PART I

ITEM1. ~~IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS~~

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.~~OFFER STATISTICS AND EXPECTED TIMETABLE~~

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. ~~KEY INFORMATION~~

KEY INFORMATION

SELECTED FINANCIAL DATA

The selected consolidated financial data below is provided under generally accepted accounting principles in the U.S. (U.S. GAAP). You should read the selected consolidated financial data presented in this Item together with Item 5 – Operating and Financial Review and Prospects and with our consolidated financial statements included elsewhere in this annual report.

Our selected consolidated statements of income data for the years ended December 31, ~~2012,~~ 2013, 2014 and ~~2014~~2015, and our selected consolidated balance sheet data as of December 31, ~~2013~~2014 and ~~2014~~2015 have been derived from our consolidated financial statements included elsewhere in this report. The selected consolidated statements of income data for each of the years ended December 31, ~~2010~~2011 and ~~2011~~2012, and the selected consolidated balance sheet data as of December 31, ~~2010,~~ 2011, 2012 and ~~2012~~2013, are derived from our audited consolidated financial statements not included in this report.

Selected Financial Data Under U.S. GAAP:

Consolidated Statements of Income Data

Year Ended December 31,
2014 2013 2012 2011 2010
In USD
In thousands, except per share amounts
Revenues:
Location based services 133,692 126,951 114,565 120,410 108,101
Wireless communications products 48,435 43,216 35,753 39,757 39,724

Total Revenues 182,127 170,167 150,318 160,167 147,825
Cost of Revenues:
  Location based services 46,852 44,850 44,974 49,731 41,272
  Wireless communication products �� 38,142 36,015 29,786 29,758 33,037

Total cost of revenues 84,994 80,865 74,760 79,489 74,309

  Gross profit 97,133 89,302 75,558 80,678 73,516

  Research and development expenses 2,526 2,414 2,066 1,877 1,346
   Selling and marketing expenses 9,264 9,715 8,489 8,543 8,675
  General and administrative expenses 38,617 34,483 33,439 34,984 31,671
  Other expenses, net 856 4,760 1,617 8,691 1,156

  Operating Income 45,870 37,930 29,947 26,583 30,668
  Other income (expenses), net - (166 ) 6,755 (819 ) (14,745 )
Financing income (expenses), net 1,704 238 987 2,100 139

Income before income tax 47,574 38,002 37,689 27,864 16,062
Income tax (14,246 ) (12,447 ) (11,690 ) (5,655 ) (6,286 )
Share in losses of  affiliated companies, net (421 ) (1 ) (39 ) (23 ) (3 )

Net income for the year 32,907 25,554 25,960 22,186 9,773
Less: net income attributable to non-controlling interest (2,478 ) (1,792 ) (1,080 ) (908 ) (1,071 )

Net income attributable to Company stockholders 30,429 23,762 24,880 21,278 8,702

Earning per share
Basic $ 1.45 $ 1.13 $ 1.19 $ 1.01 $ 0.42
Diluted $ 1.45 $ 1.13 $ 1.19 $ 1.01 $ 0.42
Weighted average number of shares outstanding
    Basic 20,968 20,968 20,968 20,968 20,968
    Diluted 20,968 20,968 20,968 20,968 20,968

	Year Ended December 31,
	2015			2014			2013			2012			2011
	In USD
	In thousands, except per share amounts
Revenues:
Location based services		127,683			133,692			126,951			114,565			120,410
Wireless communications products		47,945			48,435			43,216			35,753			39,757

Total Revenues		175,628			182,127			170,167			150,318			160,167
Cost of Revenues:
Location based services		46,823			46,852			44,850			44,974			49,731
Wireless communication products		38,924			38,142			36,015			29,786			29,758

Total cost of revenues		85,747			84,994			80,865			74,760			79,489

Gross profit		89,881			97,133			89,302			75,558			80,678

Research and development expenses		2,401			2,526			2,414			2,066			1,877
Selling and marketing expenses		9,303			9,264			9,715			8,489			8,543
General and administrative expenses		37,801			38,617			34,483			33,439			34,984
Other expenses (income), net		(268	)		856			4,760			1,617			8,691

Operating Income		40,644			45,870			37,930			29,947			26,583
Other income (expenses), net		-			-			(166	)		6,755			(819	)
Financing income, net		1,189			1,704			238			987			2,100

Income before income tax		41,833			47,574			38,002			37,689			27,864
Income tax		(12,822	)		(14,246	)		(12,447	)		(11,690	)		(5,655	)
Share in losses of affiliated companies, net		(2,439	)		(421	)		(1	)		(39	)		(23	)


Net income for the year		26,572			32,907			25,554			25,960			22,186
Less: net income attributable to non-controlling interest		(1,601	)		(2,478	)		(1,792	)		(1,080	)		(908	)

Net income attributable to Company stockholders		24,971			30,429			23,762			24,880			21,278

Earning per share
Basic	$	1.19		$	1.45		$	1.13		$	1.19		$	1.01
Diluted	$	1.19		$	1.45		$	1.13		$	1.19		$	1.01
Weighted average number of shares outstanding
Basic		20,968			20,968			20,968			20,968			20,968
Diluted		20,968			20,968			20,968			20,968			20,968

Consolidated Balance Sheets Data

Year Ended December 31,
2014 2013 2012 2011 2010
In USD
In thousands, except per share amounts

Cash & Cash Equivalent; deposit in escrow (short and long term) and investment in trading marketable securities 40,780 46,679 34,392 40,226 61,279
Working Capital 56,910 57,259 44,145 48,474 48,594
Total Assets 152,337 160,542 147,339 157,457 188,344
Total Liabilities 57,754 65,057 55,332 52,105 73,181
Retained Earnings 49,067 38,831 32,187 43,185 43,689
Stockholders Equity 90,696 90,918 88,027 101,194 110,771
Dividend declared per share 0.93 0.86 0.81 1.23 1.00

~~Other Data:~~

Year Ended December 31,
2014 2013 2012 2011 2010
(unaudited)

Subscribers of our location-based services(1)
817,000 741,000 667,000 623,000 604,000
Average monthly churn rate 3 % 2.9 % 3 % 3.2 % 2.8 %

(1~~) number of subscribers is approximate.~~

	Year Ended December 31,
	2015		2014		2013		2012		2011
	In USD
	In thousands, except per share amounts

Cash & Cash Equivalent; deposit in escrow (short and long term) and investment in trading marketable securities		29,051		40,780		46,679		34,392		40,226
Working Capital		50,124		56,910		57,259		44,145		48,474
Total Assets		142,003		152,337		160,542		147,339		157,457
Total Liabilities		54,182		57,754		65,057		55,332		52,105
Retained Earnings		57,739		49,067		38,831		32,187		43,185
Stockholders Equity		83,698		90,696		90,918		88,027		101,194
Dividend declared per share		0.76		0.93		0.86		0.81		1.23

Other Data:

	Year Ended December 31,
	2015			2014			2013			2012			2011
	(unaudited)

Subscribers of our location-based services(1)		948,000			817,000			741,000			667,000			623,000
Average monthly churn rate		3.3	%		3	%		2.9	%		3	%		3.2	%

(1) number of subscribers are rounded to the nearest thousand.

CAPITALIZATION AND INDEBTEDNESS

Not applicable.

REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

RISK FACTORS

Our business, operating results and financial condition could be seriously harmed due to any of the following risks, among others. If we do not successfully address the risks to which we are subject, we could experience a material adverse effect on our business, results of operations and financial condition and our share price may decline, which may result in a loss of all or part of your investment . We cannot assure you that we will successfully address any of these risks. You should carefully consider the following factors as well as the other information contained and incorporated by reference in this annual report before taking any investment decision with respect to our securities. See “Forward Looking Statements” on page iv above.

RISKS RELATED TO OUR BUSINESS

Failure to maintain our existing relationships or establish new relationships with insurance companies could adversely affect our revenues and growth potential.

Revenues from our stolen vehicle recovery services, which we refer to as SVR services, and automatic vehicle location products, which we refer to as AVL products, are primarily dependent on our relationships with insurance companies. In Israel, insurance companies drive demand for our SVR services and AVL products by encouraging and, in some cases, requiring customers to subscribe to vehicle location services and purchase vehicle location products such as ours. In Brazil and Argentina, insurance companies enter into written agreements to subscribe to our services and purchase or lease our products directly. Our inability to maintain our existing relationships or establish new relationships with insurance companies could adversely affect our revenues and growth potential.

Changes in practices of insurance companies in the markets in which we provide our SVR services and sell our AVL products could adversely affect our revenues and growth potential.

We depend on the practices of insurance companies in the markets in which we provide our SVR services and sell our AVL products. In Israel, insurance companies either mandate the use of SVR services and AVL products, or their equivalent, as a prerequisite for providing insurance coverage to owners of certain medium- and high-end vehicles, or provide insurance premium discounts to encourage vehicle owners to subscribe to services and purchase products such as ours. In Brazil and Argentina, insurance companies mainly lease our AVL products directly and subsequently require their customers to subscribe to our SVR services.

Therefore, we rely on insurance companies’ continued practice of:

n	accepting vehicle location and recovery technology as a preferred security product;

n	requiring or providing a premium discount for using location and recovery services and products;

n	mandating or encouraging use of our SVR services and AVL products, or similar services and products, for vehicles with the same or similar threshold values and for the same or similar required duration of use; and

n	with respect to insurance companies in Brazil and Argentina, deciding to lease SVR services and AVL products from us directly.

If any of these policies or practices change, revenues from sales of our SVR services and AVL products could decline, which could adversely affect our revenues and growth potential.

A reduction in vehicle theft rates may adversely impact demand for our SVR services and AVL products.

Demand for our SVR services and AVL products depends primarily on prevailing or expected vehicle theft rates. Vehicle theft rates may decline as a result of various reasons, such as the availability of improved security systems, implementation of improved or more effective law enforcement measures, or improved economic or political conditions in markets that have high theft rates. If vehicle theft rates in any or all of our existing markets decline, or if insurance companies or our other customers believe that vehicle theft rates have declined or are expected to decline, demand for our SVR services and AVL products may decline.

A decline in sales of new medium and high end cars and commercial vehicles in the markets in which we operate could result in reduced demand for our SVR services and AVL products.

Our SVR services and AVL products are primarily used to protect medium- and high-end cars and commercial vehicles and are often installed before or immediately after their initial sale. Consequently, a reduction in sales of new medium- and high-end vehicles could reduce our addressable market for SVR services and AVL products. New vehicle sales may decline for various reasons, including an increase in new vehicle tariffs, taxes or gas prices. A decline in vehicle production levels or labor disputes affecting the automobile industry in the markets where we operate may also impact the volume of new vehicle sales. A decline in sales of new medium- and high-end vehicles in the markets in which we provide our SVR services or sell our AVL products could result in reduced demand for such services and products.

There is significant competition in the markets in which we offer our services and products and our results of operations could be adversely affected if we fail to compete successfully.

The markets for our services and products are highly competitive. We compete primarily on the basis of the technological innovation, quality and price of our services and products. Our most competitive market is the location-based services market and the related AVL products market, due to the existence of a wide variety of competing services and products and alternative technologies that offer various levels of protection and tracking capabilities, including global positioning systems, or GPS (although we also provide services based on GPS/GPRS technology), satellite- or network-based cellular systems and direction-finding homing technologies. Some of these competing services and products, such as certain GPS-based products, are installed in new cars by vehicle manufacturers prior to their initial sale, which effectively precludes us from competing for such subscribers in the SVR market. Furthermore, providers of competing services or products may extend their offerings to the locations in which we operate or new competitors may enter the location-based services market. Our AVL products also compete with less sophisticated theft protection devices such as standard car alarms, immobilizers, steering wheel locks and homing devices, some of which may be significantly cheaper. Some of these competing products have greater brand recognition than our AVL products, including LoJack Corporation in the United States.

The development of new or improved competitive products, systems or technologies that compete with our wireless communications products may render our products less competitive or obsolete, which could cause a decline in our revenues and profitability.

We are engaged in businesses characterized by rapid technological change and frequent new product developments and enhancements. The number of companies developing and marketing new wireless communications products has expanded considerably in recent years. The development of new or improved products, systems or technologies that compete with our wireless communications products, for both our SVR and fleet management services, may render our products and services less competitive and we may not be able to enhance our technology in a timely manner. In addition to the competition resulting from new products, systems or technologies, our future product enhancements may not adequately meet the requirements of the marketplace and may not achieve the broad market acceptance necessary to generate significant revenues. Any of the foregoing could cause a decline in our revenues and profitability.

The inability of local law enforcement agencies to timely and effectively recover the stolen vehicles we locate could negatively impact customers’ perception of the usefulness of our SVR services and AVL products, adversely affecting our revenues.

Our AVL products identify the location of vehicles in which our products are installed. Following a notification of an unauthorized entry, or if we receive notification of the vehicle’s theft from a subscriber, we notify the relevant law enforcement agency of the location of the subscriber’s vehicle and generally rely on local law enforcement or governmental agencies to recover the stolen vehicle. We cannot control nor predict the response time of the relevant local law enforcement or other governmental agencies responsible for recovering stolen vehicles, nor that the stolen vehicles, once located, will be recovered at all. In the past, some stolen vehicles in which our AVL products were installed were not recovered and the average stolen vehicle recovery time in the markets in which we operate was 20 minutes from the time an unauthorized entry is confirmed or reported to the time the vehicle is recovered. To the extent that the relevant agencies do not effectively and timely respond to our calls and recover stolen vehicles, our recovery rates would likely diminish, which may, in turn, negatively impact customers’ perception of the usefulness of our SVR services and AVL products, adversely affecting our revenues.

The ability to detect, deactivate, disable or otherwise inhibit the effectiveness of our AVL products could adversely affect demand for such products and our revenues.

The effectiveness of our AVL products is dependent, in part, on the inability of unauthorized persons to deactivate or otherwise alter the functioning of our AVL products or the vehicle anti-theft devices that work in conjunction with our AVL products. As sales of our AVL products increase, criminals in the markets in which we operate may become increasingly aware of our AVL products and may develop methods or technologies to detect, deactivate or disable our tracking devices or the vehicle anti-theft devices that work in conjunction with our AVL products. We believe that, as is the case with any product intended to prevent vehicle theft, over time, there may be an increased ability of unauthorized persons to detect, deactivate, disable or otherwise inhibit the effectiveness of our AVL products, although it is difficult to verify this fact. An increase in the ability of unauthorized persons to detect, deactivate, disable or otherwise inhibit the effectiveness of our AVL products could adversely affect demand for our products and our revenues.

We rely on some intellectual property that we license from third parties, the loss of which could preclude us from providing our SVR services or market and sell some of our AVL products, which would adversely affect our revenues.

