticated financial crime and compliance programs to establish their legitimacy and prevent reputational harm. The growth of demand from emerging markets, including Latin America, Eastern Europe, Asia Pacific and Africa, has introduced the opportunity to expand coverage into these regions. In addition, new and increased regulatory scrutiny facing hedge funds, energy trading firms, and other industry verticals has expanded the scope of surveillance requirements beyond the established areas of banking and brokerage.

~~Security business industry background and trends~~

~~Persistent physical security challenges for public safety, homeland security and intelligence agencies.~~

The use of cloud technologies and cloud-based services is becoming increasingly common. Alongside workforce and business applications that are being offered in SaaS models, infrastructure services such as computing power and storage space are now also being offered on demand, with cloud providers offering their customers a myriad of applications and infrastructure packages. Service providers are also utilizing cloud technologies to reduce hardware costs and improve IT staff productivity. Recent service provider acquisitions of cloud service companies and the growing number of cloud service propositions to small and medium businesses and enterprise segments indicate the strategic importance of cloud within our industry.

~~Terrorist attacks around the world have significantly changed the geopolitical landscape~~An Ever-Growing Need to Safeguard People and created long-term consequences for public safety, security and intelligence agencies. In addition, transportation organizations, municipalities and governmental entities have become increasingly aware of the benefits technology can provide in the areas of crime prevention and public safety. These organizations face new challenges in detecting, protecting against and effectively responding to more sophisticated and complex threats. Organizations are also facing vast amounts of information from different sources, which make it more difficult to ‘connect the dots’ and act efficiently. As a result of these global trends, the challenge of storing, managing and analyzing vast amounts of multimedia content generated by traditional and IP-based communications captured by an increasing variety of detection devices is growing. In addition, emergency services and public organizations require increasingly sophisticated solutions to analyze content in order to strengthen the measures they take for public safety and security.

~~Emerging needs for holistic situational awareness and event management in the security market~~Assets.

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. Organizations, municipalities and governmental entities are struggling to eliminate the number of information silos created by deployment of redundant security systems. Consolidation of companies, as seen in the banking industry for example, creates more information silos and disparate systems in the organization. These silos limit the control room operators’ ability to gain a cohesive and unified picture of situations. The lack of unified solutions undermines the ability to take decisive actions; furthermore, the lack of adequate tools for sharing information in real time between the various field security personnel, emergency forces and law enforcement agencies, among others, can substantially prolong response time and reduce the probability of successful event mitigation.

Proliferation of communication channels. Advancement in communication channels and technologies, the interception of communication for law enforcement agencies (“LEAs”), and intelligence organizations has also become complex. The new form of electronic communication, increasing data volumes, encryption of communications and proliferation of services offered are driving communication service providers and LEAs and intelligence organizations to look for advanced lawful interception (“LI”) solutions. Another driving factor is that criminals and terrorist have also changed their means of communication and possess advanced technological expertise. To combat such activities, the advancement in LI solutions is much more needed.

~~Increased focus on physical corporate security.~~

Exponential growth in physical security devices. Driven by increased urbanization in both developed and developing countries and increased need for ensuring safety and security, which is driving large-scale “safe city” projects. The number and variety of physical security sensors is growing substantially, with public and private organizations deploying surveillance cameras, access control systems, intrusion detection sensors, and more. Corporations, municipalities and government entities are seeking to eliminate the number of information silos created by redundant security systems so they can take the right actions, share information in real time, and successfully mitigate hostile events. These large-scale projects include installation and implementation of wide-scale security systems, which better synchronize and correlate multimedia data sources.

~~Companies operating throughout the world have recognized that threats to their facilities, IT networks~~Financial Crime and personnel need to be addressed at all times. For example, many companies have determined that they need to establish measures for personnel screening and observation, invest in enhanced physical security measures and incident response capability, and deploy a variety of systems to address network-based vulnerabilities. As a result of these global trends in security needs, more companies face the growing challenge of storing and analyzing vast amounts of content, such as voice, video and other IP-based communications, captured by an increasing variety of detection devices, such as closed circuit television.Compliance.

~~Increased urbanization raises rates of crime and risks of terror attacks.~~

Increased urbanization in both developed and developing countries results in higher rates of various types of crime (such as robbery, theft, murder and other assaults) and greater fears of terror attacks in city centers and other metropolitan areas and systems (such as mass transit). These growing concerns are driving large-scale security projects in these areas, aiming at improving the security of the citizens. These large-scale projects include installation and implementation of wide-scale security systems, which better synchronize and correlate multimedia data sources in order to assist law enforcement officials to detect and prevent crimes and terror attacks and investigate quickly in order to apprehend the suspects.

An Unpredictable Threat Landscape Environment. The growing number of data breaches and cybersecurity incidents puts growing 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, for terrorist financing, account fraud, market manipulation, social engineering, and more. 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 organizations.

~~Requirement for increased service level, operational efficiency and business continuity.~~

Stringent 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 our different markets: customer interactions, financial services, and security operations. In the contact center, the need to comply with regulations, such as in the area of consumer protection regulation and enforcement actions by the Consumer Financial Protection Bureau (“CFPB”) in the United States, drives the adoption of recording and voice analytics solutions. 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. Lastly, security-sensitive organizations are subject to regulations regarding physical security and reliability, such as the North American Electric Reliability Corporation Critical Infrastructure Protection (“NERC-CIP”) standards. These organizations adopt technological solutions in order to comply with relevant regulations.

Organizations leverage investments made in systems originally assigned to handle security and safety to also address operations, improvement of service-levels, and maximizing of business continuity. As a result, organizations are willing to invest in higher-end solutions that provide insights, relevancy and decision making capabilities.

~~Our Strategy~~Technology Trends

The ~~key elements~~following technology trends define the roadmap for our solutions and are essential to meet the future needs and requirements of our ~~strategy include the following:~~customers:

~~Drive adoption of cross-channel and cross-sensor analytics solutions.~~

~~With our solutions, we intend~~

Big data technologies to ~~continue to address the growing unmet need to more accurately~~ capture and manage ~~and analyze~~ structured and unstructured data ~~from multiple channels in a wide variety of businesses and operational environments.~~

In our enterprise business, we aim to provide our customers with insight in real-time and off-line in order to positively impact the customer processes while they occur, which in turn has a positive impact on their businesses. More specifically, such insights enable our customers to improve operational efficiency and customer experience, grow revenues and minimize losses, enhance regulatory compliance and prevent fraud and financial crime. In order to provide our customer with such insights and the ability to impact their businesses most effectively, we aim to offer our customers with market leading, best-of-suite analytics solutions.

In our security business, we intend to leverage the expansion of the physical security domain into other areas, by continued investment in an integrated product portfolio that addresses security, safety and operational risks. As part of this integrated portfolio, we continue to invest in cross-sensor analytics solutions, which are meaningful in both the security control room, and the operational environment, providing tools for situational awareness, post-event debriefing and data and trend analysis reports for decision makers.

Accordingly, we plan to continue to target these opportunities through focused sales and marketing, by developing industry specific applications that are enabled or greatly enhanced by convergence analytics, and by providing value-added services that facilitate the implementation of our solutions. Moreover, we plan to continue to invest in research and development and strategic alliances to enhance our industry-leading solutions and deliver superior insight to drive improved operational and business results, as well as increased security and safety. We will continue to leverage the technology, operational and partnership synergies we derive from serving the enterprise, financial and security markets. - organizations generate and manage an ever increasing amount of structured and unstructured information through myriad daily interactions and transactions as well as security sensors. Customers are faced with a growing, unmet need to more accurately analyze and extract meaningful information from structured and unstructured data in real time; and to do so across multiple channels, in a wide variety of businesses and operational environments; to provide perfect experiences that are personalized, in-context and provided in real-time. Organizations look for solutions to capture, manage and enrich structured and unstructured data and make it available for the organization to derive the relevant insights and act proactively and preemptively.

~~Expand~~

Real-time analytics capabilities – deriving real-time insights from the generated data is essential to creating perfect experiences. Real-time and offline analytics capabilities are adopted to operationalize big data and realize the business value. These capabilities include:

Customer interaction analytics for mining insights from multiple channels (such as phone, in-store, email, chat, social media, etc.), transactional data (usage, action taken in the account, etc.), and personal information (demographics, segments).

Video analytics for improving an organization’s surveillance system, such as with real-time alerts regarding intrusion, crowd management issues, and situational awareness.

Transactional analytics for preventing internal and external fraud, and to mitigate other forms of financial risk.

Cloud technologies and SaaS business models – cloud technologies are becoming increasingly popular in delivering flexible and 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.

Strategy

Maintaining market leadership

We intend to maintain our market-leading position by continuing to offer a comprehensive portfolio of solutions, differentiated by its ability to drive decisions and ~~leverage~~actions addressing multiple business needs. Our brand, global reach, financial resources, extensive domain expertise and ability to deliver solutions for large organizations will also contribute to our leading position.

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

Customer Interactions Business Strategy

Our strategy is to extend our market leadership position in the customer service space, while expanding beyond the contact center to the different customer experience channels and touch points. We will do that by providing solutions that focus on:

Covering all customer touch points by providing solutions implemented in the contact center, as well as solutions that 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 Marketing Department stakeholders; and

Employee engagement and performance optimization, coupled with a better understanding of customer needs and how to address them.

Financial Crime and Compliance Business Strategy

We plan to continue extending our market leadership position by building an extensive risk and financial crime solutions enterprise-wide platform. We are focused on providing solutions to many branches of the global financial services industry and are constantly attempting to engage new customers. We continue to cross-sell and up-sell into our existing customer base ~~strategic alliances~~around the world. Many of our customers, for instance, buy our solutions as part of their Financial Intelligence Unit strategy. We also intend to continue to focus on tier-1 clients, providing them with solutions to meet their needs via both cloud and ~~global infrastructure.~~on-premises models. In addition, we are increasingly selling holistic solutions, combing Financial Crime and Compliance offerings with those of other divisions within NICE. We also sell some of our high-end solutions to tier-2 customers, which provide us an opportunity to expand our presence in this segment. Finally, we also offer our solutions to verticals outside of the traditional financial services, such as energy, insurance, healthcare, industry regulators, government agencies, and alternative payments providers.

Security Business Strategy

Our Security business strategy is to strengthen our market position and accelerate penetration into the critical facilities market. This includes serving organizations for which security issues have a direct impact on the entire business operation (e.g., airports, seaports, banks, safe cities, etc.). Part of our overall strategy is to further enhance our technology expertise, providing advanced correlation, real-time analytics and on-the-fly-adaptive workflows and trend analysis. For our existing and prospective customers, this promotes a high level of situational awareness and effective responses.

Our Public Safety strategy is to continue providing audio logging solutions for first responders, while increasingly focusing on digital evidence management and post-incident investigation. Our go-to-market strategy revolves around: strong partnerships with leading system integrators that help promote, sell and provide the necessary services for our solutions; partnerships with technology collaborators that customize and tailor our solutions to specific vertical or customer needs; and ongoing impact in the field through direct contact with end-users and by working closely with consultants.

Continuing to deliver more comprehensive solutions to our existing customers

One of our main assets is our customer base. We believe there are ~~abundant~~ opportunities to up-sell and cross-sell within our existing customer ~~base by~~base. This includes increasing our customers’ ~~use of~~exposure to the full breadth of our solutions, ~~and by~~ migrating them to our next-generation ~~portfolio. We also have strong strategic relationships with industry leaders in each~~portfolio, and providing them the benefits of our ~~sectors of operations, including contact center infrastructure~~new and ~~telephony vendors, financial trading floor solution providers,~~expanded offerings.

Continuing organic innovation and ~~security solution providers.~~ development, while also pursuing acquisitions

We intend to continue ~~to leverage these relationships~~investing in innovation and ~~invest in nurturing new strategic alliances to increase the value of our solutions to our customers, to strengthen our channels to market~~development and ~~to enhance our market position.~~

~~Continue to pursue selective acquisitions.~~

~~We have a history of successful acquisitions, comprised of approximately ten transactions over the past three years. We intend~~plan to continue augmenting our organic growth ~~through~~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.~~channels.

~~Expand~~Maximizing the synergetic potential across some of our businesses

While we bring deep domain expertise to a diverse set of industries, 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. Thus, an important pillar of our corporate strategy is to maximize the synergies and cooperation between our business ~~offering~~areas, where possible.

Introducing joint offerings and combining go-to-market efforts, as well as leveraging extensive complementary domain expertise, technological know-how, capabilities and 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.

Providing innovative, real-time analytics and cross-channel solutions with ~~SaaS~~significant impact on our customers’ businesses

Our solutions address the growing, unmet need to more accurately analyze and ~~Hosting.~~extract meaningful information from structured and unstructured data in real time; and to do so across multiple channels, in a wide variety of businesses and 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 ~~have expanded~~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 ~~delivery~~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-premises and cloud-based enterprise software business models. Currently, the largest portion of our ~~products~~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.

A 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 revenues mix, is expected to provide ~~Software~~increasingly predictable revenue streams.

As an alternative to on-premises deployments, our strategy is to offer many of our solutions in cloud-based models - either as a ~~Service (SaaS) and hosting offerings.~~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 ~~sized customers~~business market segment, as well as enable our existing customers to broaden their use of our products. We ~~will continue to broaden our offering delivered through these models.~~

~~Further enhance the integration between our businesses.~~

We intend to continue ~~increasing synergies between~~offering our ~~Enterprise Customer Interactions, Financial Crime and Compliance and Security business units. We are aligning~~solutions in a variety of models, which enables us to be flexible in effectively addressing our ~~field operations, creating joint product offerings and improving our systems and infrastructure. We will continue making efforts~~customers’ needs. This, in ~~this area, as we believe that a higher level of integration, knowledge sharing and alignment~~turn, will enable us to ~~increase revenues~~focus on growth and ~~improve our performance.~~

~~Drive deployment of our solutions through value-added services.~~improving profitability.

Our customers face diverse business and deployment challenges. We continuously develop our professional services organization that helps our customers capture the full value from our solutions. We help our customers analyze their business issues and re-engineer critical processes to address their specific needs. These value-added services should allow us to accelerate the market penetration of our advanced solutions and expand our offering to our installed base.

~~Continue to lead the evolution of the contact center beyond its traditional market and expand our differentiated end-to-end suite.~~

With the increasing strategic importance and complexity of the contact center, customers have a growing need for comprehensive management solutions. We believe our end-to-end suite, which is comprised of integrated and modular tools and business solutions for contact center management represents a differentiated approach and value for our customers. We also aim to develop industry specific business solutions to enable our customers to better interact with their customers by taking advantage of industry-specific knowledge, best practices, and processes, increasing our ability to respond to industry specific needs. We intend to augment and expand our offering of end-to-end solutions to maintain our industry leadership position.

Furthermore, we have extended the value of our solutions outside the contact center to the back office and point of sale/retail and branches to enable real-time adherence as well as planning and optimization. Back office operations often employ a significantly larger workforce as compared to contact centers. Although the back office faces similar business issues to those faced by contact centers operations, it typically lacks solutions for effectively managing the workforce as well as ensuring efficiency and compliance.

~~Further enhance our position as the largest and broadest provider of a single financial crime, risk and compliance software platform for the financial services industry.~~

We continue to build the largest and broadest risk and financial crime solutions enterprise-wide platform. The consolidation of financial crime management, coupled with the industry’s evolution towards enterprise risk and compliance systems, need to monitor all channels, growing regulatory pressure and focus on cost reduction and productivity improvement, all creating a growing need for a broader offering in this industry. We intend to augment and expand our offerings in this market to meet the growing needs of the industry and maintain our market leadership.

~~Drive deployment of end-to-end security solutions.~~

We are in a unique position to deliver a comprehensive solution that complements our proven surveillance, public safety and multimedia reconstruction capabilities, with an advanced security management solution that offers complete situational awareness, integrating information from multiple sensors. This end-to-end solution addresses market demand for a unified solution that eliminates information silos and enables security personnel to proactively mitigate risks through effective execution of optimal security operational procedures. We intend to leverage this broad solution portfolio to strengthen our market leadership 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 installed base.

~~Address security, safety and operational risks in three dimensions~~

Our security solutions address security, safety and operational risks in three dimensions: Cross-time, Cross-organizational Roles, and Cross-vertical expertise. Cross-time impacts the entire lifecycle of an event—before, during and after—for real-time management, investigation, planning and improvement. Cross-organizational Roles means solutions for the operator in the control room, the investigator, as well tools for decision makers. Cross-vertical Expertise, enables us to tailor security solutions to the unique needs of organizations in various market segments, including public transport, airports, critical facilities, banking and public safety. Systems originally assigned by organizations to handle security and safety, are also being utilized to address operational risks. As a result, organizations are looking to adopt tools that are adequate not only to manage their security and safety situations, but such that can contribute to operational gains like increased efficiency and service-level.

~~Our~~ Solutions ~~and Products~~

I. ~~NICE Enterprise Solutions~~Customer Interactions

~~NICE Enterprise solutions are comprised of two offerings, the Enterprise Customer Interaction offering and the Financial Crime and Compliance offering (NICE Actimize).~~Our Solutions’ Core Capabilities

A. Multi-Channel Recording and Interaction Management enables organizations to capture unstructured and structured customer interaction and transaction data from multiple channels, including: phone calls, chats, emails, videos, customer feedback, web sessions, social media postings, and walk-in centers.

Customer Interactions enables organizations to analyze the entire customer journey across the various transactions and events. This solution allows our customers to get a comprehensive view of the customer intents and actions across their journey with the organization. Customer Interactions leverages Big Data infrastructure and predictive analytics models to identify and sequence individual customer’s interactions across time and touch points. With this analysis, organizations can understand the context of each contact, uncover patterns, predict needs and personalize interactions in real time.

Real-time Decisioning and Guidance is a real-time decisioning engine, which draws on business rules and predictive models to process insights derived from analytics, applied as an interaction is underway. This combination enables organizations to make the right decision during individual interactions and across a mass number of interactions, which in turn drives future next-best-action guidance in real time through process automation.

Cross-Channel Interaction ~~Solutions~~Analytics 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 service issues and to drive business results.

The ~~NICE Enterprise Customer Interactions offering~~combination of the above capabilities enables ~~businesses~~organizations to ~~capture~~operationalize customer ~~interactions, transactions and feedback; analyze them to reveal business~~ insights and apply these insights in real time to achieve a positive impact on the interaction and the business. NICE provides an integrated suite of products and solutions that help businesses grow revenue, enhance customer experience, improve regulatory compliance, and optimize contact center and back office operations. NICE Enterprise Customer Interactions Solutions are implemented by contact centers of all sizes, back office operations, retail branches and financial trading floors.

The NICE Enterprise Customer Interactions offering is comprised of four solution suites: NICE SmartCenter, NICE Trading Suite, NICE Back Office Suite and NICE Solutions for Small & Mid-sized Contact Centers and Branch Offices.

~~1. NICE SmartCenter~~ ~~is a suite of targeted business solutions and best-in-class products that is aimed at providing contact centers and~~across service, sales and marketing organizations with the ability to capture customer interactions across all communication channels, including phone, surveys, email and Web, analyze them to discover valuable insights – such as customer purchase preferences - and leverage these insights to maximize workforce utilization and performance, and impact interactions as they occur.

Our business solutions for contact centers encapsulate industry best practices, pre-built content and closed-loop workflows that are integrated with real-time speech analytics and real-time decisioning and agent guidance, enabling organizations to address strategic business issues such as those described below.

~~NICE SmartCenter Business Solutions~~

~~Optimizing Operational Efficiency~~

We provide solutions that help contact centers enhance operational efficiency that benefits the bottom line by optimizing handle time, improving agent productivity, reducing call volume, and effectively forecasting workloads and scheduling staff.

~~NICE First Contact Resolution~~ enables organizations to measure the rate at which customer issues are resolved during the first contact and identify why others result in repeat contacts. By analyzing this data, organizations can take real-time action to increase first contact resolution, improve operational efficiency and increase customer satisfaction.

·	~~NICE Handle Time Optimization~~ ~~helps companies understand what drives high average handle time and then take action in real time to mitigate it, while preserving quality and customer service.~~

~~NICE Quality Optimization~~ uses real-time, interaction analytics to analyze all customer interactions and measure key performance indicators (KPIs) for improving the quality of service provided by contact center agents. KPIs can be derived from telephony-based metrics such as average handle time, hold time and call transfers, as well as from speech analytics, such as customer dissatisfaction and first contact resolution.