We license from third parties some of the technology that we need in order to provide our SVR services and market and sell some of our AVL products. In the event that such licenses were to be terminated, or if such licenses were rendered unenforceable or invalid and we would not be able to license similar technology from other parties, it would require us, at a minimum, to obtain rights to a different technology and reconfigure our AVL products accordingly. In addition, some of the licenses we obtained from third parties are non-exclusive, which may enable other entities to obtain identical licenses from such third parties to operate in the places in which we conduct our business resulting in increased competition and could adversely affect our revenues.

We depend on proprietary technology and our failure to protect and enforce our intellectual property rights or our need to defend against infringement claims could result in a significant increase in costs and decline in revenues.

Our business is dependent on the uninterrupted use of proprietary technology, both owned and licensed, from third parties. If we fail to protect, enforce and maintain our intellectual property rights, we may not be able to compete and our business and operating results could be negatively impacted. We seek to protect our intellectual property rights through a combination of patents, trademarks, copyrights, trade secret laws, know-how, confidentiality procedures and licensing arrangements. Even with the intellectual property protection currently in place, we may not be able to protect our technology from misappropriation or infringement and we may lose, or the relevant owners may restrict or lose, our current rights of use of the technology that we license from such owners. Any of our existing intellectual property rights may be invalidated, circumvented, challenged or rendered unenforceable. In addition, the laws of some countries in which we operate or plan to operate, may not protect intellectual property rights to the same extent as the laws of Israel or the United States, increasing the possibility of piracy of our technology and products. It may be necessary for us to litigate in order to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others, which litigation can be time consuming, distracting to management, expensive and difficult to ~~predict..~~predict.

It is possible that we have or will inadvertently violate the intellectual property rights of other parties and those other parties may choose to assert infringement claims against us. If a court were to determine that our technology infringes on third parties’ intellectual property, in addition to exposure to substantial damages, we could be required to expend considerable resources to modify our products, to develop non-infringing technology or to obtain licenses to permit our continued use of the technology that is the subject matter of the litigation.

Our failure to protect and enforce our intellectual property rights, or our need to defend against claims of infringement of intellectual property rights of others or the loss of any such claims, could result in a significant increase in costs and decline in revenues.

Our ability to sell our services and products depends upon the prior receipt and maintenance of various governmental licenses and approvals and our failure to obtain or maintain such licenses and approvals, or third-party use of the same licenses and frequencies, could result in a disruption or curtailment of our operations, a significant increase in costs and a decline in revenues.

We are required to obtain specific licenses and approvals from various governmental authorities in order to conduct our operations. For example, our AVL products use radio frequencies that are licensed and renewed periodically from the Ministry of Communications in Israel and similar agencies worldwide. As we continue to expand into additional markets, we will be required to obtain new permits and approvals from relevant governmental authorities. Furthermore, once our AVL infrastructure is deployed and our AVL end-units are sold to subscribers, a change in radio frequencies would require us to recalibrate all of our antennas and replace or modify all end-units held by subscribers, which would be costly and may result in delays in the provision of our SVR services. In addition, some of the governmental licenses for radio frequencies that we currently use may be preempted by third parties. In Israel, our license is designated as a “joint” license, allowing the government to grant third parties a license to use the same frequencies, and in Brazil our license is designated as a “secondary”, non-exclusive license, which allows the government to grant a third party a primary license to use such frequencies, which third-party use could adversely affect, disrupt or curtail our operations. Our inability to maintain necessary governmental licenses and frequency approvals, or third-party use of or interference with the same licenses or frequencies, could result in a significant increase in costs and decline in revenues.

Our SVR services business model is based on the existence of certain conditions, the loss or lack of which in existing or potential markets could adversely affect our revenues generated in existing markets or our growth potential.

Our SVR services business model and, consequently, our ability to provide our SVR services and sell our AVL products, relies on our ability to successfully identify markets in which:

n	the rate of car theft or consumer concern over vehicle safety is high;

n	satisfactory radio frequencies are available to us that allow us to operate our business in an uninterrupted manner; and

n	insurance companies or owners of cars believe that the value of cars justifies incurring the expense associated with the deployment of SVR services.

The absence of such conditions, our inability to locate markets in which such conditions exist or the loss of any one of the above conditions in markets we currently serve could adversely affect our revenues generated in existing markets or our growth potential.

Some of our agreements restrict our ability to expand into new markets for our SVR services, which could adversely affect our growth potential.

In 2008, we entered into an agreement with Telematics, pursuant to which Ituran and Telematics designated parts of the world as their exclusive territories for selling their AVL products and SVR services using any RF location technology compatible to the RF vehicle location systems. This agreement restricts our ability to expand our business and operations and sell our products and services in certain markets, which could adversely affect our growth potential.

The loss of key personnel could adversely affect our business and prospects for growth.

Our success depends upon the efforts and abilities of key management personnel, including our President and our Co-Chief Executive Officers. Loss of the services of one or more of such key personnel could adversely affect our ability to execute our business plan. In addition, we believe that our future success depends in part upon our ability to attract, retain and motivate qualified personnel necessary for the development of our business. If one or more members of our management team or other key technical personnel become unable or unwilling to continue in their present positions, and if additional key personnel cannot be hired and retained as needed, our business and prospects for growth could be adversely affected.

We rely on third parties to manufacture our wireless communications products, which could affect our ability to provide such products in a timely and cost-effective manner, adversely impacting our revenues and profit margins.

We outsource the manufacturing of ~~most~~a significant part of our wireless communications products to third parties. ~~Furthermore, we~~We use one manufacturer for production of a significant portion of our wireless communications products and we do not maintain significant levels of inventories to support us in the event of an unexpected interruption in its manufacturing process. If our principal manufacturer or any of our other manufacturers is unable to or fails to manufacture our products in a timely manner, we may not be able to secure alternative manufacturing facilities without experiencing an interruption in the supply of our products or an increase in production costs. Any such interruption or increase in production costs could affect our ability to provide our wireless communications products in a timely and cost-effective manner, adversely impacting our revenues and profit margins.

We rely on Telematics Wireless Ltd. (previously owned by us) toand ERM (our subsidiary)_to supply us with various products and services. Each of these suppliers supply us with different type of products and services and act as single supplier of such products and services. Termination of our agreement with Telematics in respect of such products and services could adversely affect our revenues and operations.

Following the sale of our subsidiary, Telematics Wireless Ltd. in 2007 to a third party and the execution of a 10-year supply agreement (with purchase orders to date are until the end of 2018). with Telematics as a result of such sale, we rely on Telematics as a single supplier of products and services. Termination of our relations with Telematics would adversely affect our operations and revenues. Risk from ERM, our other major supplier is significantly smaller due to it being our subsidiary.

We depend on the use of specialized quality assurance testing equipment for the production of our wireless communications products, the loss or unavailability of which could adversely affect our results of operations.

We and our third-party manufacturers use specialized quality assurance testing equipment in the production of our products. The replacement of any such equipment as a result of its failure or loss could result in a disruption of our production process or an increase in costs, which could adversely affect our results of operations.

The adoption of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and could harm our results of operations.

There are no established industry standards in all of the businesses in which we sell our wireless communications products. For example, vehicle location devices may operate by employing various technologies, including network triangulation, GPS, satellite-based or network-based cellular or direction-finding homing systems. The development of industry standards that do not incorporate the technology we use may decrease or eliminate the demand for our services or products and we may not be able to develop new services and products that are in compliance with such new industry standards on a cost-effective basis. If industry standards develop and such standards do not incorporate our wireless communications products and we are unable to effectively adapt to such new standards, such development could harm our results of operations.

Expansion of our operations to new markets involves risks and our failure to manage such risks may delay or preclude our ability to generate anticipated revenues and may impede our overall growth strategy.

We anticipate future growth to be attributable to our business activities in new markets, particularly in developing countries, where we may encounter additional risks and challenges, such as longer payment cycles, potentially adverse tax consequences, potential difficulties in collecting receivables and potential difficulties in enforcing agreements or other rights in foreign legal systems. The challenges and risks of entering a new market may delay or preclude our ability to generate anticipated revenues and may impede our overall growth strategy.

Part of our services rely on GPS/GPRS-based technology owned and controlled by others, the loss, impairment or increased expense of which could negatively impact our immediate and future revenues from, or growth of, our services and adversely affect our results of operations.

Part of our business relies on signals from GPS/GPRS satellites built and maintained by third parties. If GPS/GPRS satellites become unavailable to us, or if the costs associated with using GPS/GPRS technology increase such that it is no longer feasible or cost-effective for us to use such technology, we will not be able to adequately provide our fleet management services. In addition, if one or more GPS/GPRS satellites malfunction, there could be a substantial delay before such satellites are repaired or replaced, if at all. The occurrence of any of the foregoing events could negatively impact our immediate and future revenues from, or growth of, our fleet management services and adversely affect our results of operations.

Material cyber security failure may harm our operations, which rely on use of information technology and wireless transmission.

Our AVL and SVR services, relies on the use of information technology which under a major cyber security breach, could harm our operations. We are using physical services, wireless transmitting stations, GPRS/GPS, and in lesser account cloud computing to provide our services. There are risks associated with storing and transmitting data, which due to cyber security breach may be corrupted, and the store data on remote servers may be destroyed, damaged, seized, or otherwise no longer accessible, which may temporary decrease our ability to deliver AVL and SVR services.

We implemented cyber security controls – which consists of three pillars prevention, detection and response (data recovery in the event of a cyber breach). We perform an ongoing review of our systems and an annual external review of our cyber security controls and their implementation. However, such cyber security controls may not be able to prevent all unexpected weaknesses. In the event of a cyber-attack, we could experience the corruption or loss of data, misappropriation of assets or sensitive information, including customer information, or operational disruption. This could result in response costs and various financial loss, and may subject us to litigation and cause damage to our reputation, for which we may not be covered under our current insurance policies and may lead to substantial loss of revenues.

Due to the already high penetration of SVR services and AVL products in Israel and moderate overall growth of the addressable market in Israel, our prospects for growth in such market may be limited.

Our AVL products are primarily installed in medium- and high-end cars and commercial vehicles. Therefore, our ability to increase demand for our SVR services and revenues from sales of our AVL products is limited by the number of potential vehicles in which our products can be installed in each relevant market. We estimate that our AVL products are installed in a significant portion of the medium- and high-end cars and commercial vehicles in Israel. We anticipate that revenues from sales of our SVR services and AVL products in Israel will not increase significantly due to the already high penetration of SVR services and AVL products in Israel and moderate overall growth of the addressable market in Israel, which could adversely affect our prospects for growth in such markets.

Some of our employees in our subsidiaries in Brazil and Argentina are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude altogether our ability to generate revenues in the markets where such employees are located.

Some of our employees in our subsidiaries in Brazil and Argentina are members of labor unions. If a labor dispute were to develop between us and our unionized employees, such employees could go on strike and we could suffer work stoppage for a significant period of time. A labor dispute can be difficult to resolve and may require us to seek arbitration for resolution, which arbitration can be time consuming, distracting to management, expensive and difficult to predict. The occurrence of a labor dispute with our unionized employees could delay or preclude altogether our ability to generate revenues in the markets where such employees are located.

We are subject to litigation that could result in significant costs to us.

On July 19, 2015, Ituran Location and Control Ltd. (the “Company”) received a purported class action lawsuit which was filed against the Company in the District Court of Central Region in Tel-Aviv on July 13, ~~2010~~2015, by one plaintiff who is a subscriber of the ~~State Revenue Services of São Paulo issued a tax deficiency notice against our subsidiary in Brazil, Ituran Sistemas de Monitoramento Ltda., claiming~~Company, alleging that the ~~vehicle tracking~~Company, which was declared a monopoly under the Israeli Restrictive Trade Practices Law, 1988, unlawfully abused its power as a monopoly and ~~monitoring services provided~~discriminated between its customers. The lawsuit is yet to be approved as a class action. The total amount claimed if the lawsuit is approved as a class action was estimated by the plaintiff to be approximately NIS 300 million (approximately USD 77 million). Based on an opinion of its legal counsels, the Company believes that the lawsuit lacks substantiation, and that the Company has good defense arguments in respect of claims made by the plaintiff and that the chances that the suit will not be approved as a class action lawsuit are higher than it will be approved. Notwithstanding the aforesaid, at this preliminary stage, the Company is unable to assess the lawsuit's chances of success. While we cannot predict the outcome of this case, if we are not successful in defending our ~~subsidiary should~~claim, we could be ~~classified as telecommunication services and therefore~~ subject to ~~the imposition of State Value Added Tax – ICMS, resulting in an imposition of 25% state value added tax on all revenues of~~significant costs, adversely affecting our subsidiary during the period between August 2005 and December 2007. At the time the notice was served to us, the tax deficiency notice was in the amount of R$36,499,984 (approximately US$22.1 million at the time) plus interest in the amount of R$30,282,420 (approximately US$18.2 million at the time) and penalties in the amount of R$66,143,446 (approximately US$40.0 million at the time). On March 2, 2012 the Administrative Court of the State of São Paulo dismissed the State Revenue Services of São Paulo's claims and resolved in our favor. The State of São Paulo filed an administrative appeal to the full bench session at the Administrative Court which has been dismissed and such a decision is non-appealable .

Furthermore, it is noted that the effect of aforesaid decision is limited to the period of August 2005 up to December 2007. It is possible that the State of São Paulo may issue us additional tax deficiency notices regarding the past 5 year period. However, we maintain our position, based among other things on the results of ~~the aforesaid legal proceedings, that if such tax deficiency notices are issued in future, our chances of success in defending its position are overwhelmingly favorable.~~operations.

For additional information on this lawsuit and for information concerning additional litigation proceedings, please refer to Item 8.A – “Consolidated Statements and other Financial Information” under the caption “Material Legal Proceedings” below.

We have not obtained nor applied for several of the permits required for the operation of some of our base sites. To the extent enforcement is sought, the breadth, quality and capacity of our network coverage could be materially affected.

The provision of our SVR services depends upon adequate network coverage for accurate tracking information. In Israel, we have installed 103 base sites that provide complete communications coverage in Israel. Similarly, we have ~~established complete~~ communications coverage in Sao Paulo and Rio, Brazil and Buenos Aires, Argentina. The installation and operation of most of our base sites require building permits from local or regional zoning authorities as well as a number of additional permits from governmental and regulatory authorities.

Currently most of our base sites in Israel and Brazil and some of our base sites in Argentina operate without local building permits or the equivalent. Although relevant authorities in Israel, Brazil and Argentina have not historically enforced penalties for non-compliance with certain permit regulations, following ongoing press coverage and actions by various public interest groups, relevant Israeli and Argentine authorities have begun seeking enforcement of permit regulations, especially with respect to antennas constructed for cellular phone operators. Some possible enforcement measures include the closure or demolition of existing base sites or the imposition of limitation on erection of new base stations. Should these enforcement measures be imposed upon us in Israel or Argentina, the extent, quality and capacity of our network coverage and, as a result, our ability to provide SVR services, may be adversely affected. In Israel we are in process of achieving compliance with the regulation of our base stations, such process can take several years.

Currency fluctuations may result in valuation adjustments in our assets and liabilities and could cause our results of operations to decline.

The valuation of our assets and liabilities, our revenues received and the related expenses incurred are not always denominated in the same currency. This lack of correlation between revenues and expenses exposes us to risks resulting from currency fluctuations. These currency fluctuations could have an adverse effect on our results of ~~operations.~~operations, such currency fluctuations take place in Argentina Brazil and Israel which affects our operation results in these countries. In addition, fluctuations in currencies may result in valuation adjustments in our assets and liabilities which could cause our results of operations to decline.

RISKS RELATED TO OUR OPERATIONS IN ISRAEL

We are headquartered in Israel and therefore our results of operations may be adversely affected by political, economic and military instability in Israel.

Our headquarters and sole research and development facilities are located in Israel and our key employees, officers and directors are residents of Israel. Accordingly, security, political and economic conditions in Israel directly affect our business. Over the past several decades, a number of armed conflicts have taken place between Israel and its Arab neighbors. During July-August 2014 and November 2012, Israel was engaged in an armed conflict with a militant group and political party who control the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militant group and political party. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. Continued or increased hostilities, future armed conflicts, political developments in other states in the region or continued or increased terrorism could make it more difficult for us to conduct our operations in Israel, which could increase our costs and adversely affect our financial results.

Israel has experienced in recent years, unionized general strikes in connection with the legislation of new economic reforms. A prolonged general strike in Israel would affect our ability to provide our wireless communications products that are manufactured in Israel and would negatively impact our operations. Furthermore, there are a number of countries, primarily in the Middle East, that still restrict business with Israel or Israeli companies and as a result our company is precluded from marketing its products in these countries. Restrictive laws or policies directed toward Israel or Israeli businesses could have an adverse affect on our ability to grow our business and our results of operations.

Under Israeli law, we are considered a “monopoly” and therefore subject to certain restrictions that may negatively impact our ability to grow our business in Israel.

We have been declared a monopoly under the Israeli Restrictive Trade Practices Law, 1988 (the "Israeli Antitrust Law"), in the market for the provision of systems for the location of vehicles. Under Israeli law, a monopoly is prohibited from taking certain actions, such as predatory pricing and the provision of loyalty discounts, which prohibitions do not apply to other companies. The Israeli antitrust authority may further declare that we have abused our position in the market. Any such declaration in any suit in which it is claimed that we engage in anti-competitive conduct would serve as prima facie evidence that we are a monopoly or that we have engaged in anti-competitive behavior. Furthermore, we may be ordered to take or refrain from taking certain actions, such as set maximum prices, in order to protect against unfair competition. If we breach certain provisions of the Israeli Antitrust Law, including as a monopoly, the Israeli antitrust authority may also impose on us in an administrative procedure, financial sanctions in an amount of up to the lower of NIS 2424.5 million or 8% of our annual revenues for the last financial year prior to such breach. Restraints on our operations as a result of being considered a “monopoly” in Israel could adversely affect our ability to grow our business in Israel.

It may be difficult and costly to enforce a judgment issued in the United States against us, our executive officers and directors, or to assert United States securities laws claims in Israel or serve process on our officers and directors.

We are incorporated and headquartered in Israel. As a result, our executive officers and directors are non-residents of the United States and a substantial portion of our assets and the assets of these persons are located outside of the United States. Therefore, service of process upon any of these officers or directors may be difficult to effect in the United States. Furthermore, it may be difficult to enforce a judgment issued against us in the United States against us or any of such persons in both United States courts and other courts abroad.

Additionally, there is doubt as to the enforceability of civil liabilities under United States federal securities laws in actions originally instituted in Israel or in actions for the enforcement of a judgment obtained in the United States on the basis of civil liabilities in Israel.

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

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. In addition, our articles of association contain, among other things, provisions that may make it more difficult to acquire our company, such as classified board provisions and certain restrictions on the members of our board pursuant to regulatory requirements of the Israeli Ministry of Communication. Furthermore, Israeli tax considerations may make potential transaction structures involving the acquisition of our company unappealing to us or to some of our shareholders. See Item 10.B. – "Memorandum and Articles of Association" - “Our Corporate Practices under the Israeli Companies Law” under the caption “Approval of Transactions under Israeli law” and Item 10.E. – “Taxation” under the caption “Israeli Tax Considerations” for additional discussion of some anti-takeover effects of Israeli law. These provisions of Israeli law and our articles of association may delay, prevent or otherwise encumber a merger with, or an acquisition of, our company or any of our assets, which could have the effect of delaying or preventing a change in control of our company, even when the terms of such a transaction could be favorable to our shareholders.

The rights and responsibilities of our shareholders will be governed by Israeli law and may differ in some respects from the rights and responsibilities of shareholders under United States law.

We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our memorandum of association, articles of association and by Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical US-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders and to refrain from abusing his, her or its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. Israeli corporate law has undergone extensive revisions in the recent years and, as a result, there is little case law available to assist in understanding the implications of these provisions that govern shareholders’ actions, which may be interpreted to impose additional obligations on holders of our ordinary shares that are typically not imposed on shareholders of US-based corporations.

RISKS RELATED TO OUR ORDINARY SHARES AND THE ECONOMY

Future sales of our ordinary shares could reduce the market price of our ordinary shares.

If we or our shareholders sell substantial amounts of our ordinary shares, either on the Tel Aviv Stock Exchange or the Nasdaq Global Select Market, the market price of our ordinary shares may decline.

The market price of our ordinary shares is subject to fluctuation, which could result in substantial losses for our investors.

The stock market in general, and the market price of our ordinary shares in particular, are subject to fluctuation, and changes in our share price may be unrelated to our operating performance. The market price of our ordinary shares has fluctuated in the past, and we expect it will continue to do so, as a result of a number of factors, including:

n	the gain or loss of significant orders or customers;

n	recruitment or departure of key personnel;

n	the announcement of new products or service enhancements by us or our competitors;

n	quarterly variations in our or our competitors' results of operations;

n	announcements related to litigation;

n	changes in earnings estimates, investors' perceptions, recommendations by securities analysts or our failure to achieve analysts' earning estimates;

n	developments in our industry; and

n	general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors.

These factors and price fluctuations may materially and adversely affect the market price of our ordinary shares and result in substantial losses to our investors.

ASomewhat significant portion of our ordinary shares are held by a small number of existing shareholders and ~~you~~our articles of association provide for a staggered board, which may ~~not agree with some or all~~hinder change of ~~the decisions taken by such shareholders.~~control.

Moked Ituran Ltd., currently beneficially owns approximately 19.44% of our outstanding ordinary shares (not including treasury stock held by us). The amount of shares owned by Moked Ituran Ltd, was significantly reduced on September 16, 2014, by 6.82% (from 26.26%), due to Moked Ituran Ltd Shareholder, F.K. Generators and Equipment Ltd. sale of 1,431,000 of our ordinary shares through Moked Ituran Ltd. For additional information concerning the transaction, see Item 6.A "Shareholders Agreement and Articles of Association of Moked Ituran Ltd.". Following such sale, it is uncertain whether Moked Ituran Ltd. may be considered as a "Controlling Shareholder" as defined under section 268 of the Israeli Company law (for additional information see Item 10.B "Memorandum and Articles of Association" - “Our Corporate Practices under the Israeli Companies Law” under the caption "Shareholders"). Other than applicable regulatory requirements under applicable law, Moked Ituran Ltd., is not prohibited from selling a ~~controlling~~ interest in our company to a third party. This shareholder could exercise significant influence over our operations and business strategy and may use its voting power to influence all matters requiring approval by our shareholders, including the ability to elect or remove directors, to approve or reject mergers or other business combination transactions, the decision to raise additional capital and the amendment ofIn addition, our articles of association ~~that govern the rights attached to our ordinary shares. In addition, this concentration of ownership~~provide for a staggered board which may delay, prevent or deter a change in ~~control, or deprive our shareholders of a possible premium for ordinary shares as part of a sale of our company.~~control. For additional information concerning our ~~major shareholders,~~staggered board, see Item ~~7.A- "Major Shareholders" and Item 6.A. –Directors~~6.A – Directors and Senior ~~Management under the caption "Shareholders Agreement and Articles of Association of Moked Ituran Ltd.".~~Management.

U.S. investors in our company could suffer adverse tax consequences if we are characterized as a passive foreign investment company.

If, for any taxable year, our passive income or our assets that produce passive income exceed levels provided by law, we may be characterized as a passive foreign investment company, which we refer to as PFIC, for US federal income tax purposes. This characterization could result in adverse US tax consequences to our shareholders who are U.S. Holders. See Item 10.E. – “Taxation” under the caption “United States Tax Considerations” below, for more information about which shareholders may qualify as U.S. Holders. If we were classified as a PFIC, a U.S. Holder could be subject to increased tax liability upon the sale or other disposition of our ordinary shares or upon the receipt of amounts treated as “excess distributions.” Under such rules, the excess distribution and any gain would be allocated ratably over the U.S. Holder’s holding period for the ordinary shares and the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income. The amount allocated to each of the other taxable years would be subject to tax at the highest marginal rate in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed on the resulting tax allocated to such other taxable years. In addition, holders of shares in a PFIC may not receive a “step-up” in basis on shares acquired from a decedent. U.S. shareholders should consult with their own U.S. tax advisors with respect to the United States tax consequences of investing in our ordinary shares as well as the specific application of the “excess distribution” and other rules discussed in this paragraph. For a discussion of how we might be characterized as a PFIC and related tax consequences, please see Item 10.E. – “Taxation” under the caption “United States Tax Considerations–Passive foreign investment company considerations”.

Our ordinary shares are traded on more than one market and this may result in price ~~variations.~~variations, which may intensify during the last days prior to the delisting from Tel Aviv Stock Exchange.

Our ordinary shares are traded on the Nasdaq Global Select Market and the Tel Aviv Stock Exchange. Our shares are scheduled to be delisted from the Tel Aviv Stock Exchange on May 25, 2016. Trading in our ordinary shares on these markets takes place in different currencies (dollars on the Nasdaq Global Select Market and NIS on the Tel Aviv Stock Exchange), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the trading price of our ordinary shares on one of these markets could cause a decrease in the trading price of our ordinary shares on the other market. Such phenomena may intensify on the last days prior to our delisting from Tel-Aviv Stock Exchange. For an information on the delisting from Tel-Aviv Stock Exchange, see Item 9.A – Price History of Our Shares.

Securities we issue to fund our operations or in connection with acquisitions could dilute our shareholders ownership or impact the value of our ordinary shares.

We may decide to raise additional funds through a public or private debt or equity financing to fund our operations or finance acquisitions. If we issue additional equity securities, the percentage of ownership of our shareholders will be reduced and the new equity securities may have rights superior to those of our ordinary shares, which may, in turn, adversely affect the value of our ordinary shares.

Global and local economic downturns could reduce the level of consumer spending and available credit within the automobile industry, which could adversely affect demand for our products and services and negatively impact our financial results.

Current and future economic conditions could adversely affect consumer spending in the automobile industry, as such spending is often discretionary and may decline during economic downturns when consumers have less disposable income. Consequently, changes in general economic conditions resulting in a significant decrease in dealer automobile sales or in a tightening of credit in financial markets, such as the 2007 U.S. subprime mortgage crisis and resulting credit crunch, could adversely impact our future revenue and earnings. Such decreases could also affect the financial security of the automobile dealers with whom we do business. The delayed payment from or closure of our larger dealer groups could affect our ability to collect on our receivables. Similar effects could result from local economic downturns in either one of our main markets of operations, i.e. Israel, Brazil and Argentina. Given the volatile nature of the current market disruption, we may not timely anticipate or manage such existing or new risks. Our failure to do so could materially and adversely affect our business, financial condition, results of operations and prospects.

ITEM 4. ~~INFORMATION ON THE COMPANY~~

INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

Our History

We are mainly engaged in the area of location-based services, consisting of stolen vehicle recovery, fleet management services and other tracking services. We also provide wireless communication products used in connection with our location-based services and various other applications. We currently primarily provide our services as well as sell and lease our products in Israel, Brazil, Argentina and the United States.

Ituran was initially incorporated in February 1994 in Israel as a subsidiary of Tadiran Ltd., an Israeli-based designer and manufacturer of telecommunications equipment, software and defense electronic systems, whose original business purpose was to adapt military-grade technologies for the civilian market. In July 1995, Moked Ituran Ltd. purchased us and the assets used in connection with our operations from Tadiran and Tadiran Public Offerings Ltd. The AVL infrastructure and AVL end-units for the operation of our SVR services were originally developed by an independent division of Tadiran Communications and Systems Group. These operations were later transferred to a Tadiran subsidiary, Tadiran Telematics Ltd. In November 1999, we purchased Tadiran Telematics from Tadiran and in 2002, we changed its name to Telematics Wireless.

In May 1998, we completed the initial public offering of our ordinary shares in Israel and our ordinary shares began trading on the Tel-Aviv Stock Exchange. In September 2005, we publicly offered our ordinary shares in the United States and our ordinary shares are currently quoted on both the Tel-Aviv Stock Exchange and on Nasdaq under the symbol “ITRN”. The address of our principal executive office is 3 Hashikma Street, Azour 58001, Israel. Our telephone number is 972-3-557-1333. Our agent for service of process in the United States is Ituran USA Inc.1700 NW 64th ST. SUITE 100 Fort Lauderdale, Florida 33309.

In 2006 we acquired control of E.R.M. Electronic Systems Limited (“~~ERM”~~E.R.M”), a developer, manufacturer, and marketer of innovative vehicle security, tracking, and management GSM based communication solutions for the international market. Since such acquisition, we have been developing our fleet management services and products, which now constitute a material portion of our operations.

In 2007, we purchased the entire issued share capital of Mapa Group from its shareholders for US$9.9 million. In addition, we invested an additional sum of approximately US$3.1 million in Mapa Group, which was used by Mapa Group to repay shareholders’ loans. Mapa Group is a provider of geographic information (GIS) in Israel and owner of geographic information database for navigation in Israel.

On December 31, ~~2007, we completed~~2015, Mapa Internet (one the ~~sale of our subsidiary, Telematics Wireless Ltd.,~~two Mapa Group members) was sold to ST (Infocomm). Pursuant to the sale transaction, we sold our entire shareholdings, constituting 93.93%, of Telematics Wireless to ST (Infocomm), for an enterprise value of US$90 million (following repurchase of our shares in Telematics for the aggregate sum of US$5 million). Pursuant to an adjustment mechanism as detailed in the agreement and following arbitration proceedings with ST, the purchase price was adjusted by US$4.4 Million. For details regarding the recent conclusion of arbitration proceedingsa company not related to ~~the sale~~us, for a total consideration of ~~Telematics to ST (Infocomm), please refer to Item 8.A. – “Consolidated Statements and other Financial Information” under the caption~~ “~~Material Legal Proceedings” below.~~NIS 2.3million (approximately US$600,000).