~~Growing Revenue~~

NICE SmartCenter Revenue Growth Solutions help businesses increase the number of sales attempts made by their contact center agents and improve sales conversion rates, identify and promote best practices for improving debt collection, and extract business intelligence from customer interactions to enhance marketing effectiveness.

~~NICE Service-to-Sales~~ uses real-time, interaction analytics technologies along with desktop analytics and text mining, to analyze and measure agents’ sales attempt and success rates, identifying the root causes of customer objections, sales best-practices and agents struggling with poor sales skills. Based on this input, it defines business rules to identify sales opportunities, and leverages real-time, next-best-offer guidance to assist agents in maximizing them.

~~NICE Collections Effectiveness~~ identifies high performing collection agents and analyzes their interactions in order to uncover best practices and techniques. Based on these insights, it provides real-time, next-best-action guidance to agents and identifies training opportunities for agents with a low contact rate or collection performance. The solution also helps companies understand the main reasons why customers don’t pay their debts, use that insight to improve agent negotiation skills, and deliver real-time objection handling guidance. In addition, the solution analyzes all collection interactions in order to assure regulatory compliance.

~~NICE Marketing Effectiveness~~ mines interactions for customer references to marketing campaigns and promotions and enables organizations to compare the effectiveness of different campaigns across different media. These insights are used to adjust and improve marketing campaigns and maximize their return on investment. The solution also collects valuable business intelligence.

processes.

~~Enhancing Customer Experience~~Addressing Business and Operational Needs

~~NICE SmartCenter Customer Experience solutions enables organizations to provide a consistent~~1. Compliance and compelling customer experience across all communication channels, deliver a customer experience that differentiates them from their competitors, and drive customer loyalty, which results in expanded wallet-share.Risk

·Solution

~~NICE Churn Reduction~~ ~~enables organizations~~Description

Compliance Recording

Proactively captures and retains all customer interactions across multiple touch points to ~~proactively identify customers at risk to churn by leveraging cross-channel analytics to analyze customer satisfaction. By integrating voice-based intelligence~~help ensure compliance with CRM and business intelligence transactional data, the solution identifies high-risk customers that would not be detected by a transactional model alone. It then guides retention agents in real time, helping them tailor retention offerings to the individual customer.

~~NICE Customer Satisfaction~~ provides a comprehensive, accurate understanding of customer satisfaction across channels – phone, email, chat, and social media. It leverages NICE’s technologies for speech analytics, emotion detection, social media analytics, web interactions analytics, call flow analytics and text mining, as well as direct customer feedback, to automatically measure various customer satisfaction-related key performance indicators (KPIs),government regulations, such as ~~Net Promoter Score. The solution provides stakeholders access to~~ the ~~KPIs via dashboards,~~Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Security Exchange Commission Rule 17a-4 (“SEC 17a-4”), the ~~tools to perform root-cause analysis to identify~~Health Insurance Portability and Accountability Act (“HIPAA”), the ~~drivers for customer dissatisfaction.~~

~~Improving Regulatory Compliance~~

We provide a number of solutions that enable organizations to proactively capture and retain all customer interactions across multiple touch points to help ensure compliance with government regulations and internal policies, as well as resolve disputes, perform investigations and verify sales.

~~NICE Process Enforcement~~Sarbanes–Oxley Act (“SOX”), ~~provides enterprise level support for ensuring compliance in real time, in contact centers, back offices and branches. It leverages~~ the company's real-time decisioning technology to deliver context-sensitive instructions directly to employee desktops in real time, and ensure that such instructions are followed during every customer interaction.

·	~~Other capabilities include ensuring compliance with~~ Payment Card Industry Data Security Standard ~~(PCI DSS)~~(“PCI-DSS”), and the Financial Services Authority (FSA) and Medicare Improvements for Patients and Providers Act (“MIPPA”), 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 guiding agents to appropriately handle high-risk interactions, and effectively open and manage an investigation ticket.
Trading Floor Compliance Solutions	Enable organizations to capture, monitor and analyze interactions and transactions in real ~~time; recording, management,~~time, in order to proactively minimize risks, detect potential regulatory breaches, counter fraudulent activities, and ~~analysis~~improve investigative capabilities. These solutions deliver comprehensive, integrated capabilities to effectively manage the complex, ongoing, high-risk exchange of ~~traders’~~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 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.
Communication Surveillance	Monitors trading activity across trading turrets, fixed and mobile ~~phone interactions; enabling financial institutions~~phones, email, text and ~~contact centers handling financial transactions further improve risk management~~instant messaging, chat and ~~better avoid~~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 ~~breaches.~~environment established with the introduction of the Dodd-Frank Act, and related rules and regulations.

~~The NICE SmartCenter Core Products~~

NICE SmartCenter spans best-in-class capabilities for interaction capture, real-time cross-channel interaction analytics, workforce management, performance management, quality management, real-time process automation, and customer feedback.2. Operational Efficiency

·Solution	~~NICE Interaction Management~~ ~~records interactions from various communication channels into~~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 - including VoIP, SIP, traditional Time Division Multiplexing (“TDM”) and hybrid networks - enabling a ~~central Cross-Channel Interaction Hub.~~

~~NICE Quality Management~~ ~~delivers comprehensive tools for implementing~~seamless transition during technology migrations as the contact center grows and evolves. It supports thousands of concurrent IP streams in a ~~multifaceted quality program encompassing agents, supervisors, evaluators and managers, and the ability to improve the quality and effectiveness of customer interactions in contact centers.~~

~~NICE Interaction Analytics~~ ~~utilizes a multi-dimensional analysis approach to analyze customer interactions across communication channels and~~single platform: capturing, forwarding streams in real ~~time.~~time, recording and archiving. It ~~provides automated business insight and root cause analysis based on speech analytics, e-mail and chat analytics, desktop analytics, call flow analytics and integration with external business data~~also captures non-voice interactions such as ~~CRM systems.~~

video, chat and email, and stores them in a single recording platform, ensuring regulatory adherence and standardized cross-channel workforce optimization. With its comprehensive and scalable recording capabilities, NICE recording solutions provide an unrivalled TCO value.

~~NICE Real-time Process Optimization~~ impacts interactions as they unfold through next-best-action agent guidance, cross-sell and up-sell recommendations and process automation. Helps contact centers to deliver efficient customer service, improve customer retention, and convert service calls into sales opportunities. It uses real-time decisioning technology to display relevant guidance to agents as they interact with customers on the phone.

·	~~NICE IEX Workforce Management~~ forecasts customer interactions, schedules agents with appropriate skills to manage and optimize the level of customer service and resources, measures agent and team performance and supports managing overall contact center performance.

·	~~NICE~~ Performance Management ~~maps~~	Maps enterprise business objectives to group and individual goals, and tracks and reports ~~performance against these goals.~~performance. It also automates critical managerial activities, including employee coaching, recognition, and performance improvement, ~~to allow~~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. As a result, customer-facing operations ~~are able to~~ substantially improve productivity, boost revenue and increase customer satisfaction.
Workforce Management	Forecasts customer interactions load, schedules agents 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 interaction 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 performance. It also provides tools to ensure regulatory compliance and accuracy. Ultimately, this back office solution elevates the level of service customers receive across the entire enterprise.
Real-time Authentication	Leverages voice biometrics for authenticating customers in real time. Our 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 prevent 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.

3. Customer Experience

·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 customers’ issues. This enables companies to drive operations and deliver insights across departments by incorporating the customer’s perspective.
Real-time Customer Feedback (“NICE Fizzback”)	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, Interactive Voice Response (“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	Focused on helping 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.

4. Sales Optimization

Solution	Description
Incentive Compensation Management~~provides~~	Provides the end-to-end ability to create, manage and distribute all aspects of a commissions program. ~~Automates~~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~~that rewards employees for achieving targets ~~that align~~aligned with 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.

~~NICE Fizzback~~ enables customer service organizations to capture customer feedback immediately following an interaction with the brand at any service touch point, including contact center, branch, retail store, and web. NICE Fizzback analyzes the feedback in real time and initiates workflows to ensure that prompt action is taken on customers’ comments and issues to help drive significant increases in customer advocacy, loyalty and satisfaction.

2. ~~NICE Trading Suite~~ delivers comprehensive, integrated capabilities to harness the complex, ongoing, high-risk exchange of interactions and transactions between traders, firms and their counterparties. The solutions enable organizations to capture, monitor and analyze interactions and transactions in real time to proactively minimize risks, detect potential regulatory breaches, counter fraudulent activities and improve investigative capabilities.

~~The NICE Trading Suite is comprised of a multi-channel capture platform, real-time interaction analytics, and business workflows.~~

3. ~~NICE Back Office Suite~~ extends front office operational efficiency into back office processing environments. It automates manual processes, integrates data collected directly from employee desktops, improves forecast accuracy, enables managers to view and manage resource capacity, and empowers employees to improve their own performance. In addition to these capabilities, the NICE Back Office Suite also provides tools to ensure internal and regulatory compliance, improve the quality of the work items being processed, and ultimately, elevate the level of service customers receive across the entire enterprise.

~~The NICE Back Office Suite combines NICE’s workforce management solution with real-time guidance, process automation and compliance, as well as quality management and performance management.~~

4. ~~NICE Solutions for Small & Mid-sized Contact Centers (SMCC) and Branch Offices.~~ NICE Recording eXpress and NICE Quality eXpress are provided for small and medium-sized contact centers (SMCC) and branch offices that are also seeking a robust call recording to help ensure regulatory compliance and quality management. It is an easy-to-install, low-cost solution that is based on NICE’s advanced interaction recording technology.

B. ~~Financial Crime and Compliance Solutions (NICE Actimize)~~

NICE Actimize provides real-time financial crime, fraud prevention, anti-money laundering (AML), enterprise investigations, risk management, compliance and trading surveillance capabilities to financial institutions, government agencies, and related organizations across the globe. NICE Actimize’s solutions monitor billions of transactions daily, enabling clients to mitigate financial crime risk, improve compliance, and reduce operational costs.

NICE Actimize’s solutions are based on a scalable, proprietary software platform and flexible applications that address hundreds of compliance, fraud and money-laundering scenarios. Our solutions enable customers to detect anomalous transactions, generate alerts and facilitate corrective action.

II. Financial Crime and Compliance

Our Solutions’ Core Capabilities

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

Flexible analytics and tools: The core platform provides 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 analytics: Comprehensive, domain-specific solutions detect anomalous customer or employee behavior in 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 allow effective alert management.

Addressing Business Needs

1. ~~NICE Actimize’s~~ Enterprise Risk Management ~~technology enables a firm-wide approach to proactively addressing risk and compliance processes and investigations across the enterprise.~~

·Solution

~~Actimize~~ Description

Enterprise Risk Case Manager is

Enables firms to better manage and mitigate organizational risk by providing a single view of risk across the business. It serves as a central platform for managing alerts, cases, investigations, link analysis, regulatory reporting, financial losses, oversight and more, ~~depending on the individual solutions that are added to it. Through this modularity, it is able to meet the unique needs~~across multiple lines of ~~securities compliance, financial crime,~~business, channels, products, and ~~corporate security organizations.~~regions, turning them into actionable insights.

2. Anti-Money Laundering -~~In the anti-fraud space, NICE Actimize offers~~ integrated fraud management solutions to deliver customer-centric fraud prevention that support a holistic, enterprise-wide fraud management program. These focused fraud prevention solutions are available individually or as a comprehensive, integrated suite and can be used in both real time and batch processing to detect and prevent various types of fraud.

·	~~The Actimize Card Fraud Solution~~ ~~enables card issuers, acquirers and processors to detect fraudulent transactions across a variety of card types including ATM/debit, credit, and prepaid, among others.~~

·	~~The Actimize Remote Banking Fraud Solution~~ ~~monitors online banking, call center, IVR and mobile banking channels to detect and prevent fraud perpetrated against monetary and non-monetary activities in real time.~~

·	~~The Actimize Employee Fraud solution~~ ~~automates detection of common types of insider fraud activity such as policy violations, embezzlement, collusion, theft of customer or bank assets, and theft of customer data.~~

·	~~The Actimize Commercial Banking/Wire & ACH solution~~ monitors electronic fund transfers (EFT) such as wire, ACH and external debit to detect suspicious activity and prevent commercial payment fraud with high-volume, real-time, transaction monitoring, alerting and blocking.

·	~~The Actimize Deposit Fraud solution~~ ~~minimizes deposit fraud losses with comprehensive account activity monitoring for both 'On-Us' and deposit fraud risk.~~

·	~~The Actimize Remote Brokerage Fraud solution~~ ~~prevents securities fraud attacks by analyzing a wide range of data including trading, market, and session information to detect attacks.~~

3. ~~In the anti money laundering (AML) space, NICE Actimize offers~~ ~~an end-to-end suite of AML~~ solutions available individually or as an integrated whole. The 2009 acquisition of certain subsidiaries of Fortent, Inc. (“Fortent”), expanded and enriched the company’s existing AML offering and further strengthened the firm’s ability to apply proven best practices and technology to help financial institutions comply with anti-money laundering regulations from agencies around the world.whole

·Solution	~~The Actimize~~ Description
Suspicious Activity Monitoring ~~solution~~ ~~provides end-to-end coverage~~	Leverages transaction analytics to identify and report suspicious transactions related to money laundering and terrorist ~~financing, ensuring firms can meet current regulations and quickly adapt to the evolving regulatory environment.~~financing.

~~The Actimize~~ Watch List Filtering ~~solution~~ ~~provides comprehensive~~

Provides enterprise-wide customer and transaction screening against multiple watch ~~lists, to identify~~lists. It identifies and ~~manage~~manages sanctioned or high-risk individuals and entities, with real-time name recognition capabilities.

~~The Actimize~~ Customer Due Diligence ~~solution~~ ~~provides~~

Provides integrated risk-based rating and continuous monitoring of accounts throughout the entire customer ~~life cycle -~~life-cycle, from initial applicant onboarding to ~~ongoing customer due diligence.~~periodic re-screening of existing customers.

·	~~The Actimize~~ CTR Processing &and Automation ~~solution~~ ~~provides~~	Provides seamless automated Currency Transaction Reporting ~~(CTR)~~(“CTR”) processing ~~reducing inaccuracies~~to ensure compliance with U.S. Bank Secrecy Act standards, and ~~manual effort by consolidating enterprise data, guiding analyst actions,~~to optimize CTR processes for efficiency and ~~validating information prior~~cost-effectiveness.
FATCA Compliance	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 ~~e-filing.~~generating reports to meet United States Internal Revenue Service requirements.

·	~~The Actimize FATCA Compliance solution~~ ~~provides non-US financial institutions the ability to detect and manage US account holders that are liable for tax payments to comply with the FATCA regulation and prevent financial penalties.~~

3. 4.Fraud Prevention - ~~In the brokerage compliance space, NICE Actimize offers~~solutions that enable brokerage firms and investment banks to effectively adhere to global regulatory requirements and organizational standards by monitoring a comprehensive range of financial products to prevent, detect, and deter non-compliant activities and improve risk and compliance performance.available individually or as an integrated whole

·Solution	Description
Card Fraud	Enables card issuers, acquirers and processors to detect fraudulent transactions, whether ATM, PIN, signature point-of-sale, or without a physical card.
Remote Banking	Provides cross-channel analytical models for retail online and mobile banking, call centers, 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 or bank assets, self-dealing, embezzlement, collusion, and identity shielding.
Deposit Account Fraud	Helps institutions minimize deposit fraud losses by providing comprehensive account activity monitoring. The ~~Actimize Institutional Surveillance package~~ ~~provides comprehensive compliance solutions for sales~~solution also detects new and ~~trading practices and control room surveillance including specific tools for desk supervision and trade reporting practices. The solutions provide hundreds~~evolving forms of deposit fraud, innovatively using proven ~~detection models~~analytic techniques not traditionally deployed to ~~identify and manage scenarios such as market manipulation and abuse, fair dealings with customers, and insider trading.~~address this problem.

~~The Actimize Retail Surveillance package~~ ensures sales practices compliance across the organization by monitoring transactions, accounts, sales representatives and branches. By providing electronic access and sign-off on individual trades, the solution enables comprehensive compliance across the organization and supports a broad range of Know Your Customer and Suitability matters, including FINRA 2090/2111.

~~The Actimize Employee Conflict of Interest package~~ mitigates employee conflicts of interest and trading fraud by helping identify and prevent conduct that can lead to significant corporate damage. The solutions provide comprehensive detection and management of employee activities by analyzing transactions against rules mapped to the organization’s policies and procedures, and automating the submission, review and approval process for employees’ personal trades, gifts, outside business activities and more.

~~The Actimize Enterprise Conflicts Management solution suite~~ goes beyond employee monitoring and offers a comprehensive approach to detect conflicts of interest on a global, enterprise-wide scale – before they occur. With out-of-the-box detection and investigation capabilities, automated surveillance, and end-to-end workflow management, audit, and reporting capabilities, the solution enables financial institutions to deploy consistent standards for detecting possible cases of conflicts of interest by monitoring for potentially unfair dealings, insider trading, inappropriate behavior, and personal dealing.

~~The Actimize Rogue Trading solution~~4. Financial Markets Compliance - comprised of solutions available individually or as an integrated whole is specifically designed to provide a comprehensive, unified view of desk and trader data, enabling broker/dealers to detect suspicious trading scenarios and mitigate the risk of rogue trading losses. The solution analyzes data from multiple functional areas such as trading, compliance, middle and back-office, and human resources to detect and prevent rogue trading in the earliest stages.

·Solution	Description
Institutional Trade Surveillance	~~The Actimize MiFID Surveillance package~~ ~~is comprised of context-specific solutions~~Provides scenario management for identifying 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 ~~complete~~comprehensive oversight and sales and trading compliance. We also deliver a real-time, cloud-based, institutional trade surveillance solution. Furthermore, by leveraging communication surveillance capabilities from our Customer Interactions business, we provide 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 retail sales practices relating to Know Your Customer (“KYC”) 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	Detects Conflicts of Interest and Rogue Trading. It completely automates the ~~Markets in Financial Instruments Directive (MiFID). The solutions address best execution, suitability, client order handling, transaction reporting~~submission, review and ~~conflicts-of-interest allowing organizations~~approval process for employees’ personal trades, including post-trade reconciliation. It analyzes transactions against rules mapped to ~~flag violations in real time, or near real time, where required by~~ the ~~regulations.~~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.
Sales Practices and Suitability	Provides coverage for a broad range of sales practices, and enables firms to meet current and future global regulatory requirements. It also includes a comprehensive toolset to automate sales practices compliance processes.

~~The Actimize Energy Trading Compliance solution~~ provides proactive surveillance to meet compliance oversight obligations across energy markets, including crude oil, refined products, natural gas, power, and more. The solution combines a proven energy data model, advanced detection capabilities, case management, and comprehensive query, audit, and reporting capabilities, enabling organizations to adhere to energy trading standards set by the CFTC, FERC, FTC, and other global regulatory agencies.

~~II. NICE Security Solutions~~

The NICE Security offering addresses the needs of governments and enterprises to secure and leverage their most important business assets, and fight crime and terror by anticipating, managing and mitigating safety, security and operational risks. The offering enables the capture, analysis and correlation of data from multiple sensors and systems, including audio, video, radio, geo-location and web, providing a framework for fusing data silos into a single, holistic operational view. Using its superior integrated product portfolio, NICE Security Solutions empower organizations to address risks through detection, real time management, investigation, planning, improvement and prevention. Our solutions support different organizational roles: operators, managers and decision makers. NICE Security Solutions are deployed worldwide in public transportation systems, critical infrastructures, city centers, banks, airports and public safety agencies, among others.