In January 2008, we entered into a 10 year Frame Product and Service Purchase Agreement with Telematics, pursuant to which the Company and Telematics shall purchase from each other certain products and services as detailed in the agreement for a price and other conditions as detailed in the agreement. In addition, each of Ituran and Telematics undertook toward one another not to compete in each other’s exclusive markets in the area of RF vehicle location and tracking RF technology or similar RF terrestrial location systems and technology. The agreement is for a term of 10 years, following which it shall be renewed automatically for additional consecutive 12 months periods, unless non-renewal notice is provided by one of the parties to the other. Pursuant to the agreement, each of Telematics and Ituran granted the other party a license to use certain technology in connection with the products and services purchased from each other, which license shall survive the termination or expiration of the agreement.

In 2010 we launched a new line of AVL products (IturanSave), which is based on our SMART products and tailored to be installed in medium-end vehicles, a market which was not previously targeted by us, offering our customers an affordable tracking device solution. This new line of products led to an increase in our sales since then.

~~On April 9, 2012, we entered into an~~In September 2015 one of the largest global road vehicles manufacturers ("Manufacturer") has signed a four year agreement (which may be extended by the manufacturer for additional 2 years) with ~~General Motors Brazil (“GMB”)~~us to offer Ituran's services in the Brazilian market. Ituran’s services includes: vehicle security, personal safety, remote diagnostic, Web and App application and Concierge. The service was launched through a ~~Brazilian company controlled~~joint venture with Road Truck, called IRT (Ituran Road Track), which is 50% owned by ~~us. According~~Ituran. The agreement has a long-term timeframe. Ituran expects some investment and expense requirements during the initial period of contract, resulting in a loss at the joint venture in an amount which is not significant to Ituran. During 2017, the ~~agreement, GMB will offer its customers immobilization, location and Telematics~~joint venture expected to become profitable, making the entire project increasingly accretive to Ituran. On October 2015 the joint venture started to deliver the services for the ~~Chevrolet range of vehicles it sells in Brazil through Ituran’s Brazilian company. The sale and~~first Car Model. As the ~~installation~~date of the ~~anti-theft device will not be carried out~~report, a few thousands clients are using the services these days. The equipment for the agreement is provided by ~~us. For the purposes of this agreement, we incorporated~~another joint venture through a ~~new Brazilian~~ subsidiary ~~Ituran~~in Uruguay which is also a joint venture with Road Truck, ~~Ltda. in~~ which ~~we own~~is held 50% ~~of the issued share capital. As of the date hereof, this Brazilian subsidiary has not yet commenced operations.~~by Ituran, called RTI (Road Truck Ituran).

In December 2013 we invested $1.4 million in Bringg delivery technologies Ltd. (formerly Overvyoo Ltd.), an Israeli start-up company developing solutions for the management of mobile/field workforce. According to the agreement with Bringg, we have invested by January 2015 an additional amount of $1.1 million and we now hold 40.8% of its share capital. On July 2015 we invested another US$ 2 million, and during November 2015, additional investors which are not related to Ituran, invested in Bringg. Following such investments, we now hold 41.18% of Bringg’s share capital.

Capital Expenditures and Divestitures

We had capital expenditures of ~~$15.2~~$18.7 million in 2015, $15 million in 2014, ~~$14~~and $14.2 million in ~~2013 and $10 million in 2012.~~2013. We have financed our capital expenditures with cash generated from our operations.

Our capital expenditures in 2015, 2014 ~~2013~~ and ~~2012~~2013 consisted primarily of acquisition of operational equipment for $13.3 million, $11.2 million ~~$10.2 million~~ and ~~$5.6~~$10.2 million, respectively.

~~We did~~On December 31, 2015, Mapa Internet (one of the two Mapa Group members) was sold to a company not related to us, for a total consideration of NIS 2.3 million (approximately US$600,000). For additional information concerning the sale of Mapa Internet, see Item 4.A- " History and Development of the Company" under the caption "Our history". Except the sale of Mapa Internet, we didn’t have any material capital divestitures during the last three fiscal years and until the date of this report.

BUSINESS OVERVIEW

Overview

We believe we are a leading provider of location-based services, consisting predominantly of stolen vehicle recovery, fleet management services and other tracking services. We also provide wireless communications products used in connection with our location-based services. We currently primarily provide our services and sell and lease our products in Israel, Brazil, Argentina and the United States. We utilize technologies that enable precise and secure high-speed data transmission and analysis. Some of the technology underlying our products was originally developed for the Israeli Defense Forces in order to locate downed pilots.

We generate our revenues from subscription fees paid for our location-based services and from the sale and lease of our wireless communications products.

We describe below the principal markets in which we compete. For a breakdown of total revenues by category of activity and geographic market for each of the last three financial years, please see Item 5.A - Operating Results under the caption "Revenues".

Location-Based Services

In ~~2014, 73.4%~~2015, 73% of our revenues were attributable to our location-based services. As of December 31, ~~2014,~~2015, we primarily provided our services in Israel, Brazil, Argentina and the United States to approximately ~~340,000, 298,000, 158,000~~381,000, 368,000, 169,000 and ~~21,000subscribers,~~30,000 subscribers, respectively.

Stolen vehicle recovery services

Our stolen vehicle recovery and tracking services, which we refer to as SVR services, enable us to locate, track and recover stolen vehicles for our subscribers. Our customers include both individual vehicle owners who subscribe to our services directly and insurance companies that either require their customers to install a security system or offer their customers financial incentives to subscribe to SVR services such as ours. In certain countries, insurance companies directly subscribe to our SVR services and purchase automatic vehicle location products supporting these SVR services from us on behalf of their customers.

Fleet management services

Our fleet management services enable corporate and individual customers to track and manage their vehicles in real time. Our services improve appointment scheduling, route management and fleet usage tracking, thereby increasing efficiency and reducing operating costs for our customers. We market and sell our services to a broad range of vehicle fleet operators and individual vehicle owners in different geographic locations and industries. As of December 31, ~~2014,~~2015, we provided our services to approximately ~~122,000~~140,000 end-users through ~~28,000~~31,000 corporate customers in Israel, Brazil, Argentina and the United States. We are currently exploring collaborations with local entities in other regions of the world for the marketing of our fleet management services and products in such regions. By the date of this report, we have a total of 3,000 end users which are spread in various countries (except Israel, Brazil, US and Argentina).

Value-added services

The personal locator services that we offer allow customers to protect valuable merchandise and equipment. We currently provide personal locator services in Israel, Brazil and Argentina and, as of December 31, ~~2014,~~2015, we ~~had approximately 8,000~~few thousands subscribers to this service. In addition, through a call center, we provide 24-hour on-demand navigation guidance, information and assistance to our customers. Such services include the provision of traffic reports, help with directions and information on the location gas stations, car repair shops, post offices, hospitals and other facilities. We ~~provide~~offer our concierge services to many of our subscribers in Israel, Argentina and Brazil. ~~As of December 31, 2014, we had approximately 160,000 subscribers to our concierge service.~~

Wireless Communications Products

In ~~2014, 26.6%~~2015, 27% of our revenues were attributable to the sale of our wireless communications products. Our wireless communications products employ short- and medium-range communication between two-way wireless modems and are used for various applications, including automatic vehicle location, which we refer to as AVL.

Our AVL products enable the location and tracking of vehicles, as well as assets and persons, and are used by us primarily to provide SVR and fleet management services to our customers. Each subscriber to our SVR services has our AVL end-unit installed in his or her vehicle. Subscribers to services for locating equipment and merchandise will use our SMART products. As part of our expansion into additional markets, in 2006 we acquired control of E.R.M. Electronic Systems Limited (“ERM”), a developer, manufacturer, and marketer of innovative vehicle security, tracking, and management GSM based communication solutions for the international market. Subscribers to our fleet management services use ~~ERM~~E.R.M hardware and our proprietary ~~software~~software.

Industry Overview

While we believe that the statistical data, industry data forecasts and market research discussed below are reliable, we have not independently verified the data, and we do not make any representation as to the accuracy of the information.

(a) Location-based services

Stolen vehicle recovery

The demand for vehicle security products and services is driven by vehicle theft rates, increasing security awareness among customers and insurance companies’ efforts to reduce incidents of loss. In addition, in Brazil, which is one of our primary markets, a regulation was adopted pursuant to which new vehicles (cars, motorcycles, trucks etc.), manufactured in Brazil or imported into the country may only be sold when equipped with a blocking (immobilizing) and GPS location system or tracking system (such as our products). However ~~the implementation date of~~such regulation was repeatedly postponed and in our understanding this regulation ~~was delayed to June 31, 2016. This regulation may not enter~~will be changed completely in ~~force on such date and may be subject to further delays, to amendments~~the future or ~~to cancelation.~~entirely cancelled. In some of our markets, demand for SVR services has been enhanced by incidents of carjacking and car-related kidnappings that have increased consumers’ perceived crime risk. Additionally, theft of trucks carrying valuable or hazardous cargo (e.g., microchips and chemicals) represents a threat to commercial, industrial, public and personal safety and security.

A wide range of vehicle security products, with varying degrees of sophistication and pricing, are available to vehicle owners today. These products can be divided roughly into two categories:

Traditional products, such as locks, alarms and traditional immobilizers. These devices are limited in their effectiveness as most can be disarmed easily and typically require the driver to activate the device upon leaving the vehicle. Also, unmonitored alarms that set off sirens are routinely ignored by people as the incidence of false alarms has been historically high. Furthermore, these products can only help in preventing theft and not in recovering the vehicle once it is stolen.

More sophisticated products that include some form of remote monitoring and communication. This category can be further separated into devices that simply provide information on the general direction of the vehicle and those that enable the location, tracking and recovery of the vehicle in real time.

AVL technology is typically used to report stolen vehicles to police, provide real-time location and tracking information and immobilize the vehicle if necessary. The application of AVL technology has proven to be effective in increasing the recovery rates of stolen vehicles. As a result, many insurance companies in countries such as Israel, Brazil and Argentina either offer discounts between 10% and 20% on insurance premiums for vehicles equipped with AVL systems or require customers to install such AVL systems in vehicles above a pre-determined value.

Fleet management

The market for fleet management services ranges from very large fleets of thousands of vehicles to very small fleets of five vehicles or less, with smaller fleets constituting a significant portion of the market given the large number of companies that maintain a fleet today. Fleet management services allow fleet operators and individuals to locate, monitor and communicate with their vehicles and employees in the field in real time. This helps them to better track loads, predict arrival times, schedule customer appointments, reduce fuel usage and manage vehicles’ maintenance schedules. By increasing efficiency and reducing costs, fleet management can provide a quantifiable return on investment for fleet operators, as well as improve customer satisfaction. In addition, fleet management services can enhance driver security and can notify the fleet operator if a vehicle leaves a prescribed geographic region, reducing theft-related liabilities.

A principal factor supporting fleet management industry growth is the presence of millions of vehicles that are in commercial use but which are not yet equipped with fleet management systems.

(b) Wireless communications products

Automatic vehicle location

AVL is one of the many possible applications for wireless location technology and is an umbrella term used for communication equipment and services that facilitate wireless tracking of vehicles, as well as assets and persons.

Typical AVL applications include:

Security	Transportation	Telecommunication services	Government

Vehicle tracking	Fleet management	Maintenance vehicle tracking	Government vehicle tracking
Driver Behavior and Accident Notification	Parcel tracking
Personal tracking	Public transit
Asset tracking

Currently, the main underlying technologies available for wireless location and tracking in the AVL industry are terrestrial network triangulation, GPS (in combination with wireless communication), network-based cellular communication and radio frequency-based homing.

n	Terrestrial network triangulation uses the wireless signals transmitted by an end-unit in the vehicle and received by a network of land-based wireless antennas (base stations) installed in the relevant coverage region in order to determine the precise location of the transmitter.

n	GPS-based systems utilize specially designed GPS devices in the vehicle that receive data from three or more satellites in order to determine the location of the device. Once located, GPS-based systems require a cellular or another wireless network to communicate with a remote control center.

Network-based cellular systems utilize signals between the wireless device and the cellular operator’s network of land-based antennas in order to triangulate the location of the relevant device. These systems require two-way communication between the device and antennas and, therefore, both a transmitter and receiver need to be installed in the vehicle.

n	RF-based homing systems utilize direction-finding technology based on a tracking signal transmitted by the end-unit in the vehicle, which is activated by a unique radio signal from the tracking unit once the vehicle is reported stolen.

Our Services and Products

Location-based services

Stolen vehicle recovery

Our stolen vehicle recovery system is based on three main components: an AVL end-unit that is installed in the vehicle, a network of base stations and a 24-hour manned control center. Once the control center receives indication of an unauthorized entry into a vehicle equipped with our AVL end-unit, our operators decide whether it is a false alarm or an actual unauthorized entry. If it is determined to be an unauthorized entry, or if a notification of the vehicle’s theft is received directly from the vehicle operator, our operators transmit a signal that activates the transmitter installed in the vehicle. We then pinpoint the location of the transmitter with terrestrial network triangulation technology or GPRS technology and notify the relevant law enforcement agency. In Israel, Brazil and Argentina, we also maintain private enforcement units, which work together with local police to recover the vehicle. In addition, we have the capability to immobilize vehicles remotely from our control centers.

Fleet management

We offer our customers the ability to use a comprehensive application for fleet management both by using an Internet site and workstations. Our system allows our customers 24-hour access to information on their fleets through our active control center and we are able to tailor our system to our customers' specific needs.

Our solutions allow our subscribers to effectively manage and control their fleet, and thereby to reduce their operating costs, optimize work hours and appointment scheduling and improve their services and operations. Our system includes the following features:

the ability to locate the fleet's vehicles;

continuous data communication with the fleet's vehicles;

real-time vehicle status indicators: speed, distance driven, direction of travel, driver name, motion start/stop, engine start/stop, speeding, diagnostic alerts, driver behavior and more;

recording of determined events and analysis of data over time to improve driving and vehicle use;

remote monitoring and processing of data, such as temperature control in refrigerated or chilled compartments, time stamp, tire pressure and heat and other complementary data;

connection to standard organization systems;

accident notification;

driver's behavior; and

task management optimization.

Value-added services

Locator services. Our services allow consumers to protect valuable merchandise and equipment. We provide our locator services in Israel, Brazil and Argentina.

Concierge services. Through a call center, we provide 24-hour on-demand navigation guidance, information and assistance to our customers. Such services include the provision of traffic reports, help with directions and information on the location of gas stations, car repair shops, post offices, hospitals and other facilities. We provide our concierge services to subscribers mainly in Israel.