~~The NICE Security offering is comprised of solutions that address the following needs:~~

A. ~~Situation Management~~

Our situation management solution, NICE Situator, addresses the security operations needs of public transport, airports, critical infrastructure, city centers, banks and public safety agencies, among others, by enabling automatic situation planning, response and analysis in real time to improve situational awareness and incident handling. It does this by integrating a wide array of sensors and security systems into a common operating picture, analyzing and correlating this information, and then applying standard operating procedures and automated response plans. Designed to promote an interoperable and open security ecosystem, NICE Situator is vendor agnostic, enabling security operations to leverage best of breed technologies that meet their specific needs. NICE Situator provides approximately 200 gateways to different security and safety systems, including intrusion sensors, communication devices, web feeds, and databases, as well as access control, fire and safety, geo-location, building management and video surveillance systems.

B. ~~Video Surveillance and Analytics~~III. NICE Security Solutions

Our ~~surveillance~~Solutions’ Core Capabilities

Our unique integrated product portfolio consists of capturing and recording systems, analytics ~~solutions protect people, operations~~engines and ~~infrastructure by~~advanced management tools, enabling ~~organization~~organizations to ~~anticipate, identify~~minimize risk, improve investigations and ~~mitigate potential risk or unfolding events. They~~optimize their security operations. We help ~~minimize risks~~organizations transform Big Data into operational intelligence.

Multi-sensor event management: An open architecture that integrates data from third-party devices, systems and web sources, delivering 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, analyzed in real time ~~as well as during the investigative process, helping the relevant professionals bring~~and correlated from multiple sensors to ~~justice, debrief and improve security.~~

~~The solution portfolio includes:~~identify security situations or threats.

~~NiceVision~~Real-time decisioning and resolution: ~~: allows security professionals~~Post-analysis technology that highlights decision data and trends, initiates alerts, and provides adaptive workflows to ~~maximize~~decision-makers, enabling the ~~benefits~~next-best-action for effectively resolving real-time situations.

Multimedia reconstruction: The integration of text, video, ~~technology with an enterprise-class, open-platform IP-based solution~~voice recordings, and other sources into holistic incident timelines for complete investigation and debriefing capabilities.

Trend analysis and reporting: Data analytics, reporting, and trend analysis that ~~provides continuous surveillance coverage~~transforms Big Data into operational intelligence, defining and ~~control for any size environment.~~improving best practices, and predicting and preventing future events.

Addressing Business and Operational Needs

1. Public Safety

1a. Incident Debriefing and Investigation

Solution

~~Part of the NiceVision family is~~ ~~NiceVision Net~~, a complete, end-to-end IP video surveillance solution. Each component of NiceVision Net 2.5, the latest version, is managed from the central NiceVision ControlCenter. This includes Smart Video Recorders (SVRs); advanced video analytics, 24x7 video capabilities, high-performance encoders and decoders, and feature-rich event management and control room visualization.

Description

~~The~~ ~~NiceVision Net~~ ~~solution is fully scalable and can grow from a few cameras in one location to hundreds or thousands over multiple sites — even for megapixel camera deployments.~~

The solution has a flexible and open architecture and is ONVIF (Open Network Video Interface Forum) compliant, allowing seamless integration with new and existing edge devices, as well as security management and access control systems. Additionally, with no special client download needed, web and smartphone support allows access to surveillance systems from anywhere, anytime. There is also support for easy integration with third-party devices.

~~NiceVision Fast Alpha Silver~~ ~~is an advanced, IP-based MPEG-2 and MPEG-4 and H.264 compression video and audio recording solution. It includes video recorders, encoders and decoders and a rich management application.~~

C. ~~Public Safety~~

We offer a comprehensive suite of public safety solutions. The solutions enable Emergency Services organizations worldwide and Communications and Command & Control Centers to be more effective at incident detection, verification, handling, investigation, resolution and prosecution.

~~Incident Information Management.~~ ~~Our incident information management solution,~~ NICE Inform ~~helps~~

Assists public safety agencies and ~~security operations in transportation, utilities~~organizations across various industries to consolidate and ~~other industries 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 ~~(CAD)~~(“CAD”) systems, ~~and~~ Geographic Information Systems ~~(GIS~~(“GIS”), and others). NICE Inform fuses these different types of media into a common application and interface. It provides structure to unstructured multimedia data, combining the information for a complete authentic, chronological audio/video timeline to accurately and efficiently reconstruct and investigate events.others.

1b. Public Safety Emergency Response Optimization

·Solution	Description
NICE Audio ~~Recording.~~ ~~We offer~~Recording	Includes a wide range of recording platforms that address the needs of ~~command~~command-and-control centers and air traffic control ~~centers.~~operations. These solutions ~~can~~ automatically record, analyze, store, quickly retrieve, and instantly replay ~~Time-Division Multiplexing (TDM)~~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 likelihood that all vital evidence is available for review.

~~We also offer a trunked radio recording solution for recording the radio communications between emergency services personnel~~

2. Physical Security

2a. Video Surveillance and the command and control center. The solution captures all traffic on the emergency services communication network, delivering instant verification, mission-critical reliability and resilience, legally admissible records, and accurate incident reconstruction.Analytics

~~We also offer capabilities for recording all types of voice communications between aircraft, Air Traffic Control operations and ground personnel.~~

Solution	Description
NiceVision Net	A complete, end-to-end IP video surveillance management solution. It includes Smart Video Recorders, 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	Fully integrated into the video recording infrastructure, includes field-proven applications for intrusion management, crowd management, and situation indication. The solution also issues alerts, highlights decision data, and facilitates complex surveillance operations.

2b. Situation Management/PSIM

·Solution

~~Next Generation Emergency Call Management.~~ ~~Our~~Description

NICE Situator

Enables automatic real-time situation planning, response and analysis, improving situational awareness and incident handling. It integrates, analyzes and correlates information ~~management solution, NICE Inform,~~from a wide array of sensors and systems into a common operating picture. It then applies standard operating procedures and automated response plans, informing everyone in the operational chain of what is ~~next generation ready. It can reconstruct emergency calls~~happening and events using voice, text, data or any other type of media incident information that may come in. In addition, its open architecture and integration capabilities mean it can seamlessly support any current or future media formats and standards— text messaging (SMS) and multimedia messaging (MMS).what needs to be done.

~~Our~~3. Cyber and Intelligence

The NICE Cyber and Intelligence solutions portfolio provides end-to-end solutions for communication interception, analysis and investigation. The solutions support the entire intelligence ~~law enforcement,~~production cycle, both in real time and ~~video surveillance are also benefitting the Public Safety sector, as well as other types of security areas, discussed in more detail below.~~

D. ~~Intelligence~~offline, and ~~Law Enforcement~~

~~NiceTrack is our solution suite that is used by~~help law enforcement and intelligence agencies, national and internal security agencies, ~~and~~ Signals Intelligence ~~(SIGINT)~~ organizations and corrections authorities to fight organized crime, drug trafficking, terrorist activities and ~~terrorist activities. It offers a unified platform for~~other threats to national security. The solutions are designed to provide full, 360° target monitoring by addressing the ~~interception, collection, processing~~dynamic and ~~analysis~~complex nature of ~~telephony and internet~~ communications and data from of all types of networks and applications, and generates comprehensive and meaningful intelligence. NiceTrack constitutes a complete suite of operational tools and applications, which ensure that meaningful, mission-critical information is delivered on time to security decision makers and operational staff, enabling them to detect threats and achieve a fast and appropriate response.

the Internet arena.

Strategic ~~Relationships~~Alliances

We sell our solutions and products worldwide, both directly to customers and indirectly through selected partners to better serve our global customers. We partner with companies in a variety of sales channels, including service providers, system integrators, distributors, ~~value added~~value-added resellers and complimentary technology vendors. ~~They are industry leaders who~~These partners form a vital network for selling and supporting ~~NICE~~our solutions and products. For our business partners, we have established the NICE Business Partner Program, which provides full support and a broad portfolio of sales ~~supporting~~ tools to help them promote ~~and sell~~ the NICE ~~offering, driving~~offerings, helping to drive mutual revenue growth and success.

Through a well-defined collaborative framework, the NICE Business Partner Program aligns and supports the business goals of both NICE and our business partners. Its multi-tiered structure recognizes both commercial achievement and certification in selling and supporting specific NICE offerings.

We also have strategic technology partnerships in place to ensure full integration with NICE’s offerings, ~~to deliver~~delivering value added capabilities that address a variety of technology environments.

~~For our contact center customers, we~~We have ~~entered into~~ global distribution agreements, as well as alliance and partnership programs, with leading vendors, ~~including~~service providers, and consulting firms. The following is a partial list of our main partners, some of which we cooperate with across all of our businesses, while others are only involved in a portion of our initiatives: Amdocs, Avaya, BT, and Cisco. Our agreement with Avaya is a framework agreement with industry standard terms for transactions in the ordinary course of business. The agreement is non-exclusive and automatically renews for successive one year periods. In the financial institutions market, we have established marketing, sales and support arrangements with leading suppliers of complementary products and services, including, among others, BT Group PLC,Cassidian Communications, Cisco, Dell, Deloitte, Etrali, FIS, Headstrong, Honeywell, IBM, IPC, and Orange Business Services. These companies market and distribute our products to their customers either as stand-alone solutions or as integrated parts of their own solutions. In the security markets, we have formed alliances for the co-marketing, distribution and implementation of our products with leading companies, including Cassidian Communications, EADS, Honeywell, Motorola, PWC, Raytheon Company, SAIC, Siemens, Tata Consulting Services, Thales, Verizon, and ~~Thales.~~Wipro.

Professional Service and Support

The NICE ~~Global~~Professional Services and Support organization ~~delivers~~enables our customers to derive sustainable business value from our solutions. NICE solutions, coupled with the ~~following portfolio~~experience, expertise and global presence of ~~end-to-end service~~our Professional Services and Support teams, continue to assist our customers in meeting regulatory requirements, as well as the increasing demands of their customers.

The Professional Service and Support offerings focus on enabling and sustaining business value for our customers. We address all stages of the ~~NICE~~ technology lifecycle, including ~~project~~defining requirements, planning, ~~and~~ design, implementation, ~~and~~customization, optimization, proactive maintenance and ~~product support:~~ongoing support.

~~Business Consulting - to help align NICE solutions and customer business processes and goals to accelerate return on investment, increase revenue and minimize business costs.~~

Enabling Value

Customization Solutions - to help extend the value of NICE technology by adding specialized capabilities and functions that can save users time, perform functions unique to the organization, or integrate seamlessly with other systems in the organization.

Solution Delivery optimizes solution delivery and enables our customers to achieve their specific business and organizational goals, on time and on budget. NICE solutions are delivered by certified project managers, technical experts, and application specialists. We follow a proven methodology that includes business discovery to map solutions to business processes.

~~Solution Delivery - to help optimize solution delivery planning with a view to enabling customers achieve their specific business and organizational goals, on time and on budget.~~

Business Consulting promotes customer success through value-added services targeted to improve business operations, by leveraging and integrating NICE solutions into the customer’s daily practices. This global consulting team consists of industry experts who have accumulated a broad portfolio of best practices and honed domain expertise, with extensive experience in implementing vertical market solutions for many industries. This helps our customers accelerate return on investment, increase revenue and minimize business costs.

~~Customer Education Services - to provide users with the necessary knowledge and skills to operate NICE solutions and leverage their capabilities to meet customer needs, before and after the rollout.~~

Customer Education Services provide users with the necessary knowledge and skills to operate NICE solutions and to leverage their capabilities to meet customer needs. These services are offered both before and after the deployment of NICE solutions.

~~Support and Maintenance - to provide professional 24/7 global support for any hardware or software issue using the most advanced tools and methodologies.~~

Sustaining Value

Value Realization means working hand-in-hand with our customers to identify areas that can maximize business value and minimize complications, ensuring continued delivery of business benefits.

Cloud Services ensure that solutions hosted in the NICE ~~delivers proactive maintenance~~cloud run optimally, maximizing availability, performance and ~~upgrades~~quality while ensuring the security of customer information. This includes: Hosting Operations, running our Hosting Centers; Development Operations, ensuring that our product development teams optimize our solutions for ~~installed systems~~the cloud environment; and ~~offer~~the Hosted Application Support team that operates the solutions, ensuring up-time, scalability and security.

Customer Support and Maintenance responds to customer requests for support on a 24/7 basis, using advanced tools and methodologies. NICE offers flexible service level agreements ~~(SLAs)~~(“SLAs”) to meet ~~the level of service~~ our ~~customers need.~~

customers’ needs. Our ~~systems~~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 are built in accordance with industry standard infrastructure and are PC compatible. The hardware elements in our products 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.

We manufacture our products through subcontractors, with the exception of ~~CyberTech products that are~~our CSS product line (formerly CyberTech) which is partially manufactured by us. Under manufacturing agreements with Flextronics Israel Ltd. ("Flextronics"), a subsidiary of a global electronics manufacturing services provider, and with Bynet Communications Ltd. (“Bynet”), Flextronics and BynetOur 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, 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 ~~almost all~~a significant portion of our 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’ and Bynet’s~~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 ~~we maintain an inventory~~in order to limit the potential for interruption. We also ~~carry out~~maintain relationships directly with some of the more significant manufacturers of our ~~components~~. 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 quality standard for all of our products, as well as the ISO 27001 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 ~~2009, 2010~~2012, 2013 and ~~2011~~2014 were approximately ~~$82.5~~$126.6 million, ~~$102.2~~$140.9 million, and ~~$113.7~~$153.0 million, respectively, of which approximately ~~$3.8~~$4.1 million, ~~$3.8~~$3.3 million, and ~~$3.4~~$3.5 million, respectively, were derived from third-party funding, and ~~$1.3~~$1.1 million, ~~$1.3~~$1.0 million, and ~~$1.2~~$0.9 million, respectively, were capitalized software development costs.

In ~~2011,~~2014, we were qualified to participate in 1214 programs funded by the Office of the Chief Scientist of the Israeli Ministry of ~~Industry, Trade and Labor~~Economy ("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 programs approved for companies with large research and development activities and some of these programs are members of 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 ~~2009, 2010~~2012, 2013, and ~~2011,~~2014 we received a total of ~~$3.6~~$2.5 million, ~~$3.5~~$3.3 million, and ~~$3.1~~$3.0 million from the OCS programs, respectively, and we anticipate receiving approximately ~~$0.5~~$0.6 million in ~~2012~~2015 from ~~2011~~2013 and 2014 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 ~~in Israel~~ 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 ~~Research and Development Law further provides that the know-how developed~~OCS, under ~~an approved research and development program~~special circumstances, may ~~not be transferred to any third party outside Israel, except in certain circumstances and subject to prior OCS approval. The OCS prohibits~~approve the transfer of OCS-funded know-how outside Israel, ~~unless OCS approval is obtained, which may be granted under certain circumstances,~~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, ~~(according~~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 ~~certain formulas)(~~retain the ~~portion to be paid in respect of a sale~~R&D activities of the grant recipient ~~itself will change upon applicable rules coming into effect); (b)~~in Israel after 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 subject company.transfer).

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 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. During 2010 and 2011 we were selected to participate in four FP-7 programs. The programs ~~will continue~~are for three and a half years, with a total expected grant of approximately EUR 1.6 million. In addition, we were selected to coordinate one of these programs.

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 87150 U.S. patents and 7563 patents issued in additional countries covering substantially the same technology as the U.S. patents. We have over 9789 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 time to time, we receive “cease and desist” letters claiming patent infringements. However, no formal claims or other actions have been filed with respect to such alleged infringement, except for past claims which have since been settled and dismissed, and a claim filed by Fair Isaac Corporation (for further information please see Item 8, “Financial Information—Legal Proceedings” in this annual report). We cannot assure you, however, that we will be successful in defending such claims, if asserted, or ~~that infringement claims or other claims, if asserted, will not have a material adverse effect on our business, financial condition and results of operations.~~dismissed. Defending infringement claims or other claims could involve 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.

We own the following trademarks and/or registered trademarks in different countries: ACTIMIZE, Actimize logo, Alpha, Customer ~~Feedback,~~Engagement Analytics, Decisive Moment, eGlue Interact, FAST, FAST alpha Silver, Fortent, Fortent Logo, IEX, Insight from Interactions, Intent. Insight. Impact., ~~Interaction Capture Unit,~~ Know More Risk Less, Last Message Replay, Mass Detection Center, Mirra, ~~My Universe,~~ NICE, NICE Analyzer, NICE Inform, NICE Inform Lite, NICE Inform Media Player, NICE Inform Verify, NICE Logo, NICE Perform, NICE Proactive Compliance, NICE Seamless, NICE Security Recording, NICE Situator, NICE SmartCenter, NICE ~~Storage Center, NICE~~ Systems, ~~NiceCall, NiceCall Focus,~~ 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 ~~ControlCenter,~~Control Center, NiceVision Digital, NiceVision Net, NiceVision NVSAT, NiceVision Pro, Open Situation Management, ~~Playback Organizer,~~Own the Decisive Moment, Scenario Replay, Searchspace, Syfact, Syfact Investigator, and TotalView.

Seasonality

The larger portion of our business 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 ~~2011,~~2014, 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 cyber and intelligence products we could otherwise sell in particular countries in the future.

We also 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”~~RoHS 1”), ~~which came into effect~~and Directive 2011/65/EU of the European Parliament on ~~July~~the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (together with RoHS 1, ~~2006. This directive~~“RoHS”). RoHS provides, 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”), which requires producers to manage the risks from chemicals used in their products and to provide safety information on the substances found in their products.

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 SaaS offerings are recognized ratably over the contract term commencing with the date its service is made available to customers and 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. To secure these limits, we use credit insurance. These credit limits are reviewed and revised periodically on the basis of new customer financial ~~statement~~statements information 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 (IPR&D),~~ 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",~~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.~~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.~~ performed according to the following principles:

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.

Fair value is determined using discounted cash flows. Significant estimates used in 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 estimationmethodologies include estimates of future cash flows, ~~which is dependent on internal forecasts, estimation of~~future growth rates and 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~~capital 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.~~

units.

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~~Our goodwill was tested~~We operate in three operation-based segments, which also comprise our reporting units: Customer Interactions Solutions, Security Solutions and Financial Crime and Compliance Solutions. We performed a qualitative assessment for ~~impairment~~each of our reporting units during the fourth quarter of ~~2011. Based upon our annual~~2014 and concluded that the qualitative assessment did not result in a more likely than not indication of impairment ~~test, the estimated fair value of all~~in any of our reporting units, ~~were in excess of their respective carrying values~~ and ~~as such~~therefore no further impairment ~~of goodwill existed and the second step of the goodwill impairment test was not~~testing is required. The fair values of the Customer Interaction Solutions and Security Solutions reporting units were significantly in excess of their respective carrying values, while the fair value of the Financial Crime and Compliance Solutions reporting unit was slightly in excess of its carrying value. 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 step one of the goodwill impairment test.

~~We are required to assess the impairment of~~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~~Equipment,” 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 has been recorded in 2014.

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~~classify interest and penalties on ~~late~~income taxes (which includes uncertain tax ~~payments~~positions) as ~~financial expenses and tax related penalties as general and administrative expenses.~~Taxes on 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 Combination",~~“Business Combination,” 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".~~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".~~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~~

In October 2009, the FASB issued an update to ASC 605-25, "Revenue Recognition - Multiple-Element Arrangements", that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements to: (i) provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the consideration should be allocated; (ii) require an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have VSOE of selling price or third-party evidence of selling price; (iii) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method; and (iv) require expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance. We adopted this update and ~~applied these provisions to all revenue arrangements entered into or materially modified after January 1, 2011. The adoption of the new guidance did not have a material impact on our consolidated financial statements.~~

In October 2009, the FASB issued an update to ASC 985-605, "Software-Revenue Recognition". In accordance with the update to the ASC, tangible products containing software components and non-software components that function together to deliver the tangible product's essential functionality are excluded from the scope of the software revenue recognition guidance. In addition, hardware components of a tangible product containing software component are always excluded from the software revenue guidance. We adopted this update and ~~applied these provisions to all revenue arrangements entered into or materially modified after January 1, 2011. The adoption of the new guidance did not have a material impact on our consolidated financial statements.~~

In December 2010, the EITF issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations codified in ASC 805, "Business Combinations". This ASU responds to diversity in practice about the interpretation of the pro forma disclosure requirements for business combinations. When a public entity’s business combinations are material on an individual or aggregate basis, the notes to its financial statements must provide pro forma revenue and earnings of the combined entity as if the acquisition date(s) had occurred as of the beginning of the annual reporting period. The ASU clarifies that if comparative financial statements are presented, the pro forma disclosures for both periods presented (the year in which the acquisition occurred and the prior year) should be reported as if the acquisition had occurred as of the beginning of the comparable prior annual reporting period only and not as if it had occurred at the beginning of the current annual reporting period. The ASU also expands the supplemental pro forma disclosure requirements to include a description of the nature and amount of any material non-recurring adjustments that are directly attributable to the business combination. As applicable to us, this update became effective in these annual financial statements. The adoption of this updated did not ~~have a material effect on our financial position or results of operations~~.