Wireless communications products

Our wireless communications products are used for various applications in the AVL markets and primarily in connection with our location-based services described above.

Our AVL products enable the location and tracking of vehicles, as well as assets or persons, and are primarily used by us in providing our SVR and fleet management services. Each subscriber to our SVR services has one of our end-units installed in his or her vehicle. Subscribers to services for locating persons or valuables will use our SMART products. Our key wireless communications products for AVL applications include:

n	Base Site: a radio receiver, which includes a processor and a data computation unit to collect and send data to and from transponders and send that data to control centers as part of the terrestrial infrastructure of the location system;

n	Control Center: a center consisting of software used to collect data from various base sites, conduct location calculations and transmit location data to various customers and law enforcement agencies;

n	GPS/GPRS-based products: navigation and tracking devices installed in vehicles; and

n	SMART: a portable transmitter installed in vehicles (including motorcycles) that sends a signal to the base site, enabling the location of vehicles, equipment or an individual;

Geographical Information

The following table lists the key services and products that we currently sell or lease in different regions of the world:

Country	Services offered	Products sold
Israel	SVR	AVL
	Fleet Management
	Value-added services
Brazil	SVR	AVL
	Fleet Management
	Value-added services
Argentina	SVR	AVL
	Fleet Management
United States	SVR	AVL
	Fleet Management
	Value-added services Asset protection to Auto Lenders

In each of the above countries we maintain a control center, which is operated 24 hours a day, 365 days a year. The following is a short description of key operating statistics about our location-based services in the countries in which we operate:

Israel: We commenced operations in Israel in 1995 and we had approximately ~~340,000~~381,000 subscribers as of December 31, ~~2014.~~2015. We maintain ~~103base~~103 base stations in Israel, which provide complete coverage within the country. We also operate throughout Israel in providing fleet management services through GPS/GPRS based products and services.

Brazil: We commenced operations in Brazil in 2000 and we had approximately ~~298,000~~368,000 subscribers as of December 31, ~~2014.~~2015. We currently provide RF based products and services only in the metropolitan areas of Sao Paulo, Campinas, Americans and Rio de Janeiro, where we maintain ~~137~~140 base stations; however we operate throughout Brazil in providing GPS/GPRS based products and services.

Argentina: We commenced operations in Argentina in 2002 and we had approximately ~~158,000~~169,000 subscribers as of December 31, ~~2014.~~2015. We currently provide RF based products and services only in the metropolitan area of Buenos Aires, where we maintain 43 base sites; however, we also operate throughout Argentina in providing GPS/GPRS based products and services for fleet management.

n	United States: We commenced operations in the United States in 2000. We provide GPS/GPRS products and services throughout the United States. As of December 31, ~~2014,~~2015, we had approximately ~~21,000~~30,000 subscribers for our location-based services in the United States.

Customers, Marketing and Sales

We market and sell our products and services to a broad range of customers that vary in size, geographic location and industry. In ~~2012,~~ 2013, 2014 and ~~2014~~2015 no single customer or group of related customers comprised more than 10% of our total annual revenues.

Our selling and marketing objective is to achieve broad market penetration through targeted marketing and sales activities. As of December 31, ~~2014,~~2015, our selling and marketing team consisted of ~~127~~125 employees.

(A) Location-based services

Stolen vehicle recovery

Our marketing and sales efforts are principally focused on five target groups: insurance companies and agents, car manufacturers, dealers and importers, cooperative sales channels (mostly vehicle fleet operators and owners) and private subscribers.

We maintain marketing and sales departments in each geographical market in which we operate. Each department is responsible for maintaining our relationships with our principal target groups. These responsibilities also include advertising and branding, sales promotions and sweepstakes.

In Israel, Brazil and Argentina, we focus our marketing efforts on insurance companies and private customers; while in Brazil, our primary focus has shifted to the retail market during recent years. In the United States, we believe that insurance companies do not constitute a material influence in the marketing of SVR services or AVL products. Most of our sales in the United States are made through car dealerships and dealers for new or used cars. Our customers in the SVR market include insurance companies as well as individual vehicle owners. As of December 31, ~~2014,~~2015, we had a total of approximately ~~817,000~~948,000 subscribers for our SVR services.

Fleet management

Vehicle fleet management systems are primarily marketed through vehicle fleets' departments, which form a part of our regional marketing departments. We conduct in-depth research to identify companies that will gain efficiency and cost savings through the implementation of our products and services, and conduct targeted marketing campaigns to these companies. In addition, we participate in professional conventions and advertise in professional publications and journals designed for our target customers. Our customers in the fleet management market include small-, mid- and large-size enterprises and individuals. As of December 31, ~~2014,~~2015, we provided our services to approximately ~~122,000~~140,000 end users through ~~28,000~~31,000 corporate customers and individuals in Israel, Brazil, Argentina and the United States. We are currently exploring collaborations with local entities in other regions of the world for the marketing of our fleet management services and products in such regions.

~~Value-added services~~

~~Our concierge services~~ By the date of this report, we have a total of 3,000 end users which are ~~provided to existing SVR customers. As of December 31, 2014, we had approximately 160,000 subscribers to our concierge service~~spread in various countries (except Israel, ~~Argentina~~Brazil, US and ~~Brazil and approximately 8,000 of our SMART devices were installed in valuable merchandise and equipment.~~Argentina).

Value-added services

Our concierge services are provided to existing SVR customers. A few thousands SMART devices were installed in valuable merchandise and equipment.

(B) Wireless communications products

Our AVL end-units are primarily used by us in providing our location-based services, including fleet management and value-added services, in Israel, Brazil, Argentina and the United States.

Competition

We face strong competition for our services and products in each market in which we operate. We compete primarily on technology edge, functionality, ease of use, quality, price, service availability, geographic coverage, track record of recovery rates and response times and financial strength.

(A) Location-based services

We compete with a variety of companies in each of our markets. The three major technologies utilized by our competitors are GPS/cellular, network-based cellular and radio frequency-based homing systems. In addition, new competitors utilizing other technologies may continue to enter the market.

Stolen vehicle recovery

n	Israel. Our primary competitors in Israel are ~~Eden Telecom Ltd. (Pointer)~~Pointer and Skylock Ltd.

n	Brazil. Brazil is a highly fragmented market with many companies selling competing products and services (including immobilizers and other less-sophisticated vehicle security systems). Our main competitors in Brazil are Sascar, ~~LoJack Corporation~~Zatix and ~~Car System.~~AutoTrack.

n	Argentina. Argentina is also a highly fragmented market with many companies selling competing products and services (including immobilizers and other less-sophisticated vehicle security systems). Our main competitors in Argentina are LoJack Corporation and Megatrans S.A..

United States. In the United States, there are several major companies offering various theft protection and recovery products that compete with our product and service offerings, including LoJack Corporation, OnStar Corporation, ~~Sky Link Corporation,~~ Spireon (which also includes SysLocate and GoldStar), PassTime, Guide Point, Sky Patrol, Sky Guard, I-Metrik SVR and Position Plus.

We believe that we are a leading provider of location-based services in Israel, as we are deemed a monopoly in this field; however, we are unable to provide specific market share information in the markets of our operations for various reasons, including the broad range of services and products that compete in these markets, the non-existence of trade publications with respect to the products and services we offer in such markets and the lack of meaningful or accurate market research or data available to us.

Fleet Management

The vehicle fleet management market is highly fragmented with many corporations offering location products and services. Our major competitors in Israel are Pointer, ISR, Traffilog and Skylock; our major competitors in the United States are GPS Insight, Trimble, Network Fleet, Street Eagle, FleetMatics, Navtrack, Teletrac, Trim Track, FleetBoss, PassTime and Spireon; our major competitors in Brazil are Sascar, ~~Onixsat, Autotrac~~Zatix and ~~Omnilink;~~AutoTrack; and our major competitors in Argentina are LoJack Corporation, Megatrans SA., G4S, Sitrac S.A., American Tracer, Ubicar S.A. and Sky Cop.

(B) Wireless communications products

Our AVL system for automatic vehicle location is based on terrestrial network triangulation technology and primarily competes with companies that use one of three main technologies: GPS/GPRS (in combination with wireless communication), network-based cellular communication and radio frequency-based homing.

Although AVL products based on GPS, network-based cellular and homing technologies do not require the construction of a separate infrastructure of base stations as with terrestrial network triangulation systems such as ours, such solutions have certain drawbacks. GPS receivers require line of sight to at least three satellites, which reduces their effectiveness in areas where the satellite signals are subject to interference and “noise” (such as urban areas, buildings or parking garages, forests and other enclosed or underground spaces). GPS and network-based cellular systems are also prone to jamming since the tracking signal receivers are located in the vehicle and can be easily tampered with. In addition, the satellites utilized by GPS devices are managed by the United States Department of Defense and can be subject to forced temporary outages. The main disadvantage of homing systems is that they provide only the general direction and not the precise location of the end-unit. In addition, homing systems require that the vehicle be reported stolen before the tracking signal can be activated, which may result in a delay between vehicle theft and recovery.

Terrestrial network triangulation systems have succeeded in overcoming some of the challenges faced by systems based on other technologies. Terrestrial network triangulation technology does not require line of sight and the signals are not easily interrupted in densely populated or obstructed areas. Also, the signals are transmitted from the end-unit in the vehicle to a network of base stations. Therefore, in order to jam the system, receivers in each individual base station within range of the end-unit would have to be jammed, which is difficult to accomplish. Additionally, since the primary application of terrestrial network triangulation systems in the AVL industry is vehicle location and not continuous two-way communication, short bursts of data are sufficient for tracking purposes, which enable the network of base stations to be deployed at a much lower density in the coverage area than traditional network-based cellular base stations. Terrestrial network triangulation systems are capable of determining the precise location, and not just the general direction, of a vehicle at any moment in time. Furthermore, when connected with the existing theft protection system in the vehicle, terrestrial network triangulation systems automatically alert the control center when a vehicle is stolen and do not require that the vehicle be reported stolen, which can potentially reduce stolen vehicle recovery times to a few minutes. The main disadvantage of terrestrial network triangulation systems is the necessity to deploy a physical infrastructure, including the construction, development and deployment of a network of base stations and a control center and the need to address the various financial, legal and practical issues associated with such deployment. Any such deployment entails an investment of a sizable amount of money prior to the receipt of any revenues.

Since our AVL end-units are primarily used by us in providing our location-based services, the information provided above concerning our competition in this market is applicable to the competition in the wireless communications products' market as well.

Manufacturing Operations and Suppliers

Our wireless communications products are manufactured and assembled by a limited number of manufacturers in Israel (including our subsidiary ~~ERM)~~E.R.M). We engage with our manufacturers on a full turn-key basis, where we supply detailed production files and materials list and receive a final product that we sell directly to our clients. Other than our dependency on Telematics, as described in Item 3,D, “Risk Factors” above, we do not depend on a single manufacturer for the production of our products. Our main manufacturers and assemblers are Telematics and E.R.M Electronic Systems Limited (our subsidiary). For further details of our agreement with Telematics concerning the supply of products and services see Item 4.A – History and Development of our Company under the caption “Our History” above.

Our quality assurance and testing operations are performed by our manufacturers at their facilities, while using our quality assurance and testing equipment and in accordance with the test procedures designated by us. We monitor quality with respect to key stages of the production process, including the selection of components and subassembly suppliers, warehouse procedures, assembly of goods, final testing, packaging and shipping. We are ISO 9001 certified. We believe that our quality assurance procedures have been instrumental in achieving the high degree of reliability of our products.

Several components and subassemblies included in our products are presently obtainable from a single source or a limited group of suppliers and subcontractors. We maintain strong relationships with our manufacturers and suppliers to ensure that we receive an adequate supply of products, components and raw materials at favorable prices and to access their latest technologies and product specifications.

Proprietary Rights

We seek to protect our intellectual property through patents, trademarks, contractual rights, trade secrets, know-how, technical measures and confidentiality, non-disclosure and assignment of inventions agreements and other appropriate protective measures to protect our proprietary rights in the primary markets in which we operate. The continued use of some licenses granted by third parties to use their intellectual property is material to our business. Please refer to Item 3.D – Risk Factors, under the caption "We rely on some intellectual property that we license from third parties, the loss of which could preclude us from providing our SVR services or market and sell some of our AVL products, which would adversely affect our revenues" above.

We typically enter into non-disclosure and confidentiality agreements with our employees and consultants. We also seek these protective agreements from some of our suppliers and subcontractors who have access to sensitive information regarding our intellectual property. These agreements provide that confidential information developed or made known during the course of a relationship with us is to be kept confidential and not disclosed to third parties, except in specific circumstances.

Our stolen vehicle recovery system is based on three main components: (i) an AVL end-unit that is installed in the vehicle, (ii) (for RF technology based AVL units) a network of base stations that relay information between the vehicle location units and the control center, certain components of which were developed by third parties and are currently licensed to us and (iii) a 24-hour manned control center consisting of software used to manage communications and the exchange of information among the hardware components of the AVL system, certain components of which were developed by third parties and licensed to us. For details concerning the non-exclusive license granted by Telematics to us in respect of the RF technology incorporated in some of our products, please refer to Item 4.A. – History and Development of our Company under the caption “Our History” above.

~~“Ituran”,~~“Ituran”and “Mr. Big”~~, “Mapa”~~ and the related logos are our trademarks, which have been registered in Israel. "Mapa" trademark and its related logos where sold as part of the sale of Mapa to an unrelated party to us. For additional information concerning the sale of Mapa Internet , see Item 4.A- " History and Development of the Company" under the caption "Our history". This report also refers to brand names, trademarks, service marks and trade names of other companies and organizations, each of which is the property of its respective holder.

Regulatory Environment

In order to provide our SVR services in the locations where we currently operate, we need to obtain four primary types of licenses and permits: (i) for our products utilizing the RF technology - a license that allows us to use designated frequencies for broadcasting, transmission or reception of signals and information and to provide telecommunication services to our customers, (ii) for our products utilizing the RF technology - a building permit, which permits us to erect our base sites and transmit therefrom, (iii) product specific licenses (commonly known as type approvals), which enable us to use the equipment necessary for our services, and (iv) a general commerce license, which allows us to offer our services to the public.

The telecommunication services and frequency license and general commerce licenses we require are granted by the applicable national agency regulating communications in the markets in which we operate, specifically, the Ministry of Communication, in Israel, Anatel – Agencia Nacional de Telecomunicatoes, in Brazil, ~~the Comision Nacional~~Ministerio de Comunicaciones, in Argentina , and the Federal Communications Commission, in the United States. The product specific licenses we require are granted in Israel by the Ministry of Communication, in Brazil by IBRACE (the Instituto Brasileiro de Certificatao de Productos para Telecominicatoes), in Argentina by the ~~National Institute of Industrial Technology of Argentina~~Autoridad Federal de Tecnologias de la Información y las Comunicaciones and in the United States by the Federal Communications Commission.

In Brazil, the general commerce licenses, such as the city permits, are granted by the local municipalities and other specific entities, depending on the licenses required.

Our frequency licenses in all of the locations where we operate are “secondary” or “joint”, which means that the government may grant another person or persons, typically a cellular operator, a primary license to the same frequencies and, to the extent our operations interfere with the operations of the other person, we would have to modify our operations to accommodate the joint use of the frequencies. All of these licenses are also subject to revocation, alteration or limitation by the respective authority granting them. While any events that would cause us to change frequencies or to modify our operations could have a material adverse effect on us, we do not believe that this is a likely event in any of the locations where we provide our SVR services.

Our frequency license in Israel was renewed for a term of five (5) years until July 31, 2017. Our frequency licenses in Brazil expire in 2019. Except in Brazil, where a request for a new license may have to be filed upon expiration of the license in 2019, we have options to extend all of our frequency licenses for periods ranging from three- to ten-years. In Argentina,the SECOM (Secretary of Communication), on July 15, 1999, granted us a license to provide services and the authorization to use frequencies. These authorizations do not have any expired date.

In Israel and Brazil, like our competitors and most cellular operators, we are not in compliance with all relevant laws and regulations in connection with the erection of transmission antennas (our base sites). As of the date hereof, most of our base sites in Israel and Brazil are operating without local building permits. Currently, there is heightened awareness of this issue in Israel, particularly in connection with base sites of cellular providers, and possible sanctions could include fines and even the closure or demolition of these base sites. In Brazil, Brazilian authorities enforce permit requirements and impose penalties for non-compliance with such requirements. However, we do not believe this is likely. Obtaining such required permits may involve additional fees as well as payments to the Land Administration Authority.

In Israel the required permits and approvals for the erection of the base sites include:

n	erection and operating permits from the Israeli Ministry of the Environment;

n	permits from the Israeli Civil Aviation Authority, in certain cases;

n	permits from the Israeli Defense Forces;

n	approval from Israel's Land Administration and/or from Civil Administration in the Territories, which usually also involves payment for the land use rights; and

n	building permits from local or regional zoning authorities in Israel and Brazil.

We are continuously in the process of obtaining the relevant permits required for the construction of our base sites in Israel, however, to date, we have been issued only 2829 of these permits (13 of them have expired). With respect to the general permit from Israel’s Land Administration, in 2005 we entered into an agreement with the Israel’s Land Administration, pursuant to which the general permit has been issued to us against an annual consideration based on the date of approval of our base sites. The agreement had expired on December 31, 2010. In the event that the Israel Land Administration claims consideration for the erection of the base sites without a permit, we may be subject to penalties and payment of annual consideration for the years of use of those base sites.

In Brazil, very few providers of wireless telecommunications services obtain the required permits for the erection of transmission antennas due to the nature of the approval process. Currently we do not have such permits (except Anatel permits). In Brazil, we try to minimize our risk by locating most of our equipment in sub-leased sites which are already used by other telecommunication service providers, such as cellular operators. In Brazil the required permits for the erection of our base sites include:

n	a permit from Anatel (National Agency for Telecommunication)

n	a permit from IBAMA (Environment national agency) and/or state EPAs

n	Municipal permits

n	a permit from the fire department.

n	and a permit from COMAR (Aviation authorities)

ANATEL permits are required only for sites where we have transmission equipment and we have obtained all the permits required with this agency. Special IBAMA permits need to be obtained only for ground sites which are located in certain preservation areas. We have few sites of this kind, most of them are collocated sites where we pay for the right of use and permits are undertaken by the landowner. Fire Department permits are required only for equipment rooms and we have not applied for any as of this date. COMAR permits are needed only for a very few of our sites, most of which are collocated.

We have been declared a monopoly under the Israeli Restrictive Trade Practices Law, 1988, in the provision of systems for the location of vehicles in Israel. This law prohibits a monopoly from abusing its market position in a manner that might reduce competition in the market or negatively affect the public. For instance, a monopoly is prohibited from engaging in predatory pricing and providing loyalty discounts, which prohibitions do not apply to other companies. The law empowers the Commissioner of Restrictive Trade Practices to instruct a monopoly abusing its market power to perform certain acts or to refrain from taking certain acts in order to prevent the abuse. Additionally, any declaration by the Israeli antitrust authority that a monopoly has abused its position in the market may serve in any suit in which it is claimed that such a monopoly engages in anti-competitive conduct, as prima facie evidence that it has engaged in anti-competitive behavior. Our declaration as a monopoly in the market of “provision of systems for the location of vehicles in Israel” was not accompanied with any instructions or special restrictions beyond the provisions of the Restrictive Trade Practices Law. Although we may be ordered to take or refrain from taking certain actions, to date we have not been subject to such restrictions.

ORGANIZATIONAL STRUCTURE

We were initially incorporated as a subsidiary of Tadiran, an Israeli-based designer and manufacturer of telecommunications equipment, software and defense electronic systems, whose original business purpose was to adapt military-grade technologies for the civilian market. In July 1995, Moked Ituran Ltd. purchased our company and the assets used in connection with its operations from Tadiran and Tadiran Public Offerings Ltd. The AVL infrastructure and AVL end-units for the operation of our SVR services were originally developed by an independent division of Tadiran Communications and Systems Group. These operations were later transferred to a Tadiran subsidiary, Tadiran Telematics Ltd. In November 1999, we purchased Tadiran Telematics from Tadiran and in 2002, we changed its name to Telematics Wireless. In December 2007 we sold our subsidiary ~~Telematics – for further information please refer to Item 4.A. – “History and Development of the Company” under the caption “Our History” above.~~Telematics.

List of Significant Subsidiaries

Name of Subsidiary	Country of Incorporation	Proportion of Ownership Interest

Ituran USA Holdings Inc.	USA		100	%
Ituran USA Inc.	USA		88.5	%*
Ituran de Argentina S.A.	Argentina		100	%
Ituran Sistemas de Monitoramento Ltda.	Brazil		98	%**
Ituran Instalacoes Ltda.	Brazil		98	%
Teleran Holding Ltda.	Brazil		99.99	%
Ituran servicos Ltda.	Brazil		98	%
~~Ituran Road Truck Ltda.~~	~~Brazil~~		50	%
E.R.M. Electronic Systems Limited	Israel		51	%
~~Mapa Internet Ltd.~~	~~Israel~~		~~100~~	%
Mapa Mapping & Publishing Ltd.	Israel		100	%

* 88.5% of the shares are held by Ituran U.S.A. Holding Inc., which is our wholly owned subsidiary; and the remaining shares are held by employees of Ituran USA Inc.

** we indirectly hold 98% of the ~~shares (out of which one share is being held by Mr. Avner Kurz, the President of Teleran Holding Ltda.)~~

*** we indirectly hold 98% of the shares.

PROPERTY, PLANTS AND EQUIPMENT

As of the date of this report, and other than an office building of 8 floors in the area of approximately 5,356 sqm (57,651 square feet), which was purchased by our subsidiary Ituran Sistemas de Monitoramento Ltda (Ituran Brazil) in Sao Paulo, Brazil, and was later, on December 3, 2014 sold to us, we do not own any real estate.

Other than the property in Brazil, all of our offices, headquarters, control centers and facilities are leased in accordance with our specific needs in the areas in which we operate. Additionally, we lease space for our base sites, in order to operate the reception and transmission stations of the system, in each area in which we provide our SVR services.

In ~~2014~~2015 we leased an aggregate of approximately ~~43,153~~48,763 square feet of office space in Azour and Holon, Israel. In ~~2014,~~2015, the annual lease payments for these facilities were approximately ~~$684,000.~~$683,000. The initial term of the primary lease (in Azour) expired on March 31, 2013; and we renewed the lease until 2020. These premises include our executive offices and the administrative and operational centers for our operations as well as our customer service, value-added services and technical support centers for the Israeli market.

In Buenos Aires, Argentina, we lease approximately 8,793 square feet of office space for approximately $ ~~83,470~~93,392 annually, approximately 720 square feet for our control center for approximately $ ~~6,841~~7,487 annually, approximately 5,253 square feet for our installation center for approximately $ ~~84,122~~82,141 annually, approximately 2,121 square feet for our warehouse for approximately ~~$14,877~~$ 14,422 annually, and approximately 862 square feet for our third warehouse for approximately ~~$8,425~~$ 5,017 annually.

We lease approximately 7,460 square feet for our offices and control center in Florida for a monthly rate of ~~$9,636. This~~$ 12,900 USD. As of December 31, 2015, the lease ~~commenced in October 2014 and is expected~~was on a month by month basis. We plan to ~~end in September 2015. We are planning on extending our~~extend the lease for an additional 12period of 60 months ~~commencing October 2015.~~and to assume additional 1,800 square feet (on top of current 7,460 square feet).

In ~~2014,~~2015, we leased approximately ~~1050~~682 Sq. m ~~(11,020~~7,341 square feet) of office space and warehouse in Brazil for approximately $133,000 annually.

We believe that our facilities are suitable and adequate for our operations as currently conducted. In the event that additional facilities will be required, we believe that we could obtain such facilities at commercially reasonable rates.

The size of our base station sites varies from approximately 11 to 44 square feet. In Israel, we have 103 base stations and we rent most base station sites independently for a monthly rate ranging from $200 to $2,000 per site depending on the location, size and other factors; for certain sites we do not pay any rent. The typical duration of a lease agreement for our base stations in Israel is five years and we generally have a right to renew the term of the lease agreements for a period ranging between two and five years. In Brazil, we have ~~137~~140 base station sites, of which 23 sites are leased from the same entity under a 15 years-contract,(commencing from 2012) for a monthly rate ranging from $500 to ~~$3,400~~$1,750 per site . The remaining ~~114~~117 sites are leased independently for an annual rate ranging from $200 to ~~$800~~$550 depending on the location, size and other factors, and the typical duration for these leases is five years. In Argentina, we have 43 base station sites, all of which are leased from ~~three~~six entities for a monthly rate ranging from $300 to ~~$1,250~~$1,300 per site. The duration of the lease ranges from one to two years.

We do not believe that we have a legal retirement obligation associated with the operating leases for our base sites pursuant to the relevant accounting standards, since we do not own any real property. However, we are obligated pursuant to certain of the operating leases for our base sites, mainly for base sites in Israel, Brazil and Argentina, to restore facilities or remove equipment at the end of the lease term. Since the restoration is limited to any construction or property installed on the property, which in our case is only the installed antennas, we do not believe that these obligations, individually or in the aggregate, will result in us incurring a material expense.

ITEM 4.A. ~~UNRESOLVED STAFF COMMENTS~~

UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 5: ~~OPERATING AND FINANCIAL REVIEW AND PROSPECTS~~

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OPERATING RESULTS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this report.

Introduction

We believe we are a leading provider of location-based services, consisting predominantly of stolen vehicle recovery, which we refer to as SVR, and tracking services. We also provide wireless communications products used in connection with our SVR services and for various other applications. We currently provide our services and sell and lease our products in Israel, Brazil, Argentina and the United States.

Our operations consist of two segments: location-based services and wireless communication products.

Our location-based services segment consists of our SVR, fleet management and value-added services. We currently operate stolen vehicle recovery services throughout Israel, in Brazil ~~Buenos Aires,~~(Buenos Aires) Argentina and in the United States.

Our wireless communications products segment consists of our short- and medium-range two-way wireless communications products that are used for various applications, including AVL. We sell our AVL end-units to customers that subscribe to our SVR services.

Outlook

We have historically experienced significant growth in the markets in which we provide our location-based services. These markets are generally characterized by high car theft rates and insurance companies that are seeking solutions to limit their actual losses resulting from car theft, and hence the Brazilian market continues to represent growth potential for our location-based services. The growth in subscribers within our location-based services segment also has a direct impact on the sale or lease of our AVL products, as they are an integral component of our location-based services and are installed in each subscriber’s vehicle. In Israel, ~~improvements~~ in recent years the ~~economy in 2010 have led to~~market experience an increased car sales which positively ~~affected~~affect our sales as compared with previous years.

As of December 31, ~~2014,~~2015, we had approximately ~~298,000~~368,000 subscribers in Brazil. We estimate that the total addressable market in Brazil several million vehicles, and therefore we have a significant opportunity to grow our subscriber base and increase sales of our AVL products.

We expect growth over the next 12 months in our location-based services segment to be driven by increased demand for our services in Brazil and in Israel, as a result of our strong operating results and our customers' increased familiarity with and confidence in our services; additional insurance companies who could seek to establish relationships with us; increased direct sales of SVR services to individual subscribers in Brazil who, due to prevailing high insurance costs, are self-insured and represent an additional market opportunity for our SVR services and AVL products; and increased sales of our fleet management systems and services. In connection with such potential markets and additional growth opportunities, we constantly look to enhance our brand recognition through continuous advertising efforts.

Our services and products, including our line of AVL products, which is based on our SMART and GPRS products and tailored for vehicles which are considered medium to high end vehicles, have contributed to an increase in our customer base and sales in Israel, and we expect it to continue to contribute to such increase.

Please refer to Item 3.D. – Risk Factors above in respect of factors that could negatively impact our business.

Geographical breakdown

Location-based services' subscriber base

The following table sets forth the geographic breakdown of subscribers to our location-based services as of the dates indicated:

	As of December 31,						As of December 31,
	2014		2013		2012		2015		2014		2013
Israel		340,000		310,000		276,000		381,000		340,000		310,000
Brazil		298,000		262,000		238,000		368,000		298,000		262,000
Argentina		158,000		145,000		131,000		169,000		158,000		145,000
United States		21,000		24,000		22,000		30,000		21,000		24,000

Total(1)		817,000		741,000		667,000		948,000		817,000		741,000

(1)

All numbers provided are rounded, and therefore totals may be slightly different than the results obtained by adding the numbers provided.

Revenues

The following table sets forth the geographic breakdown of our revenues for each of our business segments for the relevant periods indicated.

	Year ended December 31,												Year ended December 31,
	2014				2013				2012				2015				2014				2013
	In USD, in Millions												In USD, in Millions
	Location based services		Wireless communications products		Location based services		Wireless communications products		Location based services		Wireless communications products		Location based services		Wireless communications products		Location based services		Wireless communications products		Location based services		Wireless communications products

Israel		56		33.5		51.5		31.8		45.2		25.4		54.4		34.2		56		33.5		51.5		31.8
Brazil		63.6		2.9		60.3		3.2		55.4		2.8		56.1		2.3		63.6		2.9		60.3		3.2
Argentina		12.5		1.3		13.6		1.6		12.3		1.1		15.9		1.4		12.5		1.3		13.6		1.6
United States		1.6		6		1.6		3.3		1.7		3.2		1.3		6.5		1.6		6		1.6		3.3
Others		-		4.7		-		3.3		-		3.2		-		3.5		-		4.7		-		3.3
Total(1)	$	133.7	$	48.4	$	127.0	$	43.2	$	114.6	$	35.7		127.7		47.9		133.7		48.4		127.0		43.2

(1) We attribute revenues to countries based on the location of the customer.)