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Recently Issued Accounting Pronouncements

In ~~September 2011,~~May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) which amended the existing FASB Accounting Standards Codification. This standard establishes a principle for recognizing revenue upon the transfer of promised goods or ~~FASB issued~~services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. ASU 2011-08, Testing Goodwill for Impairment, codified in ASC 350 "Intangibles – Goodwill and Other". The revised accounting standard update intended to simplify how an entity tests goodwill for impairment. The amendment will allow an entity to first assess qualitative factors to determine whether it2014-09 is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be 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. This accounting standard update will be effective for usannual and interim periods beginning ~~January 1, 2012. We do not expect the~~after December 15, 2016, with no early adoption ~~of this new guidance to have a material impact on our financial statements.~~

In June 2011, the FASB issued ASU 2011-05 Presentation of Comprehensive Income, codified in ASC 220 "Comprehensive Income". The guidance 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. The adoption of the standard will have no impact on our financial position or results of operations, but will result in a change in the presentation of our basic consolidated financial statements.permitted. We are currently evaluating ~~whether~~the adoption method to ~~present other comprehensive income in a single continuous statement of comprehensive income or in two separate but consecutive statements.~~

~~In May 2011,~~apply and the FASB issued ASU 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, codified in ASC 820 "Fair Value Measurement". The guidance requires an entity to provide a consistent definition of fair value and ensureimpact that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements, andupdate will ~~become effective for us beginning January 1, 2012. We do not expect the adoption of this new guidance to~~ have ~~a material impact~~ on our consolidated financial ~~statements.~~statements and related disclosures.

Results of Operations

The following table sets forth our selected consolidated statements of income for the years ended December 31, ~~2009, 2010~~2012, 2013, and ~~2011~~2014, expressed as a percentage of total revenues. Totals may not add up due to rounding.

	2009			2010			2011			2012			2013			2014
Revenues
Products		48.3	%		47.2	%		44.8	%		42.0	%		39.8	%		38.4	%
Services		51.7			52.8			55.2			58.0			60.2			61.6
		100.0			100.0			100.0			100.0			100.0			100.0
Cost of revenues
Products*		31.2			32.9			32.7			33.3			31.2			30.1
Services*		49.5			44.5			43.6			44.8			43.2			41.5
		40.7			39.0			38.7			40.0			38.4			37.1

Gross Profit		59.3			61.0			61.3
Gross profit											60.0			61.6			62.9

Operating expenses
Research and development, net		13.3			14.1			13.8			13.8			14.4			14.7
Selling and marketing		24.3			25.9			25.1			26.2			26.2			26.1
General and administrative		12.5			11.1			12.0			10.9			9.3			8.5
Amortization of acquired Intangibles		2.7			2.8			3.0
Settlement and related expenses		-			-			-
Amortization of acquired intangibles											3.7			3.2			2.0
Restructuring expenses											0.2			0.1			0.5
Total operating expenses		52.8			53.9			53.9			54.8			53.2			51.8

Operating income		6.5			7.1			7.4			5.2			8.4			11.1
Financial income, net		1.3			1.3			1.3			0.7			0.4			0.4
Equity in losses of affiliated company											-			-			(0.1	)
Other income (expenses), net											0.2			(0.0	)		(0.0	)

Income before taxes		7.8			8.4			8.7			6.1			8.8			11.4
Taxes on income		0.5			1.3			1.5
Taxes on income (Tax benefit)											(1.6	)		3.0			1.2

Net income		7.3			7.1			7.2			7.7			5.8			10.2

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 [New Version], 1961 (the “Tax Ordinance”)) for the grant of Awards to Israeli grantees, which is described ~~above~~below under ~~“1995~~“2003 Stock Option ~~Plan~~.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 ~~2010,~~2014, we granted ~~1,635,387~~1,544,326 options and restricted share units under the 2008 Plan (which ~~constitutes 2.6%~~constituted 2.2% of our issued and outstanding share capital as of December 31, ~~2009)~~2014).

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 ~~14, 2012,~~15, 2015, options and restricted share units to purchase ~~4,009,487~~4,155,989 ordinary shares were outstanding under the 2008 Plan at a weighted average exercise price of ~~$22.27.~~

~~2003 Stock Option Plan~~

~~In December 2003,~~$20.67. On November 6, 2014, 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~~1,000,000 ADSs, issuable 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 14, 2012, options to purchase 415,724 ordinary shares were outstanding under the 2003 Plan at a weighted average exercise price of $30.91.

~~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.

2008 Plan.

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 ~~14, 2012,~~15, 2015, assumed Actimize options to purchase ~~91,479~~13,169 ordinary shares of NICE were outstanding at a weighted average exercise price of ~~$10.64.~~$10.91. 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 6six 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 ~~14, 2012,~~15, 2015, assumed Orsus options ~~and restricted share units~~ to purchase ~~31,668~~4,292 ordinary shares of NICE were outstanding under the 2007 Orsus Plan, ~~comprised of 18,250 ordinary shares underlying the Retention Options~~ at ana weighted average exercise price ~~per share~~ of ~~$30.78; and 13,418 ordinary shares underlying the Key Employee Awards at an exercise price per share equal to the nominal value of the ordinary shares of NICE.~~$13.88. 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% ~~vest~~vested and ~~become~~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 ~~14, 2012,~~15, 2015, Assumed e-Glue Options and restricted share unit to purchase ~~55,892~~1,660 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 ~~14, 2012,~~15, 2015, assumed Fizzback options and restricted share units to purchase ~~151,969~~12,551 ordinary shares of NICE were outstanding under the Fizzback ~~Plan.~~Plan, at a weighted average exercise price of $0.49. 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 ~~14, 2012,~~15, 2015, assumed Merced options, restricted share units and restricted shares to purchase ~~343,288~~22,667 ordinary shares of NICE were outstanding under the 2001 Merced Plan and the 2011 Merced ~~Plan.~~Plan, at a weighted average exercise price of $14.57. 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.

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 15, 2015, assumed Causata options to purchase 26,400 ordinary shares of NICE were outstanding under the Causata Scheme. 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 15, 2015, assumed Causata restricted stock units to purchase 21,190 ordinary shares of NICE were outstanding under the Causata Plan.

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 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.

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Item 7. Major Shareholders 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 ~~2, 2012.~~15, 2015. 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)~~

~~Psagot Investment House Ltd.~~ ~~14 Ahad Ha’am Street~~ ~~Tel Aviv 65142, Israel~~	~~3,583,919~~ ~~(2)~~	~~5.5%~~
~~Migdal Insurance and Financial Holdings Ltd.~~ ~~4 Efal Street, P.O. Box 3063~~ ~~Petach Tikva 49512, Israel~~	~~3,905,270~~ ~~(3)~~	~~6.0%~~

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		4,329,691	(2)		7.3	%

Massachusetts Financial Services Company 111 Huntington Avenue Boston, MA 02199		4,162,819	(3)		7.0	%

Migdal Insurance & Financial Holdings Ltd. 4 Efal Street; P.O. Box 3063 Petach Tikva 49512, Israel		3,729,783	(4)		6.3	%

Harel Insurance Investments & Financial Services Ltd. Harel House 3 Abba Hillel Street Ramat Gan 52118, Israel		3,446,287	(5)		5.8	%

___________

(1) Based upon ~~65,026,632~~59,549,523 ordinary shares issued and outstanding onas of March ~~2, 2012.~~15, 2015.

(2) 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: 1,573,543 ordinary shares are held by portfolio accounts managed by Psagot Securities Ltd., 1,342,311 ordinary shares are held by Psagot Exchange Traded Notes Ltd., 1,177,341 ordinary shares are held by provident funds managed by Psagot Provident Funds and Pension Ltd., and 236,496 ordinary shares are held by mutual funds managed by Psagot Mutual Funds Ltd. (of this amount, 30,400 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). 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 18, 2015.

~~(2)~~

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: 1,674,920 ordinary shares are held by portfolio accounts managed by Psagot Securities Ltd., 1,371,825 ordinary shares are held by provident funds managed by Psagot Provident Funds and Pension Ltd., 396,221 ordinary shares are held by Psagot Exchange Traded Notes Ltd., 113,088 ordinary shares are held by mutual funds managed by Psagot Mutual Funds Ltd., and 27,865 ordinary shares are held by pension funds managed by Psagot Pension (Haal) 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, 2012. Ron Gutler, our Chaiman of the Board, serves as a director of Psagot Securities Ltd. and Psagot Investment House Ltd., but disclaims beneficial ownership of the shares held by these entities.

(3) 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, 2015.

~~(3)~~

Of which: (i) 3,812,852 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 and Financing Holdings Ltd., according to the following segmentation: 2,333,564 ordinary shares are held by profit participating life assurance accounts; 1,308,507 ordinary shares are held by provident funds and companies that manage provident funds and 170,781 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) 92,418 are beneficially held for Migdal Insurance and Financing Holdings Ltd. own account (Nostro account). This information is based upon a Schedule 13G filed by Migdal Insurance and Financing Holdings Ltd. with the SEC on February 14, 2012.

(4) Of these securities, (i) 3,598,558 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 Reporting Person, according to the following segmentation: 1,913,888 ordinary shares are held by profit-participating life assurance accounts, 1,377,539 ordinary shares are held by provident funds and companies that manage provident funds, and 307,131 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) 131,225 are beneficially held for their own account (Nostro account). This information is based upon a Schedule 13G filed by Migdal with the SEC on February 10, 2015.

(5) Of these securities, (i) 3,275,459 ordinary shares are held for members of 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 Harel Insurance Investments & Financial Services Ltd. ("Harel"), each of which subsidiaries operates under independent management and makes independent voting and investment decisions; (ii) 92,370 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 securities held in such client accounts and (iii) 78,458 ordinary shares are beneficially held for its own account. This information is based upon a Schedule 13G filed by Harel with the SEC on February 12, 2015.

101

As of March ~~2, 2012,~~15, 2015, we had approximately 6648 registered ADS holders of record in the United States, holding approximately ~~61%~~46% of our outstanding ordinary shares, as reported by The Bank of New York Mellon, the depositary for our ADSs.

As of January 23, 2014, Migdal Insurance and Financial Holdings Ltd. (“Migdal”) held 3,101,146 or 4.5%, of our ordinary shares. This information is based upon a Schedule 13G/A filed by Migdal with the SEC on February 3, 2014. These securities 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 and Financial Holdings Ltd., according to the following segmentation: 1,572,484 ordinary shares are held by Profit participating life assurance accounts; 1,094,288 ordinary shares are held by Provident funds and companies that manage provident funds and 235,787 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) 198,587 ordinary shares are beneficially held for their own account (Nostro account).

As of December 31, ~~2010, The Phoenix Holding Ltd. ("Phoenix"~~2013, Massachusetts Financial Services Company (“MFS”) held ~~3,032,139,~~3,230,824, or ~~4.82%~~4.7%, of our ordinary shares. This information is based upon a Schedule 13G filed by ~~Phoenix~~MFS 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. February 10, 2014.

As of ~~March~~May 1, ~~2010, Phoenix and Excellence Investments~~2013, DS Apex holdings Ltd. ~~("Excellence"~~(“Apex”) held ~~3,479,696,~~2,436,925, or ~~5.6%~~4.01%, of our ordinary shares. This information is based upon a Schedule 13G filed by Apex with the SEC on May 16, 2013. As of April 4, 2013, Apex held 3,026,549, or 5.02%, of our ordinary shares. This information ~~provided to us~~is based upon a Schedule 13G filed by ~~Phoenix and Excellence.~~Apex with the SEC on May 16, 2013.

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.

102

Item 8. Financial Information.

Consolidated Statements and Other Financial Information

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

Legal Proceedings

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~~Consultant Dispute

~~In December 2006, Calyon Corporate and Investment Bank filed~~On November 4, 2014, a ~~suit against us~~former consultant of Nice Systems Latin America, Inc. sent a demand letter claiming a breach of contract by Nice Systems Latin America, Inc. due to its failure to pay him full consideration for consultation services. The former consultant is claiming an outstanding payment 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~~$937,264.82 for such services. Nice Systems Latin America, Inc. responded in December 2014 and denied Mr. Gordon’s entitlement to such payment. To date, no claim has been filed against Nice Systems Latin America, Inc. At this ~~amount~~preliminary stage we are unable to evaluate the probability of a favorable or unfavorable outcome 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 payment 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. The parties submitted their written summations and now await the Court’s decision.this dispute.

~~102~~

Actimize Former Employee Dispute

On ~~October 15, 2007,~~November 7, 2012, a former employee of Actimize ~~Ltd., a wholly owned subsidiary of ours,~~Inc. 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.~~

~~Fair Isaac Patent Infringement Lawsuit~~

~~On September 16, 2009 Fair Isaac Corporation (FICO) filed a claim~~suit in the United States District Court for the Southern District of ~~Delaware against~~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 engaged in mediation, but the mediation did not result in a resolution of the case. A settlement conference was held on February 10, 2014, but no settlement was reached. Actimize Inc., filed a ~~wholly owned subsidiary~~motion for partial summary judgment, seeking dismissal of ~~ours,~~the statutory discrimination claims. The briefing on the motion has been completed and NICE, claiming that Actimize and NICE are infringing on two U.S. patents. These patents cover various aspects of fraud detection. FICO requested damages and an injunction. On December 17, 2009, the parties ~~agreed~~await the Court’s decision. We are unable to ~~dismiss NICE from~~evaluate the ~~action. On December 21, 2009, Actimize filed~~probability of a response and counterclaims. On January 25, 2010, Actimize filed an amended response and counterclaims. On January 25, 2011, FICO filed a first amended complaint, adding new allegations of infringement of two additional U.S. patents and allegations of willful infringement. The parties are currently engagedfavorable or unfavorable outcome in fact discovery. A ten-day jury trial is scheduled for January 28, 2013. On January 18, 2012, the parties agreed to the terms of settlement proposed by the court; a negotiated written settlement agreement is due to be presented to the court by the parties by April 13, 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. The lawsuit alleges, among others, that we breached a contract with Nuvation and defrauded Nuvation. Nuvation is claiming damages in a total amount of $8 million. On May 3, 2010, we filed an Answer and Counterclaim against Nuvation, denying the allegations and further claiming that we had the right to terminate our contract with Nuvation, and that as a consequence of the termination, we sustained damages in the amount of $5 million. On or about September 19, 2011, the parties reached an agreement in principle to settle the dispute through binding arbitration/mediation. The parties had a one-day arbitration/mediation meeting on March 14, 2012 and are awaiting the arbitrator’s decision.

~~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.this dispute.

103

~~Discrimination in Employment Dispute~~

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.

Dividends

~~Since~~On February 13, 2013, we announced that our ~~initial public offering and listing on the NASDAQ National Market (now the NASDAQ Global Select Market) in 1996,~~Board of Directors approved a dividend plan under which we ~~have not declared or paid~~intend to pay quarterly cash dividends onto holders of our ordinary shares and ADRs subject to declaration by the Board. The initial annual dividend was $0.64 per share, or ~~ADSs. We intend to retain our earnings for future growth~~$0.16 per share quarterly, and ~~therefore do not anticipate paying any cash dividends~~the first quarterly dividend payment was made in the ~~foreseeable future.~~second quarter of 2013. The total amount of dividends paid in 2014 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” of this annual report.

~~104~~

Significant Changes

~~There~~On February 5, 2015, we announced that Dafna Gruber will be retiring from her position as Chief Financial Officer of our company. As approved by our Board of Directors on February 4, 2015, Ms. Sarit Sagiv will assume the position of Chief Financial Officer of NICE following a transition period.

Other than as disclosed above, there are no significant changes that occurred since December 31, ~~2011,~~2014, except as otherwise disclosed in this annual report and in the annual consolidated financial statements included in this annual report.

104

Item 9. The Offer and 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
2007 $ 40.95 $ 29.04
2008 35.87 16.11
2009 33.42 18.04
2010 35.20 25.10
2011 38.49 27.17

Quarterly 2010
First Quarter $ 34.30 $ 28.22
Second Quarter 33.77 25.10
Third Quarter 31.94 25.25
Fourth Quarter 35.20 30.30

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 (through March 28) $ 39.95 $ 33.66

Monthly
September 2011 $ 32.00 $ 28.49
October 2011 37.82 27.61
November 2011 36.23 31.84
December 2011 35.24 31.26
January 2012 36.35 33.66
February 2012 36.89 33.88
March 2012 (through March 28) 39.95 34.36

	ADSs
	High	Low
Annual
2010	35.20	25.10
2011	38.49	27.17
2012	40.04	29.51
2013	42.12	33.63
2014	51.75	37.08

Quarterly

Quarterly 2013
First Quarter	$38.28	$34.02
Second Quarter	37.96	33.63
Third Quarter	42.12	36.31
Fourth Quarter	42.06	37.44

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
Monthly
September 2014	$41.55	$38.62
October 2014	41.80	38.60
November 2014	50.09	40.26
December 2014	51.75	47.23
January 2015	51.20	47.95
February 2015	59.64	48.21
March 2015	61.92	57.99

~~105~~

On ~~March 28, 2012,~~April 1, 2015, the last reported price of our ADSs was ~~$39.72~~$60.50 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.

Trading in the Ordinary Shares

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).
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 Post-Effective Amendment No. 3 to the Registration Statement on Form F-6 (Registration No. 333-157371) filed with the SEC on ~~February~~April 17, ~~2011,~~2014, and incorporated herein by reference).
4.1		Manufacturing Outsourcing Agreement dated January 21, 2002 by and among NICE-Systems Ltd. and Flextronics Israel Ltd. (filed as Exhibit 4.5 to NICE-Systems Ltd.’s Annual Report on Form 20-F filed with the SEC on June 26, 2003, and incorporated herein by reference).
~~4.2~~		Asset Purchase Agreement, dated as of November 22, 2009, among Orsus Solutions Limited and its wholly-owned subsidiaries and NICE-Systems Ltd. and certain of its wholly-owned subsidiaries (filed as Exhibit 4.5 to NICE-Systems Ltd.’s Annual Report on Form 20-F filed with the SEC on March 31, 2010, and incorporated herein by reference).
~~4.3~~		Agreement and Plan of Merger, dated as of June 9, 2010, among NICE-Systems Ltd., certain subsidiaries of the NICE-Systems Ltd., e-Glue Software Technologies, Inc. and certain shareholder representatives of e-Glue (filed as Exhibit 4.4 to NICE-Systems Ltd.’s Annual Report on Form 20-F filed with the SEC on March 31, 2011, and incorporated herein by reference).
~~4.4~~		Share Purchase Agreement, dated as of March 4, 2011, among NICE-Systems Ltd., IEX Corporation B.V. and CyberTech Beheer B.V. and Stichting Administratiekantoor Cybertech (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).
~~4.5~~		~~Share Purchase Agreement dated as of September 18, 2011, by and among NICE-Systems Ltd. and shareholders of Fizzback Group (Holdings) Ltd.~~
~~4.6~~		~~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.~~
~~4.7~~		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).
~~4.8~~		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).
~~4.9~~4.2		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).

~~137~~

~~4.10~~4.3		NICE Systems Ltd. 2008 Share Incentive Plan, as amended on February 4, 2014 (filed as Exhibit ~~4.4~~4.5 to ~~NICE-System Ltd.’s Registration Statement~~NICE’s Annual Report on Form ~~S-8 (Registration No. 333-171165)~~20-F filed with the ~~SEC~~Commission on ~~December 15, 2010,~~March 26, 2014, and incorporated herein by reference).
~~4.11~~4.4		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).
~~4.12~~4.5		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).
~~4.13~~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).
~~4.14~~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).
~~4.15~~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).

138

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-System’s Ltd. Immediate Report on Form 6-K filed with the SEC on July 23, 2013 and incorporated herein by reference).
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, ~~2011,~~2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, ~~2011~~2014 and ~~2010;~~2013; (ii) Consolidated Statements of Income for the years ended December 31, ~~2011, 2010~~2014, 2013 and ~~2009;~~2012; (iii) Statements of Changes in Shareholders’ Equity and Comprehensive Income for the years ended December 31, ~~2011, 2010~~2014, 2013, and ~~2009;~~2012; (iv) Consolidated Statements of Cash Flows for the years ended December 31, ~~2011, 2010~~2014, 2013, and ~~2009;~~2012; and (v) Notes to Consolidated Financial Statements. Users of this data are advised, in accordance with Rule 406T of Regulation S-T promulgated by the SEC, that this Interactive Data File is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

~~138~~139

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

~~CONSOLIDATED FINANCIAL STATEMENTS~~

AS OF DECEMBER 31, ~~2011~~2014

IN U.S. DOLLARS

INDEX

	Page

Reports of Independent Registered Public Accounting Firm	F-2 ~~-F-4~~- 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 ~~and Comprehensive Income~~	~~F-8~~F-9 - ~~F-9~~F-10

Consolidated Statements of Cash Flows	~~F-10~~F-11 - ~~F-11~~F-12

Notes to Consolidated Financial Statements	~~F-12~~F-13 - ~~F-56~~F-53

Kost Forer Gabbay & Kasierer

3 Aminadav St.

Tel-Aviv ~~67067,~~6706703, Israel

Tel: ~~972 (3)6232525~~+972-3-6232525

Fax: ~~972 (3)5622555~~+972-3-5622555

~~www.ey.com~~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, ~~2011~~2014 and ~~2010,~~2013, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity ~~and comprehensive income,~~ and cash flows for each of the three years in the period ended December 31, ~~2011.~~2014. 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, ~~2011~~2014 and ~~2010,~~2013, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2011,~~2014, 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, ~~2011,~~2014, 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 29, 2012~~April 2, 2015 expressed an unqualified opinion thereon.

Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
~~March 29, 2012~~April 2, 2015	A Member of Ernst & Young Global

- F - 2 -

Kost Forer Gabbay & Kasierer

3 Aminadav St.

Tel-Aviv ~~67067,~~6706703, Israel

Tel: +972-3-6232525

Fax: +972-3-5622555

~~Tel: 972 (3)6232525~~

~~Fax: 972 (3)5622555~~

~~www.ey.com~~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, ~~2011,~~2014, 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 ~~67067,~~6706703, Israel

Tel: +972-3-6232525

Fax: +972-3-5622555

~~Tel: 972 (3)6232525~~

~~Fax: 972 (3)5622555~~

~~www.ey.com~~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, ~~2011,~~2014, 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, ~~2011~~2014 and ~~2010,~~2013, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity ~~and comprehensive income~~ and cash flows for each of the three years in the period ended December 31, ~~2011~~2014 and our report dated ~~March 29, 2012~~April 2, 2015 expressed an unqualified opinion thereon.

Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
~~March 29, 2012~~April 2, 2015	A Member of Ernst & Young Global

- F - 4 -

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	December 31,
	2014		2013
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	187,497	$	119,545
Short-term investments		65,744		82,826
Trade receivables (net of allowance for doubtful accounts of $ 6,728 and $ 6,206 at December 31, 2014 and 2013, respectively)		181,605		189,323
Other receivables and prepaid expenses		34,041		39,849
Inventories		13,375		13,448
Deferred tax assets		24,174		15,625

Total current assets		506,436		460,616

LONG-TERM ASSETS:
Long-term investments		246,721		240,782
Other long-term assets		38,541		33,253
Property and equipment, net		41,875		44,343
Other intangible assets, net		113,740		170,125
Goodwill		694,778		707,939

Total long-term assets		1,135,655		1,196,442

Total assets	$	1,642,091	$	1,657,058

December 31,
2011 2010

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 204,437 $ 109,526
Short term investments 144,003 242,593
Trade receivables (net of allowance for doubtful accounts of $ 4,671
and $ 4,102 at December 31, 2011 and 2010, respectively)
126,981 99,257
Other receivables and prepaid expenses 43,941 31,924
Inventories 13,404 10,861
Deferred tax assets 10,405 6,798

Total current assets
543,171 500,959

LONG-TERM ASSETS:
Long term investments 214,136 311,081
Other long-term assets 28,890 31,118
Property and equipment, net 28,299 22,014
Other intangible assets, net 158,153 141,632
Goodwill 609,187 527,614

Total long-term assets
1,038,665 1,033,459

Total assets
$ 1,581,836 $ 1,534,418

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,
	2014			2013
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade payables	$	11,910		$	25,962
Deferred revenues and advances from customers		145,250			144,536
Accrued expenses and other liabilities		221,086			213,693

Total current liabilities		378,246			384,191

LONG-TERM LIABILITIES:
Accrued severance pay		24,134			26,652
Deferred tax liabilities		23,882			37,841
Other long-term liabilities		2,373			3,578

Total long-term liabilities		50,389			68,071

COMMITMENTS AND CONTINGENT LIABILITIES

SHAREHOLDERS' EQUITY:
Share capital-
Ordinary shares of NIS 1 par value:
Authorized: 125,000,000 shares at December 31, 2014 and 2013; Issued: 69,749,722 and 68,275,245 shares at December 31, 2014 and 2013, respectively; Outstanding: 59,252,342 and 60,096,547 shares at December 31, 2014 and 2013, respectively		17,615			17,212
Additional paid-in capital		1,171,424			1,112,367
Treasury shares at cost - 10,499,268 and 8,181,586 Ordinary shares at December 31, 2014 and 2013, respectively		(376,637	)		(283,851	)
Accumulated other comprehensive income (loss)		(10,546	)		12,401
Retained earnings		411,600			346,667

Total shareholders' equity		1,213,456			1,204,796

Total liabilities and shareholders' equity	$	1,642,091		$	1,657,058

December 31,
2011 2010
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade payables $ 19,014 $ 20,019
Deferred revenues and advances from customers 160,242 140,388
Accrued expenses and other liabilities 190,372 166,643

Total current liabilities
369,628 327,050

LONG-TERM LIABILITIES:
Accrued severance pay 23,728 24,776
Deferred tax liabilities 27,766 19,705
Other long-term liabilities 2,070 2,127

Total long-term liabilities
53,564 46,608

COMMITMENTS AND CONTINGENT LIABILITIES

SHAREHOLDERS' EQUITY:
Share capital-
Ordinary shares of NIS 1 par value:
Authorized: 125,000,000 shares at December 31, 2011 and 2010;
Issued: 64,804,730 and 63,384,481 shares at December 31, 2011
and 2010, respectively
Outstanding: 61,807,169 and 63,384,481 shares at December 31, 2011 and 2010, respectively
16,273 15,875
Additional paid-in capital 988,076 939,064
Treasury shares at cost – 2,997,561 and 0 ordinary shares at December 31, 2011 and 2010, respectively (96,318 ) -
Accumulated other comprehensive income (loss) (1,895 ) 10,576
Retained earnings 252,508 195,245

Total shareholders' equity
1,158,644 1,160,760

Total liabilities and shareholders' equity
$ 1,581,836 $ 1,534,418

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

- F - 6 -

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

~~CONSOLIDATED STATEMENTS OF INCOME~~

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

Year ended December 31,
2011 2010 2009
Revenues:
Products $ 355,760 $ 325,429 $ 281,783
Services 438,071 364,022 301,332

Total revenues
793,831 689,451 583,115

Cost of revenues:
Products 116,256 107,190 88,030
Services 191,049 161,885 149,175

Total cost of revenues
307,305 269,075 237,205

Gross profit 486,526 420,376 345,910

Operating expenses:
Research and development, net 109,127 97,083 77,382
Selling and marketing 199,044 178,407 141,526
General and administrative 95,650 76,345 72,791
Amortization of acquired intangibles 23,677 19,489 16,012

Total operating expenses
427,498 371,324 307,711

Operating income 59,028 49,052 38,199
Financial income and other, net 9,856 8,981 7,597

Income before taxes on income 68,884 58,033 45,796
Taxes on income 11,621 9,326 3,040

Net income $ 57,263 $ 48,707 $ 42,756

Net earnings per share:

Basic $ 0.91 $ 0.78 $ 0.70

Diluted $ 0.89 $ 0.76 $ 0.68

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

~~- F - 7 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME~~

~~U.S. dollars in thousands~~

Share
capital

Additional
paid-in
capital

Treasury shares
Accumulated other comprehensive income (loss) Retained earnings Total comprehensive income
Total
shareholders'
equity

Balance as of January 1, 2011 $ 15,875 $ 939,064 $ - $ 10,576 $ 195,245 $ 1,160,760
Assumption of restricted share units and
options upon acquisition
- 1,230 - - - 1,230
Issuance of shares of ESPP 5 557 - - - 562
Exercise of share options 391 25,683 - - - 26,074
Stock-based compensation - 21,159 - - - 21,159
Excess tax benefit from share-based
payment arrangements
- 372 - - - 372
Restricted shares vesting in respect of
Actimize acquisition
2 11 - - - 13
Treasury shares purchased - - (96,318 ) - - (96,318 )
Comprehensive income:
Foreign currency translation adjustments - - - (6,944 ) - $ (6,944 ) (6,944 )
Unrealized losses on marketable securities, net - - - (32 ) - (32 ) (32 )
Unrealized losses on derivative instruments, net - - - (5,495 ) - (5,495 ) (5,495 )
Net income - - - - 57,263 57,263 57,263

Total comprehensive income $ 44,792
Balance as of December 31, 2011 $ 16,273 $ 988,076 $ (96,318 ) $ (1,895 ) $ 252,508 $ 1,158,644

Balance as of January 1, 2010 $ 15,492 $ 892,139 $ - $ 8,585 $ 146,538 $ 1,062,754
-
Issuance of shares of ESPP 4 432 - - - 436
Exercise of share options 364 25,409 - - - 25,773
Stock-based compensation - 21,054 - - - 21,054
Excess tax shortfall from share-based
payment arrangements
- (18 ) - - - (18 )
Restricted shares vesting in respect of
Actimize acquisition
15 48 - - - 63
Comprehensive income:
Foreign currency translation adjustments - - - 135 - $ 135 135
Unrealized losses on marketable securities, net - - - (1,116 ) - (1,116 ) (1,116 )
Unrealized gains on derivative instruments, net - - - 2,972 - 2,972 2,972
Net income - - - - 48,707 48,707 48,707

Total comprehensive income $ 50,698
Balance as of December 31, 2010 $ 15,875 $ 939,064 - $ 10,576 $ 195,245 $ 1,160,760

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

~~- F - 8 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME~~

~~U.S. dollars in thousands~~

Share
capital

Additional
paid-in
capital
Accumulated other comprehensive income (loss)
Retained
earnings

Total
comprehensive
income

Total
shareholders'
equity

Balance as of January 1, 2009 $ 15,157 $ 853,226 $ (1,343 ) $ 103,782 $ 970,822

Issuance of shares of ESPP 5 370 - - 375
Exercise of share options 303 19,267 - - 19,570
Stock-based compensation 0 18,237 - - 18,237
Excess tax benefit from share-based payment
arrangements
0 969 - - 969
Restricted shares vesting in respect of
Actimize acquisition
27 70 - - 97
Comprehensive income: - - - -
Foreign currency translation adjustments - - 7,415 - $ 7,415 7,415
Unrealized gains on marketable securities, net - - 2,206 - 2,206 2,206
Unrealized gains on derivative instruments, net - - 307 - 307 307
Net income - - - 42,756 42,756 42,756

Total comprehensive income $ 52,684
Balance as of December 31, 2009 $ 15,492 $ 892,139 $ 8,585 $ 146,538 $ 1,062,754

As of December 31, 2011, 2010 and 2009, accumulated other comprehensive income (loss) was comprised of foreign currency translation adjustments of $ (1,213), $ 5,731 and $ 5,596, unrealized gains on marketable securities, net of tax, of $ 2,490, $ 2,522 and $ 3,638 and unrealized gains (losses) on derivative instruments, net of tax, of $ (3,172), $ 2,323 and $ (649), respectively.

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

~~- F - 9 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~U.S. dollars in thousands~~

Year ended December 31,
2011 2010 2009

Cash flows from operating activities:

Net income $ 57,263 $ 48,707 $ 42,756
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 66,958 57,110 47,217
Stock-based compensation 21,159 21,054 18,237
Excess tax shortfall (benefit) from share-based payment arrangements (372 ) 18 (969 )
Accrued severance pay, net 533 (1,015 ) (1,534 )
Amortization of premium and accrued interest on marketable securities 3,238 328 1,656
Gain on marketable securities, net (791 ) (1,197 ) (823 )
Deferred taxes, net (8,775 ) (4,862 ) (6,984 )
Changes in operating assets and liabilities:
Trade receivables, net (20,621 ) 6,344 8,898
Other receivables and prepaid expenses 5,812 (4,200 ) (2,265 )
Inventories (2,048 ) 3,546 (531 )
Trade payables (3,743 ) (7,136 ) 1,536
Accrued expenses and other liabilities 35,634 25,913 12,039
Other 127 410 453

Net cash provided by operating activities 154,374 145,020 119,686

Cash flows from investing activities:

Purchase of property and equipment (17,307 ) (11,704 ) (8,851 )
Proceeds from sale of property and equipment 84 13 70
Investment in marketable securities (202,768 ) (387,988 ) (197,499 )
Proceeds from maturity of marketable securities 229,482 66,635 140,396
Proceeds from sale and call of marketable securities 147,480 69,933 57,394
Investment in short-term bank deposits - - (110,021 )
Proceeds from short-term bank deposits - 40,029 134,473
Payments for business acquisitions, net of cash acquired (143,377 ) (52,267 ) (84,926 )
Capitalization of software development costs (1,150 ) (1,311 ) (1,315 )
Purchase of intangible assets (3,000 ) - (1,000 )

Net cash provided by (used in) investing activities 9,444 (276,660 ) (71,279 )

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

~~- F - 10 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~INCOME

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

	Year ended December 31,
	2014			2013			2012
Revenues:
Products	$	388,357		$	377,558		$	369,381
Services		623,282			571,726			509,631

Total revenues		1,011,639			949,284			879,012

Cost of revenues:
Products		116,741			117,833			122,917
Services		258,842			247,115			228,306

Total cost of revenues		375,583			364,948			351,223

Gross profit		636,056			584,336			527,789

Operating expenses:
Research and development, net		148,560			136,563			121,387
Selling and marketing		264,207			248,618			230,162
General and administrative		85,602			88,304			96,134
Amortization of acquired intangibles		20,310			30,571			32,590
Restructuring expenses		5,552			527			1,884

Total operating expenses		524,231			504,583			482,157

Operating income		111,825			79,753			45,632
Financial income and other, net		3,765			3,927			8,268
Equity in losses of affiliated company		(565	)		-			-

Income before taxes on income		115,025			83,680			53,900
Tax benefit (Taxes on income)		(11,950	)		(28,405	)		13,994

Net income	$	103,075		$	55,275		$	67,894

Net earnings per share:
Basic	$	1.74		$	0.92		$	1.11

Diluted	$	1.69		$	0.89		$	1.09

Year ended December 31,
2011 2010 2009

Cash flows from financing activities:

Proceeds from issuance of shares upon exercise of options and ESPP 26,751 25,984 19,948
Purchase of treasury shares (95,886 ) - -
Excess tax benefit (shortfall) from share-based payment arrangements 372 (18 ) 969

Net cash provided by (used in) financing activities (68,763 ) 25,966 20,917

Effect of exchange rate changes on cash (144 ) 389 1,111

Increase (decrease) in cash and cash equivalents 94,911 (105,285 ) 70,435
Cash and cash equivalents at the beginning of the year 109,526 214,811 144,376

Cash and cash equivalents at the end of the year $ 204,437 $ 109,526 $ 214,811

Supplemental disclosure of cash flows activities:

Cash paid during the year for:

Income taxes $ 17,560 $ 9,988 $ 5,554

Interest $ 78 $ 28 $ 36
Non-cash activities:

Accrued liability with respect to treasury shares $ 432 $ - $ -

Assumption of restricted share units and options upon the acquisition of Fizzback
$ 1,230 $ - $ -


Weighted average number of shares used in computing:
Basic earnings per share	59,362	60,388	60,905

Diluted earnings per share	60,895	61,830	62,261

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

- F - ~~11 -~~7

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

	Year ended December 31,
	2014			2013			2012

Net income	$	103,075		$	55,275		$	67,894

Other comprehensive income (loss), net of tax:

Change in foreign currency translation adjustment		(17,972	)		4,906			7,175

Available- for- sale investments:
Change in net unrealized gains (losses)		259			(3,503	)		2,553
Less - reclassification adjustment for net gains realized and included in net income		(16	)		-			(1,600	)

Net change (net of tax effect of $117, ($ 519) and $ 94)		243			(3,503	)		953

Cash flow hedges:
Change in unrealized gains		(6,770	)		985			13,845
Less - reclassification adjustment for net gains realized and included in net income		1,552			(2,181	)		(7,884	)

Net change		(5,218	)		(1,196	)		5,961

Total other comprehensive income (loss)		(22,947	)		207			14,089

Comprehensive income	$	80,128		$	55,482		$	81,983

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

F - 8

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

U.S. dollars in thousands

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

Balance as of January 1, 2014	$	17,212	$	1,112,367	$	(283,851	)	$	12,401		$	346,667		$	1,204,796

Issuance of shares of ESPP		3		433		-			-			-			436
Exercise of share options		400		27,605		-			-			-			28,005
Stock-based compensation		-		29,814		-			-			-			29,814
Excess tax benefit from share-based payment arrangements		-		1,205		-			-			-			1,205
Treasury shares purchased		-		-		(92,786	)		-			-			(92,786	)
Other comprehensive loss		-		-		-			(22,947	)		-			(22,947	)
Dividends paid ($ 0.64 per share)		-		-		-			-			(38,142	)		(38,142	)
Net income		-		-		-			-			103,075			103,075

Balance as of December 31, 2014	$	17,615	$	1,171,424	$	(376,637	)	$	(10,546	)	$	411,600		$	1,213,456

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

Balance as of January 1, 2013	$	16,666	$	1,045,733		$	(203,907	)	$	12,194	$	320,402		$	1,191,088

Issuance of shares of ESPP		6		777			-			-		-			783
Exercise of share options		523		38,395			-			-		-			38,918
Restricted shares vesting in respect of Merced acquisition		17		(17	)		-			-		-			-
Stock-based compensation		-		26,307			-			-		-			26,307
Excess tax benefit from share-based payment arrangements		-		1,172			-			-		-			1,172
Treasury shares purchased		-		-			(79,944	)		-		-			(79,944	)
Other comprehensive income		-		-			-			207		-			207
Dividends paid ($ 0.48 per share)		-		-			-			-		(29,010	)		(29,010	)
Net income		-		-			-			-		55,275			55,275

Balance as of December 31, 2013	$	17,212	$	1,112,367		$	(283,851	)	$	12,401	$	346,667		$	1,204,796

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

F - 9

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

U.S. dollars in thousands

	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

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

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

F - 10

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Year ended December 31,
	2014			2013			2012

Cash flows from operating activities:

Net income	$	103,075		$	55,275		$	67,894
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		73,349			91,355			95,477
Stock-based compensation		29,814			26,307			23,612
Equity in losses of affiliated company		565			-			-
Excess tax benefit from share-based payment arrangements		(1,205	)		(1,172	)		(104	)
Accrued severance pay, net		(207	)		(43	)		(126	)
Amortization of premium and discount and accrued interest on marketable securities		2,071			4,234			1,178
Gain on marketable securities, net		-			-			(1,600	)
Realized gain on sale of intangible assets		-			-			(1,125	)
Deferred taxes, net		(27,785	)		(17,275	)		(24,168	)
Changes in operating assets and liabilities:
Trade receivables, net		4,807			(34,569	)		(11,863	)
Other receivables and prepaid expenses		2,283			(2,084	)		3,815
Inventories		(327	)		472			500
Trade payables		(13,781	)		5,057			295
Accrued expenses and other liabilities		10,319			1,782			9,160
Deferred revenues		3,424			(4,551	)		(27,100	)
Revaluation of earn out liability		(4,002	)		-			-
Other		(131	)		(513	)		(206	)

Net cash provided by operating activities		182,269			124,275			135,639

Cash flows from investing activities:

Purchase of property and equipment		(16,759	)		(20,289	)		(28,690	)
Proceeds from sale of property and equipment		37			63			1,006
Investment in marketable securities		(74,188	)		(145,885	)		(136,897	)
Proceeds from maturity of marketable securities		43,411			162,521			151,750
Proceeds from sale and call of marketable securities		2,403			791			43,997
Proceeds from short-term bank deposits		107,327			54,422			8
Investment in short-term bank deposits		(69,500	)		(60,500	)		(31,007	)
Payments for business acquisitions, net of cash acquired		(906	)		(24,191	)		(164,545	)
Capitalization of software development costs		(908	)		(1,038	)		(1,110	)
Proceeds upon the realization of investment in affiliate		-			683			-
Proceeds from sale of intangible assets, net		-			-			1,125

Net cash used in investing activities		(9,083	)		(33,423	)		(164,363	)

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

F - 11

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Year ended December 31,
	2014			2013			2012

Cash flows from financing activities:

Proceeds from issuance of shares upon exercise of options and ESPP		29,526			38,381			30,380
Purchase of treasury shares		(94,267	)		(79,447	)		(107,038	)
Dividends paid		(38,142	)		(29,010	)		-
Excess tax benefit from share-based payment arrangements		1,205			1,172			104

Net cash used in financing activities		(101,678	)		(68,904	)		(76,554	)

Effect of exchange rate changes on cash		(3,556	)		(999	)		(563	)

Increase (decrease) in cash and cash equivalents		67,952			20,949			(105,841	)
Cash and cash equivalents at the beginning of the year		119,545			98,596			204,437

Cash and cash equivalents at the end of the year	$	187,497		$	119,545		$	98,596

Supplemental disclosure of cash flows activities:

Cash paid during the year for:

Income taxes	$	32,854		$	43,862		$	10,711

Interest	$	116		$	336		$	63

Non-cash activities:

Net change in accrued liability with respect to treasury shares	$	(1,481	)	$	497		$	551

Net change in other receivables with respect to exercise of share options	$	1,085		$	(1,320	)	$	(191	)

Assumption of restricted share units and options upon the acquisition of Merced	$	-		$	-		$	3,763

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

F - 12

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1:-

GENERAL

General:

NICE Systems Ltd. ("NICE") and subsidiaries (collectively - "the Company") is a global leading ~~provider of~~ software ~~solutions that sells its solutions worldwide~~company enabling enterprises and ~~enables~~security-sensitive organizations to ~~take action to improve customer experience~~address three main aspects of people’s lives: preventing financial crimes and ~~business results, ensure compliance, prevent financial crime,~~fraud, ensuring security and ~~enhance~~public safety and ~~security.~~ providing perfect customer experiences.