~~We attribute revenues to countries based on the location of the customer.~~

Location-based services segment

We generate revenues from sales and leases of our SVR, fleet management and value-added services. A majority of our revenues represent subscription fees paid to us by our customers, predominately subscribers in Israel, Brazil and the United States, and insurance companies in Brazil and Argentina. We recognize revenues from subscription fees on a monthly basis. Our customers are free to terminate their subscription at any time. In the absence of such termination, the subscription term continues automatically. We also generate subscription fees from our fleet management services. Assuming no additional growth in our subscriber base and based on our historical average churn rates of ~~2.5%~~3% per month in this segment, we can anticipate that at least 90% of our subscription fees generated in a prior quarter will recur in the following quarter.

Wireless communications products segment

We generate revenues from the sale of our AVL products to customers in Israel, Brazil, Argentina, and the United States. We currently sell or lease our AVL end-units in each of the above regions. Growth in our subscriber base is the principal driver for the sale of our AVL products. We recognize revenues from sales of our wireless communications products upon delivery.

Cost of revenues

Location-based services segment

The cost of revenues in our location-based services segment consists primarily of staffing, maintenance and operation of our control centers and base stations, costs associated with our staff and costs incurred for private enforcement, licenses, permits and royalties, as well as communication costs and costs due to depreciation of leased products and installation fees. Cost of revenues for sales of our fleet management services also includes payments to a third party who markets our services.

Wireless communications products segment

The cost of revenues in our wireless communications products segment consists primarily of production costs of our third-party manufacturers and costs associated with installation fees.

Operating expenses

Research and development

Our research and development expenses consist of salaries, costs of materials and other overhead expenses, primarily in connection with the design and development of our wireless communications products. We expense all of our research and development costs as incurred.

Selling and marketing

Our selling and marketing expenses consist primarily of advertising, salaries, commissions and other employee expenses related to our selling and marketing team and promotional and public relations expenses.

General and administrative

Our general and administrative expenses consist primarily of salaries, bonuses, accounting and other general corporate expenses.

Operating Income

Location-based services segment

Operating income in our location-based services segment is primarily affected by increases in our subscriber base and our ability to increase the resulting revenues without a commensurate increase in our corresponding costs.

Wireless communications products segment

Operating income in our wireless communications products segment is primarily affected by our ability to increase sales of our AVL products.

Financing expenses (income), net

Financing expenses (income), net, include, inter alia, short- and long-term interest expenses, financial commissions, and gains and losses from currency fluctuations from the conversion of monetary balance sheet items denominated in currencies other than the functional currency of each entity in the group, gains in respect of marketable securities and interest related tax positions.

Taxes on income

Income earned from our services and product sales is subject to tax in the country in which we provide our services or from which we sell our products.

Critical Accounting Policies and Estimates

Our critical accounting policies are more fully described in Note 1 to our consolidated financial statements appearing elsewhere in this report. However, certain of our accounting policies require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on a periodic basis. We base our estimates on historical experience, industry trends, authoritative pronouncements and various other assumptions that we believe to be reasonable under the circumstances. Such assumptions and estimates are subject to an inherent degree of uncertainty.

The following are our critical accounting policies and the significant judgments and estimates affecting the application of those policies in our consolidated financial statements. See Note 1 to our consolidated financial statements included elsewhere in this report.

Revenue recognition

Revenues are recognized when delivery has occurred and, where applicable, after installation has been completed, there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured and no further obligations exist. In cases where delivery has occurred but the required installation has not been performed, we do not recognize the revenues until the installation is completed.

Revenues are recognized as follows:

n1.

Revenues from sales ~~of wireless communications product~~ are recognized when title and risk of loss of the product pass to the customer (usually upon delivery).

n2.

We apply the provisions of ASC Topic 605-25, "Revenue Recognition - Multiple-Element Arrangements", as amended. ASC Topic 605-25 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. For such arrangements, each element of the contract is accounted for as a separate unit when it provides the customer value on a stand-alone basis and if an arrangement includes a right of return relative to a delivered item, delivery or performance of the undelivered item or items is considered probable and substantially in the control of the Company. According to ASC 605-25, as amended, when neither "vendor specific objective evidence" of selling price, nor third party price exists, we are required to develop a best estimate of the selling price of the deliverables and the entire arrangement consideration is allocated to the deliverables based on the relative selling prices.

Revenues from SVR services subscription fees and from installation services, ~~which have been determined not~~sold to ~~have value on the stand-alone basis to the~~ customers within a single contractually binding arrangement were accounted for revenue recognition purposes as a single unit of accounting in accordance with ASC Topic 605-25, ~~"Multiple Elements Arrangements~~"since the installation services element was determined not to have a value on a stand-alone basis to the customer. Accordingly, the entire contract fee for the two deliverables is recognized ratably on a straight-line basis over the subscription period.

Amounts earned by our Brazilian subsidiary earns commissions for arranging a bundle transaction of SVR services subscription and installation services together with insurance services to be supplied by a third party insurance company, such commissions are recognized ratably on a straight-line basis over the subscription ~~period.~~period, since the amount allocated to the company, as an agent, is contingent upon the delivery of the SVR services. As the insurance company is the primary obligor of the insurance component, the company recognizes only the net amounts as revenues, after deduction of amounts related to the insurance component.

n4.

Deferred revenues ~~which~~ include unearned amounts received from customers (mostly for the provision of installation and subscription services) but not yet recognized as revenues. Such deferred revenues are recognized ~~and~~as described in ~~the above paragraph.~~paragraph 2, above.

n5.

Extended warranty

Revenues from extended warranty which are provided for a monthly fee and are sold separately are recognized over the duration of the warranty ~~period.~~periods.

Accounting for income taxes

~~As part of the process of preparing our consolidated financial statements we are required to estimate our~~We account for income taxes in ~~each~~accordance with ASC Topic 740-10, "Income Taxes". According to this guidance, deferred income taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the ~~jurisdictions~~financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the tax rates expected to be in ~~which we operate. This process requires us to estimate our actual current tax exposure and make an assessment~~effect at the time when these differences reverse. Valuation allowances in respect of ~~temporary differences resulting from differing treatment of items, for tax and accounting purposes. These differences result in~~the deferred tax assets ~~and liabilities, which~~ are ~~included within our consolidated balance sheet. We must then assess~~provided for if, based upon the ~~likelihood~~weight of available evidence, it is more likely than not that ~~our~~all or a portion of the deferred income tax assets will not be ~~recovered from future taxable income and, to the extent we believe~~realized.

US GAAP provides that recovery is not likely (i.e., less than "more likely than not"), we establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax ~~provision~~effects from an uncertain tax position can be recognized in the consolidated statement of income. Significant management judgment is required in determining our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. In the event that we generate taxable income in the jurisdictions in which we operate and in which we have net operating loss carry-forwards, we may be required to adjust our valuation allowance.

~~We follow the provisions of ASC Topic 740-10, "Income Taxes" which clarify the accounting for uncertainty in tax positions. ASC Topic 740-10 requires that we recognize in our~~ financial statements only if the ~~impact~~position is "more-likely-than-not" to be sustained were to be challenged by a taxing authority. The assessment of a tax position ~~if that position will more likely than not be sustained upon examination,~~is based solely on the technical merits of the position, without regard the likelihood that the tax position may be challenged. If an uncertain tax position meets the "more-likely-than-not" threshold, the largest amount of tax benefit that is greater than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded.

We recognize interest as interest expenses (among financing expenses) and penalties, if any, related to unrecognized tax benefits ~~within the~~in its provision for income tax.

Goodwill and other Intangible Assets Impairment Test

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business ~~combination is deemed to have indefinite life~~combinations accounted for in accordance with the "purchase method" and is ~~not~~allocated to bereporting units at acquisition. Goodwill is not amortized but rather tested for impairment at least annually in accordance with the provisions of ASC Topic 350, "Intangibles - Goodwill and Other". We perform goodwill annual impairment test for ~~impairment.~~ the reporting units at December 31 of each year, or more often if indicators of impairment are present.

As required by ASC Topic 350, ~~as amended by ASU No. 2011-08, “Testing for Impairment”,~~ we ~~are required to~~ choose either to perform a qualitative assessment ~~wheatear~~whether the two-step goodwill impairment test is necessary or ~~to proceed~~proceeds directly to the two-step goodwill impairment test. Such determination is made by us for each reporting unit on a stand-alone basis. The qualitative assessment includes various factors such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, ~~earning~~earnings multiples, gross margin and cash flows from operating activities and other relevant factors.

When we choose to perform a qualitative assessment and ~~determine~~determines that it is more likely than not ~~(a more~~(more than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, then we proceed to the two-step goodwill impairment test. If the we determine ~~otherwise,~~Otherwise, no further evaluation is necessary.

When we decide or ~~are~~we required to perform the ~~two step~~two-step goodwill impairment test, ~~we implement the following process: firstly,~~ we compare the fair value of ~~each~~the reporting unit to its carrying value ("step 1"). If the fair value of the reporting unit exceeds the carrying value of the reporting unit net assets (including the goodwill allocated to such reporting unit), goodwill is considered not to be impaired, and no further testing is required. If the carrying value exceeds the fair value of the reporting unit, then the implied fair value of goodwill is determined by subtracting the fair value of all the identifiable net assets from the fair value of the reporting unit. An impairment loss is recorded for the excess, if any, of the carrying value of the goodwill allocated to the reporting unit over its implied fair value ("step 2").

There are a number of generally accepted methods used for valuing a reporting unit:

The ‘income approach’ ~~which~~ utilizes discounted forecasted cash flows, the ‘Market – ~~approach',~~approach which ~~utilizes~~utilize pricing multiples of business entities with publicly traded securities whose business and financial risks are comparable to those of the reporting unit being valued and the ~~'Asset~~‘Asset - based approach’, which establishes a value based on the cost of reproducing or replacing the asset being valued.

These methods described may be used alone or in combination with one another.

~~As required by ASC Topic 820, "Fair Value Measurements", we~~We apply ~~assumptions~~assumption that market participants would consider in determining the fair value of each reporting ~~unit.~~ unit and the fair value of the identifiable assets and liabilities of the reporting units, as applicable.

We perform ~~the annual goodwill impairment test~~a qualitative assessment for ~~our~~two reporting unit at December 31 of each year, or more often if indicators of impairment are present. Fair value is determined using valuation methodology that is considered appropriate under the circumstances (in connection with the assessmentunits as of December 31, 2015 and 2014, and concluded that the qualitative assessment did not result in a more likely than not indication of impairment, and therefore no further impairment testing was required, with respect to such units.

For other reporting units (two in 2014, one in 2015), operating in Israel, we elected to bypass the qualitative assessment and proceeded directly to performing the first step of the goodwill impairment test.

In order to determine the fair value of such reporting units, we utilized the ~~"Income~~"income approach" ~~with respect~~. According to ~~one reporting unit and~~ the ~~Assets-based~~income approach ~~with respect to one reporting unit). Significant estimates used in the methodologies includes estimates of~~expected future cash flows ~~estimates~~are discounted to their present value using an appropriate rate of ~~discount rates, growth rates, etc. We have performed impairment tests on our goodwill~~return. Judgments and other intangible assets. In 2013 and 2014, we wrote impairment losses of US$4.6 million and US$ 0.9 million, respectively In assessing the recoverability of our goodwill and other intangible assets, we must make assumptions ~~regarding the estimated~~related to future cash flows ~~(including, projected~~(projected revenues, operating expenses, and capital expenditures), future short-term and long-term growth rates, and weighted average cost of capital, which are based on management's internal assumptions, and believed to be similar to those ofthat would be utilized by market participants under the circumstances and to represent both the specific risks associated with the business, and capital market ~~conditions. If these estimates or their related assumptions change~~conditions, are inherent in developing the ~~future, we may be required to record additional impairment charges for these assets.~~discounted cash flow model.

Intangible assets with finite lives are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up, as follows:

	Years
GIS database	10
Brand name	15
Other	3-10

Contingencies

~~From~~We are involved in certain legal proceedings that arise from time to time ~~we are subject to claims arising~~ in the ordinary course of ~~our~~their business and in connection with certain agreements with third ~~parties,~~parties. Except for income tax contingencies, the Company records accruals for contingencies to the extent that the management concludes that the occurrence is probable and that the related liabilities are estimable. Legal expenses associated with contingencies are expensed as ~~more~~incurred.

Our material legal proceedings are fully described in Item 8.A. – “Consolidated Statements and other Financial Information” under the caption “Material Legal Proceedings” below. In determining whether liabilities should be recorded for pending litigation claims (including claims that are under arbitration proceedings), we assess the allegations made and the likelihood that we will be able to defend against the claim successfully. When we believe that it is probable that we will not prevail in a particular matter and when the amount thereof is estimable, we estimate the amount of such liability and its likelihood.

Results of Operations

The following table sets forth for the periods indicated selected items from our consolidated statements of income as a percentage of our total revenues.

	Year Ended December 31,
	%									Year Ended December 31,
	2014			2013			2012			%
Consolidated statements of operations data:										2015			2014			2013
Revenues:
Location based services		73.4			74.6			76.2			72.7			73.4			74.6
Wireless communications products		26.6			25.4			23.8			27.3			26.6			25.4

Total Revenues		100			100			100			100			100			100
Cost of Revenues:
Location based services		25.7			26.4			29.9			26.7			25.7			26.4
Wireless communication products		21			21.1			19.8			22.1			21			21.1

Total cost of revenues		46.7			47.5			49.7			48.8			46.7			47.5

Gross profit		53.3			52.5			50.3			51.2			53.3			52.5
Operating Expenses:
Research and development expenses		1.4			1.4			1.4			1.4			1.4			1.4
Selling and marketing Expenses		5.1			5.7			5.6			5.3			5.1			5.7
General and administrative expenses, net		21.2			20.3			22.3			21.5			21.2			20.3
Other expenses, net		0.4			2.8			1.1
Other expenses (income), net											(0.1	)		0.4			2.8

Total operating expenses		28.1			30.2			30.4			28.1			28.1			30.2
Operating Income		25.2			22.3			19.9			23.1			25.2			22.3
Other income (expenses)		----			(0.1	)		4.5			----			----			(0.1	)
Financing income, net		0.9			0.1			0.7			0.7			0.9			0.1

Income before income tax		26.1			22.3			25.1			23.8			26.1			22.3
Income tax		(7.8	)		(7.3	)		(7.8	)		(7.3	)		(7.8	)		(7.3	)
Share in losses of affiliated companies, net		(0.2	)		-			-			(1.4	)		(0.2	)		-

Net income for the year		18.1			15.0			17.3			15.1			18.1			15.0
Less: net income attributable to non-controlling interests		(1.4	)		(1.0	)		(0.7	)		(0.9	)		(1.4	)		(1.0	)

Net income attributable to company stockholders		16.7			14.0			16.6			14.2			16.7			14.0

Analysis of our Operation Results for the Year ended December 31, 2015 as compared to the Year ended December 31, 2014

Revenues

Total revenues decreased from $ 182.1 million in 2014 to $175.6 million in 2015, or 3.6%. This decrease consisted of a decrease of $6 million from subscription fees from our location-based services and a decrease of $0.5 million from sales of our wireless communications products.