The Company operates ~~an Enterprise~~in three business ~~which is comprised of~~areas: Customer Interactions, ~~Solutions and~~ Financial Crime and Compliance ~~solutions,~~ and ~~a Security business. Across~~Security. The Company allows organizations to work smarter by unleashing the ~~Company’s businesses, its solutions capture~~power of data. The Company does this by capturing vast amounts of various types of data (e.g., structured and unstructured, ~~data~~interactions, and transactions) from ~~different types of interactions, transactions~~multiple sources (e.g., communication channels, operational systems, and ~~events, including interactions at various customer touch points, financial transactions~~more), and ~~security-related sensors. Such data is captured from phone calls, the web, emails, chat, video, radio~~acting upon it through analysis that provides insight and many others. Through cross-channel analytics, insights on the interactions, transactions and events are delivered to the organization. The extraction of insights through advanced analytics on the captured data enables organizations to take action and make an impactdecisioning in real time and offline by driving a personalized response to these insights before, during and after the interactions, transactions or events. This allows organizations to improve business performance, increase operational efficiency, prevent financial crime, ensure compliance, and enhance safety and security. The Company’s Customer Interactions Solutions are implemented by contact centers of all sizes, back office operations, retail branches and financial trading floors, to improve operational efficiency, ensure regulatory compliance, enhance customer experience and grow revenue. Enterprise customers of the Company’s Customer Interactions Solutions span a variety of industries, such as financial services, telecommunications, healthcare, outsourcers, retail, media, travel, service providers, utilities, and others. Enterprise customers of the Company’s Financial Crime and Compliance Solutions are primarily financial services organizations, government agencies and related organizations. time.

The Company’s solutions ~~drive~~capture interactions and transactions from multiple sources, including telephones, CCTV video feed, emergency services radio communications, emails, chat, social media, and more. They provide valuable insight about the business or security situation by applying real-time, cross-channel analytics to predict customer behavior, criminals and terrorists intentions and potential fraudsters, to enable such customers to fight financial crime, prevent fraud and money laundering and ensure trading compliance. NICE Security Solutions are deployed worldwide in public transportation systems, critical facilities, city centers, banks, airports, public safety agencies, law enforcement and intelligence agencies and organizations and national and internal security agencies. The Company’s Security Solutions offer incident life-cycle management, including prevention, prediction,proactive response for real-time ~~and post-incident analysis for security and safety operations. The Company’s Security Solutions also offer solutions for~~impact.

Acquisitions in prior years:

On August 12, 2013, the ~~interception, collection, processing and analysis~~Company completed the acquisition of ~~communications data.~~

Causata Inc. ("Causata"), a provider of real-time Big Data analytics. The Company ~~depends~~acquired Causata for total consideration of $22,666 comprised of $21,352 in cash and $1,314 representing the fair value of a potential earn out based on performance milestones amounting to a ~~limited number~~maximum additional payment of ~~contract manufacturers~~$2,000. The Company recorded technology, customer relationship, goodwill and deferred tax asset related to carryforward losses in amounts of $10,474, $2,001, $8,598 and $6,765, respectively. Technology and customer relationship are amortized over a period of 5 years.

On February 7, 2012, the Company completed the acquisition of all of the outstanding shares of Merced Systems, Inc. ("Merced"). The Company acquired Merced for ~~producing its products. If any~~total consideration of ~~these manufacturers becomes unable or unwilling~~$185,868 comprised of $182,105 in cash and $3,763, representing the fair value of vested options and restricted share units of the Company granted in exchange of partially vested options of Merced. In connection with this acquisition, the Company recorded net tangible liabilities, core technology, customer relationship, covenant not to ~~continue to manufacture or fails to meet the quality or delivery requirements needed to satisfy the Company's customers, it could result~~compete, backlog and goodwill in the ~~loss~~amounts of ~~sales, which could adversely affect the Company's results~~$29,314, $91,874, $32,310, $8,009, $7,390 and $75,599, respectively. Core technology, customer relationship, covenant not to compete and backlog are amortized over periods of ~~operations~~6, 8, 2.5 and ~~financial position.~~

2 years, respectively.

- F - ~~12 -~~13

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1:-

GENERAL (Cont.)

~~Acquisitions:~~

~~Acquisition of CyberTech:~~

On ~~March 4, 2011,~~October 22, 2012, the Company completed the acquisition of ~~all of the outstanding shares of CyberTech Investments BV~~RedKite Financial Markets Limited ("~~CyberTech"~~RedKite")~~, a global provider of compliance recording solutions and value-added applications.~~. The Company acquired ~~CyberTech~~RedKite for ~~an aggregate~~total consideration of ~~$ 59,436~~$11,601 comprised of $9,017 in ~~cash.~~

~~The addition of CyberTech solutions to~~cash and $2,584 representing the NICE portfolio broadened the Company's offering for financial institutions, strengthened commitments to the small and medium size business sector, and added to the Company's public safety solutions. It also enhanced the Company's positioning in EMEA and provided a product set that meets the needs of emerging markets, by offering a solution that accommodates large scale implementations with entry-level requirements. The value of goodwill is attributed to synergies between the NICE portfolio and CyberTech’s products and services. $ 35,562 from the goodwill was assigned to the Customer Interactions Solutions' reporting unit and the remaining amount of $ 6,275 was assigned to the Security Solutions reporting unit.

~~The acquisition was accounted for by the acquisition method and accordingly, the purchase price has been allocated according to the estimated~~ fair value of a potential earn out based on performance milestones amounting to a maximum additional payment of $5,750. During 2014 the ~~assets acquired and liabilities assumed of CyberTech. The results~~Company concluded that since none of the ~~CyberTech operations have been included~~performance milestones were achieved or expected to be achieved, the earn-out liability's fair value was revalued to $0. As a result, an adjustment of $2,584 was recorded in the ~~consolidated financial statements since March 4, 2011.~~

statement of income. The ~~following table summarizes the estimated fair values~~Company recorded technology and goodwill in amounts of ~~the assets acquired~~$4,785 and ~~liabilities assumed:~~

Cash $ 736
Trade receivables 4,266
Other receivables and prepaid expenses 1,200
Current deferred tax assets 203
Inventories 981
Long-term deposits 20
Property and equipment 1,433
Other intangible assets 22,710
Goodwill 41,837

Total assets acquired 73,386

Trade payables (1,370 )
Accrued expenses and other liabilities (7,971 )
Long-term deferred tax liabilities (4,609 )

Total liabilities assumed (13,950 )

Net assets acquired $ 59,436

~~- F - 13 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~$6,803, respectively. Technology is amortized over a period of 3 years.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 1:-~~

~~GENERAL (Cont.)~~

~~In performing~~During 2014, the ~~purchase price allocation, management considered, among other factors, analyses of historical financial performance, highest and best use of~~Company has also revalued the ~~acquired assets and estimates of future performance of CyberTech’s business. The~~ fair value of ~~intangible assets~~liability for earn out related to the Lamda acquisition from 2010, to $35. As a result, an adjustment of $1,418 was ~~based on market participant approach using an income approach.~~

Intangible assets that are subject to amortization are amortized over their estimated useful lives using the straight-line method at an annual weighted average rate of 38%. The following table sets forth the components of intangible assets associated with the acquisition and their annual rates of amortization:

Fair value %

Core technology $ 10,900 20
Customer relationships 8,200 33
Covenant not to compete
1,210 100
Backlog 2,400 100

Total intangible assets $ 22,710

~~Acquisition of Fizzback:~~

On October 26, 2011, the Company completed the acquisition of all of the outstanding shares 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. Fizzback's solution helps companies listen, respond and act in real-time to their customers’ comments. The Company acquired Fizzback for an aggregate consideration of $ 80,905. The total purchase price of Fizzback was composed of the following:

Cash $ 79,675
Options and Restricted Share Units*) 1,230

Total purchase price $ 80,905

Represents the fair value of the vested portion of 165,695 options and restricted shares of NICE granted upon consummation of the acquisition to the holders of partially vested options of Fizzback originally granted under the Fizzback Group (Holdings) Ltd. Employee Share Option Scheme. The fair value of these options was determined using a Black-Scholes-Merton valuation model with the following assumptions: expected life of 1-38 months, risk-free interest rate of 0.02%-0.48%, expected volatility of 36.98%-56.44% and no dividend yield.

~~- F - 14 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 1:-~~

~~GENERAL (Cont.)~~

The combination of Fizzback and NICE both improved Customer Experience Management (CEM) as well as operationalized VoC both for the contact center and across the enterprise. By adding direct customer feedback with the Fizzback solution, NICE now provides a complete CEM solution that delivers a holistic understanding of the customer by combining on one platform the VoC from each of the three feedback dimensions: direct, indirect and inferred. The value of goodwill is attributed to synergies between NICE portfolio and Fizzback’s products and services and the strength of the Company's positionrecorded in the ~~market. The entire goodwill was assigned to the Customer Interactions Solutions reporting unit.~~

~~The acquisition was accounted for by the acquisition method and accordingly, the purchase price has been allocated according to the estimated fair value~~statement of ~~the assets acquired and liabilities assumed of Fizzback. The results of the Fizzback operations have been included in the consolidated financial statements since October 26, 2011.~~

~~The following table summarizes the estimated fair values of the assets acquired and liabilities assumed:~~

Cash $ 687
Trade receivables 3,341
Other receivables and prepaid expenses 1,134
Current deferred tax assets 1,887
Long-term deposits 148
Property and equipment 984
Other intangible assets 46,075
Goodwill 44,157

Total assets acquired 98,413

Trade payables (1,426 )
Accrued expenses and other liabilities (5,024 )
Long-term deferred tax liabilities (11,058 )

Total liabilities assumed (17,508 )

Net assets acquired $ 80,905
income.

In performing the purchase price allocation, management considered, among other factors, analyses of historical financial performance, highest and best use of the acquired assets and estimates of future performance of Fizzback’s business. The fair value of intangible assets was based on market participant approach using an income approach.

~~- F - 15 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 1:-~~

~~GENERAL (Cont.)~~

Intangible assets that are subject to amortization are amortized over their estimated useful lives using the straight-line method at an annual weighted average rate of 21%. The following table sets forth the components of intangible assets associated with the acquisition and their annual rates of amortization:

Fair value %

Core technology $ 29,834 17
Customer relationships 8,879 20
Covenant not to compete
1,898 50
Brand name 5,464 33

Total intangible assets $ 46,075

~~Acquisitions in previous years:~~

In 2010, the Company completed the acquisitions of Orsus Solutions Ltd., Lamda Communication Networks Ltd, and e-Glue Software Technologies Inc. and its subsidiaries. Total fair value of purchase consideration for the acquisitions was $ 59,766, which includes cash paid for Common stock and estimated fair value of earn-out payments. In connection with these acquisitions, the Company recorded intangibles and goodwill in the amounts of $ 30,423 and $ 32,401, respectively. In 2011, the Company paid an additional amount of $ 5,689 primarily with respect to earn out for the acquisition of e-Glue.

In 2009, the Company completed the acquisitions of Syfact, Fortent Inc and Hexagon System Engineering Ltd. Total cash paid in consideration for the acquisitions was $ 85,336. In connection with these acquisitions, the Company recorded intangibles, In Process Research and Development (IPR&D) and goodwill in the amounts of $ 41,454, $ 1,440 and $ 45,349, respectively.

~~Unaudited pro forma condensed results of operations:~~

The following represents the unaudited pro forma condensed results of operations for the years ended December 31, 2011 and 2010, assuming that the acquisitions of CyberTech and Fizzback occurred on January 1, 2010. The pro forma information is not necessarily indicative of the results of operations that would have actually occurred had the acquisitions been consummated on those dates, nor does it purport to represent the results of operations for future periods.

~~- F - 16 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 1:-~~

~~GENERAL (Cont.)~~

Year ended
December 31,

2011 2010
Unaudited Unaudited

Revenues $ 812,048 $ 722,926

Net income $ 47,477 $ 20,218

Basic net earnings per share $ 0.75 $ 0.32

Diluted net earnings per share $ 0.74 $ 0.31

Acquisition related costs for the years ended December 31, ~~2011~~2014, 2013 and ~~2010~~2012 amounted to ~~$ 2,925~~$0, $508 and ~~$ 851,~~$2,902, respectively, and were included mainly in general and administrative expenses.

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements were prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP").

Use of estimates:

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

F - 14

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Financial statements in United States dollars:

The currency of the primary economic environment in which the operations of NICE and certain subsidiaries are conducted is the U.S. dollar ("dollar"); thus, the dollar is the functional currency of NICE and certain subsidiaries.

NICE and certain subsidiaries' transactions and balances denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been remeasured to dollars in accordance with ASC 830, "Foreign Currency Matters". All transaction gains and losses from remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of income as financial income or expenses, as appropriate.

~~- F - 17 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

For those subsidiaries whose functional currency has been determined to be ~~their local~~a non-dollar currency, assets and liabilities are translated at year-end exchange rates and statement of income items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in shareholders' equity.

Principles of consolidation:

Intercompany transactions and balances have been eliminated upon consolidation.

Cash equivalents:

Cash equivalents are short-term unrestricted highly liquid investments that are readily convertible into cash, with original maturities of three months or less at acquisition.

Marketable securities:

The Company accounts for investments in debt securities in accordance with ASC 320, "Investments - Debt and Equity Securities". Management determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determinations at each balance sheet date.

Marketable securities classified as "available-for-sale" are carried at fair value, based on quoted market prices. Unrealized gains and losses are reported in a separate component of shareholders' equity in accumulated other comprehensive income (loss). Gains and losses are recognized when realized, on a specific identification basis, in the Company's consolidated statements of income.

F - 15

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company's securities are reviewed 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 its 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 the Company's intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis. For securities with an unrealized loss that the Company intends to sell, or it is more likely than not that the Company 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).

~~- F - 18 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 2:-~~

~~SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

Inventories:

Inventories are stated at the lower of cost or market value. The cost of raw materials is determined by the "standard cost" method, and the cost of finished goods on the basis of costs charged by third party manufacturer. The cost of work-in-progress related to long-term contracts includes materials, subcontractors and other direct costs.

Inventory write-downs are provided to cover risks arising from slow-moving items, technological obsolescence, excess inventories, and discontinued products and for market prices lower than cost, if any. At the point of the loss recognition, a new lower cost basis for that inventory is established. In addition, the Company records a liability for firm non-cancelable and unconditional purchase commitments with contract manufacturers for quantities in excess of the Company's future demands forecast consistent with its valuation of excess and obsolete inventory. Inventory write-downs for ~~2011, 2010~~2014, 2013 and ~~2009~~2012 were ~~$ 1,395, $ 1,203~~$747, $2,089 and ~~$ 1,586,~~$3,683, respectively, and have been included in cost of revenues.

Property and equipment, net:

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

	%

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

Leasehold improvements are amortized by the straight-line method over the term of the lease ~~(including option terms)~~ or the estimated useful life of the improvements, whichever is shorter.

F - 16

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Other investments:

Other investments comprised of investment in non-marketable equity securities are accounted either under the equity or cost method. Investments through which the Company exercises significant influence but does not have control over the investee are accounted for under the equity method in accordance with ASC 323, "Investments — Equity Method and Joint Ventures". Investments through which the Company is not able to exercise significant influence over the investee are accounted for under the cost method in accordance with ASC 325-20 "Cost Method Investments".

Other intangible assets, net:

Intangible assets are amortized over their estimated useful lives using the straight-line method, at the following weighted average annual rates:

	%

Core technology	18	17
Customer relationships and distribution network	17	16
Capitalized software development costs (see lm below)	33
Trademarks	27	33
Covenant not to compete	68

~~- F - 19 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 2:-~~

~~SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~40

Acquired IPR&D is capitalized and assessed for impairment at least annually until the completion of development and afterwards is amortized over its useful life. Impairment on acquired IPR&D of $ 1,425, $ 0 and $ 0 was recorded for the years 2011, 2010 and 2009, respectively.

i.j.

Impairment of long-lived assets:

The Company's long-lived assets and identifiable intangibles that are subject to amortization are reviewed for impairment in accordance with ASC 360, "Property, Plant, and Equipment", whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. ~~Recoverability~~Impairment indicators include any significant changes in the manner of the Company's use of the assets toand significant negative industry or economic trends.

Upon determination that the carrying value of a long-lived asset may not be ~~held and used is measured by~~recoverable based upon a comparison of aggregate undiscounted projected future cash flows to the carrying amount of the ~~assets to~~asset, an impairment charge is recorded for the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lowerexcess of the carrying amount orover fair ~~value less costs to sell.~~value. In ~~2011, 2010~~2014, 2013 and ~~2009,~~2012, no impairment ~~indicators have been identified.~~charge was recognized.

j.k.

Goodwill:

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 - Goodwill and Other," ("ASC 350") goodwill is not amortized, but rather is subject to an annual impairment test.

F - 17

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

ASC 350 requires goodwill to be tested for impairment at the reporting unit level at least annually or between annual tests in certain circumstances, and written down when impaired. Goodwill is tested for impairment by comparing the fair value of the reporting unit with its carrying value.

ASC 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If 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.

The Company operates in three operation-based ~~segments:~~segments, which also comprise its reporting units: Customer Interactions Solutions, Security Solutions and Financial Crime and Compliance ~~Solutions, and these segments comprise~~Solutions. In 2014 the Company performed a qualitative assessment for all its reporting ~~units.~~

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. The Company performed annual impairment testsunits during the fourth quarter of ~~2011, 2010~~2014 and ~~2009 and~~concluded that the qualitative assessment did not ~~identify any~~result in a more likely than not indication of impairment, ~~losses.~~and therefore no further impairment testing was required.

In 2013 and 2012, for the Financial Crime and Compliance Solutions reporting unit, the Company elected to bypass the qualitative assessment and proceeded directly to performing the first step of the goodwill impairment test. The Company performed the first step of the quantitative goodwill impairment test and concluded that the fair value of the reporting unit exceeded its carrying value.

During the years 2014, 2013 and 2012, no impairment charge was recognized.

k.l.

Revenue recognition:

The Company generates revenues from sales of software products, services, which include ~~hardware~~support and ~~software, software licensing, professional services and maintenance. Professional services include mainly~~maintenance, installation, project management, customization, consulting, training, hosting and ~~training.~~SaaS, as well as hardware sales. The Company sells its products directly through its sales force and indirectly through a global network of distributors, system integrators and strategic partners, all of whom are considered end-users.

~~- F - 20 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~U.S. dollars~~The basis for the Company's software revenue recognition is substantially governed by the accounting guidance contained in ~~thousands (except share and per share data)~~

~~NOTE 2:-~~

~~SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

ASC 985-605, "Software-Revenue Recognition." Revenues from sales of ~~product and~~ software ~~licensing~~products are recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable and collectability is probable.

In transactions where a customer's contractual terms include a provision for customer acceptance, revenues are recognized either when such acceptance has been obtained or as the acceptance provision has lapsed.

F - 18

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

For multiple element arrangements within the scope of software revenue recognition guidance, revenues are allocated to the different elements in the arrangement under the "residual method" when Vendor Specific Objective Evidence ("VSOE") of fair value exists for all undelivered elements and no VSOE exists for the delivered elements. Under the residual method, ~~at the outset of the arrangement with the customer,~~ the Company defers revenue for the fair value of its undelivered elements ~~(maintenance and professional services)~~ and recognizes revenue for the remainder of the arrangement fee attributable to the elements initially delivered in the arrangement ~~(products and software licenses)~~ when the basic criteria in ASC 985-605 have been met. Any discount in the arrangement is allocated to the delivered element.

~~Starting~~ ~~January 1, 2011~~ Revenues from maintenance and professional services are recognized ratably over the ~~Company adopted the guidance of ASU 2009-13,~~ ~~Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605,~~ ~~Revenue Recognition) ("ASU 2009-13")~~contractual period 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~~as 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 arrangement that includes a tangible product are covered by the scope of the software revenue guidance. As such, the Company 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 the Company’s 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. The Company’s arrangements generally do not include any provisions for cancellation, termination, or refunds that would significantly impact recognized revenue. While certain of the Company’s bundled products are now accounted for following ASC 605, the impact of the adoption of these standards was immaterial.

~~- F - 21 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~performed, respectively.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 2:-~~

~~SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

~~The Company's revenue recognition policies provide~~For arrangements 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, the Company allocates 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"), if VSOE is not available, or best estimated selling price ("~~ESP"~~BESP"), if neither VSOE nor TPE isare available. The Company establishes 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, the Company attempts 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, the ~~Company’s~~Company's go-to-market strategy ~~typically~~ differs from that of its peers and ~~its~~the Company's offerings contain a significant level of ~~customization and~~ differentiation such that the comparable pricing of products with similar functionality cannot be obtained. Furthermore, the Company is unable to reliably determine what similar competitor ~~products’~~products' selling prices are on a standalone basis. Therefore, the Company is 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 the Company offers its products. The determination of ~~ESP~~the BESP is ~~judgmental.~~subject to discretion.

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

The Company's 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.~~

~~- F - 22 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 2:-~~

~~SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

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 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.

F - 19

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company also generates sales from SaaS offerings which provide its customers access to certain of its software within a cloud-based IT environment that the Company manages and offers to customers on a subscription basis. Revenues for the Company's SaaS offerings are recognized ratably over the contract term commencing with the date its service is made available to customers and all other revenue recognition criteria have been satisfied.

To assess the probability of collection for revenue recognition, the Company has established a credit policy that determines the credit limit that reflects an amount that is deemed probably collectible for each customer. To secure these limits the company use credit insurance. These credit limits are reviewed and revised periodically on the basis of new customer financial statements information and payment performance.

The Company maintains a provision for product returns ~~in accordance with ASC 605, "Revenue Recognition". The provision~~which is estimated based on the Company's past experience and is deducted from revenues. Actual returns could be different from the Company's estimates. As of December 31, ~~2011~~2014 and ~~2010,~~2013, the provision for product returns amounted to ~~$ 2,237~~$1,990 and ~~$ 2,810,~~$2,112, respectively.

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

l.m.

Research and development ~~costs:~~expenses, net:

Research and development costs (net of grants) incurred in the process of software production before establishment of technological feasibility are charged to expenses as incurred. Costs incurred to develop software to be sold are capitalized after technological feasibility is established in accordance with ASC 985-20, "Software - Costs of Software to be Sold, Leased, or Marketed". Based on the Company's product development process, technological feasibility is established upon completion of a detailed program design.

Costs incurred by the Company between completion of the detailed program design and the point at which the product is ready for general release, have been capitalized.

Capitalized software development costs are amortized commencing with general product release by the straight-line method over the estimated useful life of the software product.

- F - ~~23 -~~20

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

m.n.

Income taxes:

The Company accounts for income taxes in accordance with ASC 740, "Income Taxes". This topic prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.

The Company implements 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% (cumulative basis) likely to be realized upon ultimate settlement.

The Company classifies interest ~~as financial expenses~~ and penalties on income taxes (which includes uncertain tax positions) as ~~general and administrative expenses.~~taxes on income.

n.o.

~~Government~~Non-royalty grants:

Non-royalty bearing grants from the Government of Israel and the European Union for funding research and development projects are recognized at the time the Company is entitled to such grants on the basis of the related costs incurred and recorded as a deduction from research and development ~~costs.~~

expenses.

o.p.

Concentrations of credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, trade receivables, marketable securities and foreign currency derivative contracts.

The Company's cash and cash equivalents are invested in deposits mainly in dollars with major international banks. Deposits in the U.S. may be in excess of insured limits and are not insured in other jurisdictions. Generally, these deposits may be redeemed upon demand and therefore bear minimal risk.

~~- F - 24 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 2:-~~

~~SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

The Company's trade receivables are derived from sales to customers located primarily in North America, EMEA and APAC. The Company performs ongoing credit evaluations of its customers and obtains letters of credit and bank guarantees for certain receivables. Additionally, the Company insures certain of its receivables with a credit insurance company. A general allowance for doubtful accounts is provided, based on the length of time the receivables are past due.

F - 21

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company's marketable securities include investment in corporate debentures, U.S. Treasuries ~~U.S. government agency debentures~~ and Israeli ~~Treasury Bills.~~governments bonds. The Company's investment policy limits the amount that the Company may invest in any one type of investment or issuer, thereby reducing credit risk concentrations.

The Company entered into forward contracts, and option contracts intended to protect against the ~~increase~~volatility in value of forecasted non-dollar currency cash flows resulting from ~~investments in Israeli Treasury Bills~~payroll and ~~payroll expenses and entered into option contracts to hedge future anticipated payments relating to a leasehold improvement.~~facilities related expenses. The derivative instruments hedge a portion of the Company's non-dollar currency exposure. See ~~Notes 2v and 11 below.~~Note 11.

p.q.

Severance pay:

The Company's liability for severance pay for its Israeli employees is calculated pursuant to Israel's Severance Pay Law based on the most recent monthly salary of the employees multiplied by the number of years of employment as of the balance sheet date. Employees are entitled to one month's salary for each year of employment, or a portion thereof. The Company's liability is fully provided by monthly deposits with insurance policies and severance pay funds and by an accrual.

The deposited funds include profits (losses) accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israel's Severance Pay Law or labor agreements. The value of the deposited funds is based on the cash surrendered value of these policies.

The Company's agreements with employees in Israel, joining the Company since May 1, 2009, are in accordance with Section 14 of the Severance Pay Law, 1963, whereas, the Company's contributions for severance pay shall be instead of its severance liability. Upon contribution of the full amount of the employee's monthly salary, and release of the policy to the employee, no additional calculations shall be conducted between the parties regarding the matter of severance pay and no additional payments shall be made by the Company to the employee. Further, the related obligation and amounts deposited on behalf of such obligation are not stated on the balance sheet, as they are legally released from obligation to employees once the deposit amounts have been paid.

The Company also has other liabilities for severance pay in other jurisdictions.

Severance pay expense for 2014, 2013 and 2012 amounted to $13,318, $10,862 and $11,164, respectively.

- F - ~~25 -~~22

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

~~Severance pay expense for 2011, 2010 and 2009 amounted to $ 12,090, $ 8,978 and $ 7,709, respectively.~~

The Company has a 401(K) defined contribution plan covering certain employees in the U.S. All eligible employees may elect to contribute up to 6% of their eligible compensation, but generally not greater than ~~$ 16.5~~$17.5 per year in the years 2014 and 2013 and $16.5 per year in the year 2012, (for certain employees over 50 years of age the maximum contribution is ~~$ 22~~$23 per ~~year)~~year in the years 2014 and 2013 and $22 per year in the year 2012) of their annual compensation to the plan through salary deferrals, subject to IRS limits. The Company matches 50% of employee contributions to the plan up to a limit of 6% of their eligible compensation. In the years ~~2011, 2010~~2014, 2013 and ~~2009,~~2012, the Company recorded an expense for matching contributions in the amount of ~~$ 3,129, $ 2,723~~$4,105, $3,985 and ~~$ 2,330,~~$3,989, respectively.

q.r.

Basic and diluted net earnings per share:

Basic net earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year. Diluted net earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year plus dilutive potential equivalent ordinary shares considered outstanding during the year, in accordance with ASC 260, "Earnings per Share".

The weighted average number of shares related to outstanding anti-dilutive options ~~and restricted shares~~ excluded from the calculations of diluted net earnings per share was ~~1,096,069, 2,086,379~~743,100, 586,367 and ~~3,867,517~~785,821 for the years ~~2011, 2010~~2014, 2013 and ~~2009,~~2012, respectively.

r.s.

Accounting for stock-based compensation:

The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation - Stock Compensation" ("ASC 718"), which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based payment awards made to employees and directors. ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated ~~income statements.~~statement of income.

The Company recognizes compensation expenses for the value of its awards, which have graded vesting, based on the accelerated attribution method over the requisite service period of each of the awards, net of estimated forfeitures. Estimated forfeitures are based on actual historical pre-vesting forfeitures.

- F - ~~26 -~~23

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option-pricing model, which requires a number of ~~assumptions and values restricted stock based on~~assumptions: the ~~market value of the underlying shares at the date of grant. Expected~~expected volatility ~~was calculated~~is based upon actual historical stock price ~~movements. The~~movements; the expected term of options granted is based upon historical experience and represents the period of time that options granted are expected to be ~~outstanding. The~~outstanding; the risk-free interest rate is based on the yield from U.S. Federal Reserve zero-coupon bonds with an equivalent ~~term.~~ term; and the expected dividend rate (an annualized dividend yield) is based on the per share dividend declared by the Company's Board of Directors. For information on the Company's dividend payments, see Note 14e.

The Company ~~has historically not paid dividends and has no foreseeable plans to pay dividends.~~measures the fair value of restricted stock based on the market value of the underlying shares at the date of grant.

s.t.

Fair value of financial instruments:

The Company applies ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"). Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The hierarchy is broken down into three levels based on the inputs as follows:

Level 1 - Valuations based on quoted prices in active markets for identical assets that the Company has 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 inputs that are unobservable and significant to the overall fair value measurement.

- F - ~~27 -~~24

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including, for example, the type of investment, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and the investments are categorized as Level 3.

The Company's 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.~~

~~Foreign~~foreign currency derivative contracts are classified within Level 2 ~~as the valuation inputs are based on quoted prices~~(see Notes 3 and ~~market observable data of similar instruments.~~

~~The following tables present assets and liabilities measured at fair value on a recurring basis at December 31, 2011 and 2010:~~

2011
Fair value measurements using input type
Level 1 Level 2 Level 3 Total

Marketable securities:
Corporate debentures $ - $ 202,834 $ - $ 202,834
U.S. Treasuries - 19,482 - 19,482
U.S. Government agency debentures - 10,748 - 10,748
Israeli Treasury Bills - 125,067 - 125,067

Total marketable securities $ - $ 358,131 $ - $ 358,131

Derivative assets $ - $ 9,587 $ - $ 9,587

Derivative liabilities $ - $ (2,948 ) $ - $ (2,948 )

~~- F - 28 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 2:-~~

~~SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

2010
Fair value measurements using input type
Level 1 Level 2 Level 3 Total

Marketable securities:
Corporate debentures $ - $ 349,327 $ - $ 349,327
U.S. Treasuries - 18,948 - 18,948
U.S. Government agency debentures - 32,985 - 32,985
Israeli Treasury Bills - 152,412 - 152,412

Total marketable securities $ - $ 553,672 $ - $ 553,672

Derivative assets $ - $ 2,423 $ - $ 2,423

Derivative liabilities $ - $ (8,775 ) $ - $ (8,775 )
11).

The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, short-term bank deposits, trade receivables and trade payables, approximate their fair value due to the short-term maturities of such instruments.

t.u.

Legal contingencies:

The Company is currently involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss.

u.v.

Advertising expenses:

Advertising expenses are charged to expense as incurred. Advertising expenses for the years ~~2011, 2010~~2014, 2013 and ~~2009~~2012 were ~~$ 7,887, $ 6,969~~$8,992, $9,771 and ~~$ 5,883,~~$10,214, respectively.

~~- F - 29 -~~

~~NICE SYSTEMS LTD. AND ITS SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~NOTE 2:-~~

~~SIGNIFICANT ACCOUNTING POLICIES (Cont.)~~

~~Derivatives and hedging activities:~~

The Company carries out transactions involving foreign currency exchange derivative financial instruments. The transactions are designed to hedge the Company's exposure in currencies other than the dollar. The Company recognizes derivative instruments as either assets or liabilities and measures those instruments at fair value. If a derivative meets the definition of a cash flow hedge and is so designated, changes in the fair value of the derivative are recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative qualified and designated as a hedge is recognized in earnings. If a derivative does not meet the definition of a hedge, the changes in the fair value are included in earnings.

Treasury shares:

The Company repurchases its ordinary shares from time to time on the open market or in other transactions and holds such shares as treasury shares. The Company presents the cost to repurchase treasury stock as a reduction of ~~shareholders’~~shareholders' equity.

~~Recently issued accounting standards:~~Comprehensive income:

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 update intended to simplify how an entity tests goodwill for impairment. The amendment will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be 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. This accounting standard update will be effective for the Company beginning January 1, 2012. The Company ~~does not expect the adoption of this new guidance to have a material impact on its financial statements.~~

~~In June 2011, the FASB issued ASU 2011-05 Presentation of Comprehensive Income, codified~~accounts for comprehensive income in accordance with ASC No. 220, "Comprehensive Income". Comprehensive income generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders. The ~~guidance requires an entity to present the total of comprehensive income, the components of net income, and the components~~Company determined that its items of other comprehensive income ~~either~~relate to gains and losses on hedging derivative instruments and unrealized gains and losses on available for sale marketable securities and changes 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. In December 2011, the FASB issued ASU 2011-12, deferring the effective date for amendments outlined in ASU 2011-05. The Company is still evaluating whether to present other comprehensive income in a single continuous statement of comprehensive income or in two separate but consecutive statements.

foreign currency translation adjustments.

- F - ~~30 -~~25

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2:-

SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The following tables show the components of accumulated other comprehensive income, net of taxes, as of December 31, 2014 and 2013:

	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	)

	Year ended December 31, 2013
	Unrealized gains (losses) on marketable securities			Unrealized gains (losses) on cash flow hedges			Foreign currency translation adjustment		Total

Beginning balance	$	3,443		$	2,789		$	5,962	$	12,194
Other comprehensive income (loss) before reclassifications		(3,503	)		985			4,906		2,388
Amounts reclassified from accumulated other comprehensive income		-			(2,181	)		-		(2,181	)

Net current-period other comprehensive income (loss)		(3,503	)		(1,196	)		4,906		207
Ending balance	$	(60	)	$	1,593		$	10,868	$	12,401

Recently issued accounting standards:

In May ~~2011,~~2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) which amended the existing FASB ~~issued~~Accounting Standards Codification. This standard establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. ASU ~~2011-04 Amendments~~2014-09 is effective for annual and interim periods beginning after December 15, 2016, with no early adoption permitted. The Company is currently evaluating the adoption method to ~~Achieve Common Fair Value Measurement~~apply and ~~Disclosure Requirements in U.S. GAAP and IFRSs, codified in ASC 820 "Fair Value Measurement". The guidance requires an entity to provide a consistent definition of fair value to ensure~~the impact that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements, andupdate will ~~become effective for the Company beginning January 1, 2012. The Company does not expect the adoption of this new guidance to~~ have ~~a material impact~~ on its consolidated financial ~~statements.~~statements and related disclosures.

F - 26

NICE SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 3:-

~~SHORT TERM~~SHORT-TERM AND ~~LONG TERM~~LONG-TERM INVESTMENTS

Short-term and long-term investments include marketable securities in the amount of ~~$ 358,131~~$312,465 and ~~$ 553,672~~$285,928 as of December 31, ~~2011~~2014 and ~~2010,~~2013, respectively and ~~short term~~short-term bank deposits in the amounts of ~~$ 8~~$0 and ~~$ 2~~$37,680 as of December 31, ~~2011~~2014 and ~~2010,~~2013, respectively.

The following table summarizes amortized costs, gross unrealized gains and losses and estimated fair values of available-for-sale marketable securities as of December 31, ~~2011~~2014 and ~~2010:~~2013:

	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,
	2011		2010		2011		2010		2011		2010			2011		2010		2014		2013		2014		2013		2014		2013		2014		2013

Level 2:
Corporate debentures	$	201,301	$	347,114	$	3,089	$	3,402	$	1,556	$	1,189	��	$	202,834	$	349,327	$	305,046	$	272,431	$	1,326	$	2,545	$	711	$	1,797	$	305,661	$	273,179
U.S. Treasuries		18,302		18,075		1,180		873		-		-			19,482		18,948		7,011		13,331		-		65		207		647		6,804		12,749
U.S. Government agency debentures		10,709		32,996		40		40		1		51			10,748		32,985
Israeli Treasury Bills		124,679		152,451		388		5		-		44			125,067		152,412

	$	354,991	$	550,636	$	4,697	$	4,320	$	1,557	$	1,284		$	358,131	$	553,672	$	312,057	$	285,762	$	1,326	$	2,610	$	918	$	2,444	$	312,465	$	285,928

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

	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	2527
Item 4A	Unresolved Staff Comments	54
Item 5.	Operating and Financial Review and Prospects	5455
Item 6.	Directors, Senior Management and Employees	8076
Item 7.	Major Shareholders and Related Party Transactions	101
Item 8.	Financial Information	~~102~~103
Item 9.	The Offer and Listing	105
Item 10.	Additional Information	107
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	~~128~~129
Item 12.	Description of Securities Other than Equity Securities	~~131~~130
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	132
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	132
Item 15.	Controls and Procedures	132
I~~tem~~Item 16.	[Reserved]
Item 16A.	Audit Committee Financial Expert.	133
Item 16B.	Code of Ethics	133
Item 16C.	Principal Accountant Fees and Services	~~134~~ 133
Item 16D.	Exemptions from the Listing Standards for Audit Committees	~~135~~134
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	135
Item 16F.	Change in Registrant’s Certifying Accountant	136
Item 16G.	Corporate Governance	136
Item 16H.	Mine Safety Disclosure	136
PART III
Item 17.	Financial Statements	~~136~~137
Item 18.	Financial Statements	~~136~~137
Item 19.	Exhibits	~~137~~38
Index to Financial Statements		F-1

Name of Subsidiary	Country of Incorporation or Residence	~~Percentage of Ownership Interest~~

Nice Systems Australia PTY Ltd.	Australia	~~100%~~
NICE Systems Technologies Brasil LTDA	Brazil	~~100%~~
NICE Systems Canada Ltd.	Canada	~~100%~~
Nice Systems China Ltd.	China	~~100%~~
Nice Systems S.A.R.L.	France	~~100%~~
NICE Systems GmbH	Germany	~~100%~~
NICE APAC Ltd.	Hong Kong	~~100%~~
NICE Systems Kft	Hungary	~~100%~~
Nice Interactive Solutions India Private Ltd.	India	~~100%~~
Nice Technologies Ltd.	Ireland	~~100%~~
Actimize Ltd.	Israel	~~100%~~
Nice Japan Ltd.	Japan	~~100%~~
NICE Technologies Mexico S.R.L.	Mexico	~~100%~~
~~CyberTech~~NICE Systems B.V.	Netherlands	~~100%~~
~~IEX Corporation B.V.~~	~~Netherlands~~	~~100%~~
Nice Systems (Singapore) Pte. Ltd.	Singapore	~~100%~~
Nice Switzerland AG	Switzerland	~~100%~~
Actimize UK Limited	United Kingdom	~~100%~~
~~CyberTech~~NICE Systems Technologies UK Limited	United Kingdom	~~100%~~
~~Fortent Limited~~	~~United Kingdom~~	~~100%~~
~~Merced Systems Limited~~	~~United Kingdom~~	~~100%~~
NICE Systems UK Ltd.	United Kingdom	~~100%~~
~~River Projects Limited~~	~~United Kingdom~~	~~100%~~
~~The Fizzback Group Limited~~	~~United Kingdom~~	~~100%~~
Actimize Inc.	United States	~~100%~~
~~Cybertech North Amercica L.L.C.~~	~~United States~~	~~100%~~
~~Fortent Americas Inc.~~	~~United States~~	~~100%~~
~~IEX Corporation~~	~~United States~~	~~100%~~
~~Merced Systems Inc.~~	~~United States~~	~~100%~~
Nice Systems Inc.	United States	~~100%~~
Nice Systems Latin America, Inc.	United States
Nice Systems Technologies Inc.	~~100%~~United States

	Years Ended December 31,
	(U.S. dollars in millions)									Years Ended December 31, (U.S. dollars in millions)
	2010		2011		Dollar Change		Percentage Change			2013		2014		Dollar Change		Percentage Change

Product Revenues	$	325.5	$	355.8	$	30.3		9.3	%	$	377.6	$	388.3	$	10.7		2.8	%
Service Revenues		364.0		438.0		74.0		20.3			571.7		623.3		51.6		9.0
Total Revenues	$	689.5	$	793.8	$	104.3		15.1	%	$	949.3	$	1,011.6	$	62.3		6.6	%

	Years Ended December 31,
	(U.S. dollars in millions)									Years Ended December 31, (U.S. dollars in millions)
	2010		2011		Dollar Change		Percentage Change			2013		2014		Dollar Change			Percentage Change

United States, Canada and Central and South America (“Americas”)	$	429.9	$	499.2	$	69.3		16.1	%	$	596.7	$	665.4	$	68.7			11.5	%
Europe, the Middle East and Africa (“EMEA”)		182.8		196.6		13.8		7.5			223.9		239.4		15.5			6.9
Asia-Pacific (“APAC”)		76.8		98.0		21.2		27.6			128.7		106.8		(21.9	)		(17.0	)
Total Revenues	$	689.5	$	793.8	$	104.3		15.1	%	$	949.3	$	1,011.6	$	62.3			6.6	%

	Year Ended December 31,
	2007			2008			2009			2010			2011
	(U.S. dollars in thousands, except per share data)
OPERATING DATA:
Revenues
Products	$	316,888		$	351,680		$	281,783		$	325, 429		$	355,760
Services		200,486			272,482			301,332			364,022			438,071
Total revenues		517,374			624,162			583,115			689,451			793,831
Cost of revenues
Products		89,373			95,861			88,030			107,190			116,256
Services		116,969			142,885			149,175			161,885			191,049
Total cost of revenues		206,342			238,746			237,205			269,075			307,305
Gross profit		311,032			385,416			345,910			420,376			486,526
Operating expenses:
Research and development, net		59,632			78,445			77,382			97,083			109,127
Selling and marketing		120,592			147,879			141,526			178,407			199,044
General and administrative		85,089			97,378			72,791			76,345			95,650
Amortization of acquired intangible assets		9,175			14,493			16,012			19,489			23,677
In process research and development write-off		3,710			-			-			-			-
Settlement and related expenses		-			9,870			-			-			-
Total operating expenses		278,198			348,065			307,711			371,324			427,498
Operating income		32,834			37,351			38,199			49,052			59,028
Financial income, net		14,824			11,289			7,712			9,135			10,018
Other expenses, net		(24	)		(53	)		(115	)		(154	)		(162	)
Income before taxes on income		47,634			48,587			45,796			58,033			68,884
Taxes on income		10,254			9,480			3,040			9,326			11,621
Net income		37,380			39,107			42,756			48,707			57,263

Basic earnings per share	$	0.69		$	0.65		$	0.70		$	0.78		$	0.91

Weighted average number of shares used in computing basic earnings per share (in thousands)		53,921			60,088			61,395			62,652			62,924

Diluted earnings per share	$	0.67		$	0.64		$	0.68		$	0.76		$	0.89

Weighted average number of shares used in computing diluted earnings per share (in thousands)		55,926			61,268			62,490			64,132			64,241

	At December 31,												At December 31,
	2007		2008		2009		2010		2011				2010		2011		2012		2013		2014

BALANCE SHEET DATA:
Working capital	$	152,883	$	217,511	$	184,460	$	173,909		$	173,543	$	173,909	$	173,543	$	137,635	$	76,425	$	128,190
Total assets		1,192,334		1, 283,015		1,399,677		1,534,418			1,581,836		1,534,418		1,581,836		1,660,945		1,657,058		1,642,091
Shareholders’ equity		903,794		970,822		1,062,754		1,160,760			1,158,644		1,160,760		1,158,644		1,191,088		1,204,796		1,213,456

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1- 3 years		3-5 years		More than 5 years
Operating Leases		113,242		16,676		25,642		20,660		50,264
Unconditional Purchase Obligations		3,137		3,137
Severance Pay*		23,728
Total Contractual Cash Obligations		140,107		19,813		25,642		20,660		50,264
Uncertain Income Tax Positions **		43,435

Name	Age	Position
~~Ron Gutler~~David Kostman(1)(4)(5)	5450	Chairman of the Board of Directors
Joseph Atsmon(1)(3) (5)	6466	Vice-Chairman of the Board of Directors
Rimon Ben-Shaoul(2)(4)	67	~~Director~~
~~Yoseph Dauber(2)(3)~~	7670	Director
Dan Falk(1)(2)(3)(4)(5)(6)	6770	Director
Yocheved Dvir(1)(2)(3)(6)	5962	Director
~~David Kostman~~Yehoshua Ehrlich(4)	4765	Director
~~Zeev Bregman~~Leo Apotheker(4)	5061	~~President and~~ Director
Joe Cowan(2)	66	Director
Barak Eilam	39	Chief Executive Officer
~~Udi Ziv~~Miki Migdal	4654	President, Enterprise Product Group
~~Yaron Tchwella~~Christopher Wooten	5149	Executive Vice President, Surveillance
Yossi Ofek	43	Executive Vice President, Cyber and Intelligence Solutions
Joseph Friscia	60	President, ~~Security Group and Executive Vice President Business Operation~~
~~Amir Orad~~	36	~~President and Chief Executive Officer,~~ NICE-Actimize
Dafna Gruber	4750	Chief Financial Officer
Sarit Sagiv	46	Chief Financial Officer - appointee
Yechiam Cohen	5558	Corporate Vice President, General Counsel and Corporate Secretary
Eran Porat	4952	Corporate Vice President, Finance
Eran Liron	4447	Executive Vice President, Marketing and Corporate Development
Tom Dziersk	51	President, NICE Americas
Benny Einhorn	56	~~Chief Marketing Officer~~
~~Yochai Rozenblat~~	50	~~President and Chief Executive Officer, NICE Americas~~
~~Ad Ketelaars~~	5559	President, NICE EMEA
Raghav Sahgal	4952	President, NICE APAC
Sigal Gillmore	4245	Executive Vice President, Human Resources
Barry Cooper	44	Executive Vice President, Global Services and Cloud

	At December 31,						At December 31,
Category of Activity	2009		2010		2011		2012		2013		2014

Operations		101		122		147		110		110		108
Customer Support		966		1,018		1,204		1,291		1,393		1,343
Sales & Marketing		530		604		677		809		840		811
Research & Development		638		705		728		803		865		890
General & Administrative		361		345		373		387		368		361
Total		2,596		2,794		3,129		3,400		3,576		3,513

Geographic Location
Israel		1,086		1,212		1,200		1,206		1,285		1,256
Americas		942		1,009		1,095		1,298		1,365		1,344
Europe		373		352		564		607		631		607
Asia Pacific		195		221		270		289		295		306
Total		2,596		2,794		3,129		3,400		3,576		3,513

		Ordinary Shares
		High				Low
		NIS		$		NIS		$
Annual
	2007		162.30		41.04		117.50		29.94
	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

Quarterly 2010
First Quarter			129.70		34.66		107.00		28.73
Second Quarter			125.70		33.80		97.20		25.08
Third Quarter			114.50		31.11		97.83		25.19
Fourth Quarter			125.50		35.25		109.50		29.98

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 (through March 28)			148.90		40.08		127.70		34.00

Monthly
September 2011			139.00		37.45		102.80		28.30
October 2011			135.10		37.32		105.30		27.98
November 2011			132.50		35.56		118.00		31.62
December 2011			134.10		35.33		119.10		31.37
January 2012			136.10		36.38		128.80		33.46
February 2012			140.70		37.68		127.70		34.00
March 2012 (through March 28)			148.90		40.08		128.80		34.03

	Functional currencies
	(In U.S. dollars in millions)
	USD			GBP		EUR		CAD		MXN		CHF		AUD		Other currencies
Foreign currencies
USD		-			22.02		6.94		2.30		0.55		0.81		1.84		(0.87	)
GBP		8.58			-		5.18		-		-		-		-		-
EUR		1.28			14.69		-		-		-		-		-		-
CAD		5.18			0.55		-		-		-		-		-		-
AUD		0.64			-		0.69		-		-		-		-		-
MXN		1.68			-		-		-		-		-		-		-
CHF		0.83			-		-		-		-		-		-		-
HKD		(2.70	)		-		-		-		-		-		-		-
ILS		(18.78	)		-		-		-		-		-		-		-
Other currencies		-			-		-		-		-		-		-		0.62

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

Israel		-			7.26			2.94			(26.96	)*		0.49		1.28		(1.84	)		(1.55	)		2.27		-			(0.94	)		(17.05	)
European Union		20.36			(1.56	)		10.21			-			0.28		-		(0.46	)		0.29			-		-			0.27			29.39
Switzerland		(0.70	)		0.35			0.30			-			-		-		-			-			-		-			-			(0.05	)
United States of America		-			-			0.24			-			-		0.58		-			1.56			0.93		(0.32	)		0.25			3.24
Canada		2.20			-			-			-			-		-		-			-			-		-			-			2.20
Hong Kong		0.15			-			(0.43	)		-			-		-		-			-			-		-			0.11			(0.17	)
Japan		-			-			(0.33	)		-			-		-		(0.01	)		-			-		-			-			(0.34	)
Singapore		-			-			(0.18	)		-			-		-		(0.02	)		-			-		-			-			(0.20	)
China		0.20			-			-			-			-		-		-			-			-		-			-			0.20
Australia		1.04			-			-			-			-		-		-			-			-		-			0.02			1.06

		23.25			6.05			12.75			(26.96	)		0.77		1.86		(2.33	)		0.30			3.20		(0.32	)		(0.29	)		18.28

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

Net Exposure		(26.96	)*		23.50		5.94		4.05		(1.69	)		(0.32	)		4.23		0.20		10.05		(0.89	)		(0.33	)		(0.18	)		0.30		0.63		0.29		(0.54	)		18.28

In U.S. dollars in millions:
	New Israel Shekel		Other currencies		Total
less than 1 year		6.22		0.24		6.46
1-3 years		13.72		0.06		13.78
3-5 years		14.00		0.04		14.04
Over 5 years		40.23		-		40.23
Total		74.17		0.34		74.51

	New Israeli Shekels
	Notional Amount		Fair Value
Option contracts to hedge payroll expenses		73.4		(2.92	)
Option contracts to hedge future anticipated payments relating to leasehold improvements		3		(0.028	)
Forward contracts to hedge Israeli Treasury Bills (*)		123.5		9.59

	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		65.3		109.7		123.1		7.0		305.1		65.8		110.2		122.6		7.1		305.7
U.S treasuries		-		-		-		7.0		7.0		-		-		-		6.8		6.8
Total		65.3		109.7		123.1		14.0		312.1		65.8		110.2		122.6		13.9		312.5

Services Rendered	2010 Fees		2011 Fees		2013 Fees		2014 Fees
Audit (1)	$	717,000	$	689,000	$	675,000	$	691,000
Audit-related (2)	$	138,000	$	195,000	$	79,000	$	72,000
Tax (3)	$	832,000	$	576,000	$	469,000	$	399,000
Total	$	1,687,000	$	1,460,000	$	1,223,000	$	1,162,000

(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.

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

February 1 - February 28		N/A		N/A		N/A		100,000,000
March 1 - March 31		62,500		34.62		62,500		97,836,115
April 1 - April 30		156,421		37.31		156,421		92,000,014
May 1 - May 31		220,115		36.34		220,115		84,000,046
June 1 - June 30		435,896		34.31		435,896		69,045,889
July 1 - July 31		137,123		36.80		137,123		64,000,060
August 1 - August 31		618,421		29.94		618,421		45,485,381
September 1 - September 30		1,177,340		30.18		1,177,340		9,958,019
October 1 - October 31		33,245		28.81		33,245		9,000,068
November 1 - November 30		N/A		N/A		N/A		109,000,068
December 1 - December 31		156,500		33.60		156,500		103,741,722
Total		2,997,561		32.11		2,997,561

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

Balance as of January 1, 2011	$	15,875	$	939,064	$	-		$	10,576		$	195,245				$	1,160,760
Assumption of restricted share units and options upon acquisition		-		1,230		-			-			-					1,230
Issuance of shares of ESPP		5		557		-			-			-					562
Exercise of share options		391		25,683		-			-			-					26,074
Stock-based compensation		-		21,159		-			-			-					21,159
Excess tax benefit from share-based payment arrangements		-		372		-			-			-					372
Restricted shares vesting in respect of Actimize acquisition		2		11		-			-			-					13
Treasury shares purchased		-		-		(96,318	)		-			-					(96,318	)
Comprehensive income:
Foreign currency translation adjustments		-		-		-			(6,944	)		-	$	(6,944	)		(6,944	)
Unrealized losses on marketable securities, net		-		-		-			(32	)		-		(32	)		(32	)
Unrealized losses on derivative instruments, net		-		-		-			(5,495	)		-		(5,495	)		(5,495	)
Net income		-		-		-			-			57,263		57,263			57,263

Total comprehensive income													$	44,792
Balance as of December 31, 2011	$	16,273	$	988,076	$	(96,318	)	$	(1,895	)	$	252,508				$	1,158,644

Balance as of January 1, 2010	$	15,492	$	892,139		$	-	$	8,585		$	146,538				$	1,062,754
							-
Issuance of shares of ESPP		4		432			-		-			-					436
Exercise of share options		364		25,409			-		-			-					25,773
Stock-based compensation		-		21,054			-		-			-					21,054
Excess tax shortfall from share-based payment arrangements		-		(18	)		-		-			-					(18	)
Restricted shares vesting in respect of Actimize acquisition		15		48			-		-			-					63
Comprehensive income:
Foreign currency translation adjustments		-		-			-		135			-	$	135			135
Unrealized losses on marketable securities, net		-		-			-		(1,116	)		-		(1,116	)		(1,116	)
Unrealized gains on derivative instruments, net		-		-			-		2,972			-		2,972			2,972
Net income		-		-			-		-			48,707		48,707			48,707

Total comprehensive income													$	50,698
Balance as of December 31, 2010	$	15,875	$	939,064			-	$	10,576		$	195,245				$	1,160,760

Cash	$	736
Trade receivables		4,266
Other receivables and prepaid expenses		1,200
Current deferred tax assets		203
Inventories		981
Long-term deposits		20
Property and equipment		1,433
Other intangible assets		22,710
Goodwill		41,837

Total assets acquired		73,386

Trade payables		(1,370	)
Accrued expenses and other liabilities		(7,971	)
Long-term deferred tax liabilities		(4,609	)

Total liabilities assumed		(13,950	)

Net assets acquired	$	59,436

	Fair value		%

Core technology	$	10,900		20
Customer relationships		8,200		33
Covenant not to compete		1,210		100
Backlog		2,400		100

Total intangible assets	$	22,710

Cash	$	79,675
Options and Restricted Share Units*)		1,230

Total purchase price	$	80,905

Cash	$	687
Trade receivables		3,341
Other receivables and prepaid expenses		1,134
Current deferred tax assets		1,887
Long-term deposits		148
Property and equipment		984
Other intangible assets		46,075
Goodwill		44,157

Total assets acquired		98,413

Trade payables		(1,426	)
Accrued expenses and other liabilities		(5,024	)
Long-term deferred tax liabilities		(11,058	)

Total liabilities assumed		(17,508	)

Net assets acquired	$	80,905

	Fair value		%

Core technology	$	29,834		17
Customer relationships		8,879		20
Covenant not to compete		1,898		50
Brand name		5,464		33

Total intangible assets	$	46,075

	2011
	Fair value measurements using input type
	Level 1		Level 2			Level 3		Total

Marketable securities:
Corporate debentures	$	-	$	202,834		$	-	$	202,834
U.S. Treasuries		-		19,482			-		19,482
U.S. Government agency debentures		-		10,748			-		10,748
Israeli Treasury Bills		-		125,067			-		125,067

Total marketable securities	$	-	$	358,131		$	-	$	358,131

Derivative assets	$	-	$	9,587		$	-	$	9,587

Derivative liabilities	$	-	$	(2,948	)	$	-	$	(2,948	)

	Amortized		Estimated		Amortized		Estimated
	cost		fair value		cost		fair value

Due within one year	$	143,600	$	143,995	$	65,336	$	65,744
Due after one year through five years		211,391		214,136		232,761		232,811
Due after six years through ten years						13,960		13,910

	$	354,991	$	358,131	$	312,057	$	312,465

	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	)

	December 31, 2013
	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	$	119,043	$	(1,718	)	$	7,767	$	(79	)	$	126,810	$	(1,797	)
U.S. treasuries		-		-			6,365		(647	)		6,365		(647	)

	$	119,043	$	(1,718	)	$	14,132	$	(726	)	$	133,175	$	(2,444	)

For the year ended December 31,

2012	$	52,881
2013		43,313
2014		26,947
2015		18,275
2016		10,147
2017 and thereafter		3,995

	$	155,558

For the year ended December 31,

2015			43,094
2016			32,990
2017			26,310
2018			6,971
2019			4,375

			113,740

	Year ended December 31, 2011
	Customer Interactions Solutions			Security Solutions			Financial Crime and Compliance Solutions			Total

As of January 1, 2011	$	214,805		$	52,129		$	260,680		$	527,614

Acquisitions		79,719			6,275			-			85,994
Functional currency translation adjustments		(3,934	)		(426	)		(61	)		(4,421	)

As of December 31, 2011	$	290,590		$	57,978		$	260,619		$	609,187

	Year ended December 31, 2014
	Customer Interactions Solutions			Security Solutions			Financial Crime and Compliance Solutions			Total

As of January 1, 2014	$	380,200		$	58,918		$	268,821		$	707,939

Functional currency translation adjustments		(8,197	)		(3,572	)		(1,392	)		(13,161	)

As of December 31, 2014	$	372,003		$	55,346		$	267,429		$	694,778