Location-based services segment

Revenues in our location-based services segment decreased by $6 million from $133.7 million in 2014 to $127.7 million in 2015, or 4.5%. while the average annual number of subscribers increased from 778,000 in 2014 to 881,000 in 2015; however, this increase was offset by the negative impact of exchange rate fluctuations in the amount of approximately $29 million. If the negative impact of the exchange rate fluctuations was not accounted, our revenues would increase by $23 million.

Wireless communications products segment

Revenues in our wireless communications products segment decreased from $48.4 million in 2014 to $47.9 million in 2015, or 1%. This decrease of $0.5 million is primarily due to an increase of $3.8 million in our products' sales, mainly in Israel, and a negative effect of exchange rates fluctuation in an amount of $4.3 million.

Cost of revenues

Total cost of revenues increased from $85 million in 2014 to $85.7 million in 2015, or 0.8%. This increase consisted of an increase of $0.7 million in the location based services segment and while the wireless communication product segment was unchanged. As a percentage of total revenues, cost of revenues increased from 46.7% in 2014 to 48.8% in 2015.

Location-based services segment

Cost of revenues for our location-based services segment decreased slightly from $46.9 million in 2014 to $46.8 million in 2015, or 0.2%. This decrease was primarily the result of an increase in salary expenses of approximately $3.3 million, and depreciation expenses of $3.8 million and increase in other various expenses such as enforcement and installation fees etc. in total of approximately $1.6 million, which was offset by effect of exchange rates fluctuations in an amount of approximately $8.8 million. As a percentage of total revenues for this segment, cost of revenues increased from 35% in 2014 to 36.7% in 2015.

Wireless communications products segment

Cost of revenues for our wireless communications products segment in 2015 increased from $38.1 million in 2014 to $38.9 million in 2015, or 2.1%. This increase was mainly due to the increase in our products' sales in local currencies and product mixture. As a percentage of total revenues for this segment, cost of revenues increased from 78.7% in 2014 to 81.2% in 2015, mainly due to a change in the products sales mixture.

Operating expenses

Research and development

Our research and development expenses in 2015 decreased from $2.5 million in 2014 to $2.4 million in 2015. As a percentage of total revenues, research and development expenses remained stable at 1.4%.

Selling and marketing

Our selling and marketing expenses remained stable in 2014 and 2015 at $9.3 million. As a percentage of total revenues, selling and marketing expenses increased from 5.1% in 2014 to 5.3% in 2015.

General and administrative

General and administrative expenses decreased from $38.6 million in 2014 to $37.8 million in 2015, or 2.1%. This decrease was primarily due to the effect of exchange rates fluctuations in the amount of $8 million which was offset by an increase in salary expenses in the amount of $2.6 million and an increase in legal and professional services in amount of $1.1 million and increase in other net various expenses in amount of $3.5 million. As a percentage of total revenues, general and administrative expenses increased from 21.2% in 2014 to 21.5% in 2015.

Other expenses (income), net

Other expenses (income) increased from of $0.9 million expenses in 2014 to $0.3 million income in 2015, primarily due to a $1 million gain from sale of a subsidiary in 2015.,

Operating income

Total operating income decreased from $45.9 million in 2014 to $40.6 million in 2015, or 11.5%. This decrease of approximately $5.3 million reflects a decrease of $4.3 million in the operating income in the location-based segment and a decrease of $1 million in the operating income in the wireless communication products segment.

Location-based services segment

Operating income in our location-based services segment decreased from $42.6 million in 2014 to $38.3 million in 2015, or 10%. This decrease was mainly attributed to the devaluation of local currency against the US dollar.

Wireless communications products segment

Operating income in our wireless communications products segment decreased from an operating income of $ 3.3 million in 2014 to an operating income of 2.3 in 2015. This decrease in the operating income is mainly attributed to devaluation of the Israeli Shekel against the US dollar.

Financing income, net

Financing income, net, decreased from $1.7 million in 2014 to $1.2 million in 2015. This decrease was mainly due to a decrease in short term interest expenses and in exchange rate differences.

Income Tax

Income Tax decreased from $14.2 million in 2014 to $12.8 million in 2015, or 9.86%. As a percentage of income before tax on income expense tax increased from 29.9% in 2014 to 30.7% in 2015 primarily due to a change in the income before tax mix among the group's companies.

Analysis of our Operation Results for the Year ended December 31, 2014 as compared to the Year ended December 31, 2013

Revenues

Total revenues increased from $170.2 million in 2013 to $ 182.1 million in 2014, or 7%. This increase consisted of an increase of $6.7 million from subscription fees from our location-based services and an increase of $5.2 million from sales of our wireless communications products.

Location-based services segment

Revenues in our location-based services segment increased by $6.7 million from $127 million in 2013 to $133.7 million in 2014, or 5.3%., due to an increase in the average annual number of subscribers from 703,000 in 2013 to 778,000 in 2014; however, this increase was offset by the negative impact of exchange rate fluctuations in the amount of approximately $11.3 million. If the negative impact of the exchange rate fluctuations was not accounted, our revenues would increase by $18 million.

Wireless communications products segment

Revenues in our wireless communications products segment increased from $43.2 million in 2013 to $48.4 million in 2014, or 12%. This increase of $5.2 million is primarily due to an increase of $5.7 million in our products' sales, mainly in Israel, and a negative effect of exchange rates fluctuation in an amount of $0.5 million.

Cost of revenues

Total cost of revenues increased from $80.9 million in 2013 to $85 million in 2014, or 5.1%. This increase consisted of an increase of $2 million in the location based services segment and an increase of $2.1 million in the wireless communication product segment. As a percentage of total revenues, cost of revenues decreased from 47.5% in 2013 to 46.7% in 2014.

Location-based services segment

Cost of revenues for our location-based services segment increased from $44.9 million in 2013 to $46.9 million in 2014, or 4.5%. This increase was primarily the result of an increase in salary expenses of approximately $4 million, and depreciation expenses of $0.7 million and increase in other various expenses such as enforcement and installation fees etc. in total of approximately $1.8 million, which was offset by effect of exchange rates fluctuations in an amount of approximately $4.5 million. As a percentage of total revenues for this segment, cost of revenues decreased from 35.3% in 2013 to 35% in 2014.

Wireless communications products segment

Cost of revenues for our wireless communications products segment in 2014 increased from $36 million in 2013 to $38.1 million in 2014, or 5.8%. This increase was mainly due to the increase in our products' sales. As a percentage of total revenues for this segment, cost of revenues decreased from 83.3% in 2013 to 78.7% in 2014, mainly due to a change in the products sales mixture.

Operating expenses

Research and development

Our research and development expenses in 2014 increased from $2.4 million in 2013 to $2.5 million in 2014. As a percentage of total revenues, research and development expenses remained stable at 1.4%.

Selling and marketing

Our selling and marketing expenses decreased from $9.7 million in 2013 to $9.3 million in 2014, or a decreased of 4%. As a percentage of total revenues, selling and marketing expenses decreased from 5.7% in 2013 to 5.1% in 2014.

General and administrative

General and administrative expenses increased from $34.5 million in 2013 to $38.6 million in 2014, or 11.9%. This increase was primarily due to an increase in salary expenses in the amount of $4.2 million and an increase in allowance for doubtful accounts in the amount of $0.9 million which was offset by the effect of exchange rates fluctuations in the amount of $2.3 million. As a percentage of total revenues, general and administrative expenses increased from 20.3% in 2013 to 21.2% in 2014.

Other expenses, net

Other expenses decreased from $4.8 million in 2013 to $0.9 million in 2014, primarily due to a $0.9 million impairment loss recorded in 2014, as compared to a $4.6 million impairment loss, which was recorded in 2013.

Operating income

Total operating income increased from $37.9 million in 2013 to $45.9 million in 2014, or 20.8%. This increase of approximately $7.9 million reflects an increase of $4.1 million in the operating income in the location-based segment and an increase of $3.8 million in the operating income in the wireless communication products segment.

Location-based services segment

Operating income in our location-based services segment increased from $38.5 million in 2013 to $42.6 million in 2014, or 10.6%. This increase was mainly attributed to a higher rate of increase in revenues from subscription fees as compared to the rate of increase of this segment's operating expenses during the period.

Wireless communications products segment

Operating income in our wireless communications products segment increased from an operating loss of $0.5 million in 2013 to an operating income of ~~3.3~~$3.3 million in 2014. Our sales in this segment increased during 2014 mainly due to the increase in the volume of sale and the product mix.

Other (expenses) Income, net

Other expense, net of $0.2 million in 2013 was as a result of the sale of our holdings in an affiliated company.

Financing income, net

Financing income, net, increased from $0.2 million in 2013 to $1.7 million in 2014. This increase was mainly due to a decrease in short term interest expenses and in exchange rate differences.

Income Tax

Income Tax increased from $12.4 million in 2013 to $14.2 million in 2014, or 14.5%. As a percentage of income before tax on income expense tax decrease from 32.8% in 2013 to 29.9% in 2014 primarily due to a change in the income before tax mix among the group's companies.

~~Analysis of our Operation Results for the Year ended December 31, 2013 as compared to the Year ended December 31, 2012~~

~~Revenues~~

Total revenues increased from $150.3 million in 2012 to $170.2 million in 2013, or 13.2%. This increase consisted of an increase of $12.4 million from subscription fees from our location-based services and an increase of $7.5 million from sales of our wireless communications products.

~~Location-based services segment~~

Revenues in our location-based services segment increased by $12.4 million from $114.6 million in 2012 to $127 million in 2013, or 10.8%. In 2013, subscription fees from location-based services increased by $17.4 million as compared to 2012, due to an increase in the average annual number of subscriptions from 645,000 in 2012 to 704,000 in 2013; however, this increase was offset by the negative impact of exchange rate fluctuations in the amount of approximately $5 million.

~~Wireless communications products segment~~

Revenues in our wireless communications products segment increased from $35.7 million in 2012 to $43.2 million in 2013, or 21.0%. This increase of $7.5 million is primarily due to an increase of $6.5 million in our products' sales, mainly in Israel, and a positive effect of exchange rates fluctuation in an amount of $1 million.

~~Cost of revenues~~

Total cost of revenues increased from $74.8 million in 2012 to $80.9 million in 2013, or 8.2%. This increase consisted of a decrease of $0.1 million in the location based services segment and an increase of $6.2 million in the wireless communication product segment. As a percentage of total revenues, cost of revenues decreased from 49.7% in 2012 to 47.5% in 2013.

~~Location-based services segment~~

Cost of revenues for our location-based services segment decreased slightly from $45 million in 2012 to $44.9 million in 2013, or 0.2%. This decrease was primarily the result of an increase in salary expenses of approximately $2 million, which was offset by a decrease in depreciation expenses in the amount of $1 million as well as by the effect of exchange rates fluctuations in an amount of approximately $1.5 million. As a percentage of total revenues for this segment, cost of revenues decreased from 39.3% in 2012 to 35.3% in 2013.

~~Wireless communications products segment~~

Cost of revenues for our wireless communications products segment in 2013 increased from $29.8 million in 2012 to $36 million in 2013, or 20.8%. This increase was mainly due to the increase in our products' sales. As a percentage of total revenues for this segment, cost of revenues remained stable in 2012 and 2013 at 83.3%.

~~Operating expenses~~

~~Research and development~~

~~Our research and development expenses in 2013 increased from $2.1 million in 2012 to $2.4 million in 2013. As a percentage of total revenues, research and development expenses remained stable at 1.4%.~~

~~Selling and marketing~~

Our selling and marketing expenses increased from $8.5 million in 2012 to $9.7 million in 2013, or 14.1%. As a percentage of total revenues, selling and marketing expenses increased slightly from 5.6% in 2012 to 5.7% in 2013.

~~General and administrative~~

General and administrative expenses increased from $33.4 million in 2012 to $34.5 million in 2013, or 3.3%. This increase was primarily due to an increase in salary expenses as offset by the effect of exchange rates fluctuations in the amount of $1.2 million. As a percentage of total revenues, general and administrative expenses decreased from 22.3% in 2012 to 20.3% in 2013.

~~Other expenses, net~~

Other expenses increased from $1.6 million in 2012 to $4.8 million in 2013, primarily due to a $4.6 million impairment loss recorded in 2013, as compared to a $0.7 million impairment loss, which was recorded in 2012.

~~Operating income~~

Total operating income increased from $29.9 million in 2012 to $37.9 million in 2013, or 27.1%. This increase of approximately $8.1 million reflects an increase of $8.6 million in the operating income in the location-based segment and a decrease of $0.6 million in the operating income in the wireless communication products segment.

~~Location-based services segment~~

Operating income in our location-based services segment increased from $29.9 million in 2012 to $38.5 million in 2013, or 28.8%. This increase was mainly attributed to a higher rate of increase in revenues from subscription fees as compared to the rate of increase of this segment's operating expenses during the period.

~~Wireless communications products segment~~

Operating income in our wireless communications products segment decreased from an operating gain of $0.1 million in 2012 to an operating loss of $0.5 million in 2013. Although our sales in this segment increased during 2013, an impairment loss in the amount of $1.8 million, which we recorded with respect to goodwill and intangible assets in this segment, resulted in an operating loss.

~~Other (expenses) Income, net~~

Other income, net of $6.8 million in 2012 was primarily the result of funds we received as part of a settlement agreement concerning the Leonardo litigation case (see Item 8.A – "Consolidated Statements and Other Financial Information" under the caption "Material Legal Proceedings" below). In 2013, we recorded other expenses of $0.2 million as a result of the sale of our holdings in an affiliated company.

~~Financing income, net~~

~~Financing income, net, decreased from $1.0 million in 2012 to $0.2 million in 2013. This decrease was mainly due to an increase in financing expenses as a result of exchange rates fluctuations.~~

~~Income Tax~~

Income Tax increased from $11.7 million in 2012 to $12.4 million in 2013, or 6.0%. As a percentage of income before tax on income expense tax increased from 31% in 2012 to 32.8% in 2013 primarily due to a change in the mixture of the income before tax among the group's companies.

Impact of Currency Fluctuations on Results of Operations, Liabilities and Assets

Although we report our consolidated financial statements in dollars, in ~~2012,~~ 2013, 2014 and ~~2014,~~2015, a portion of our revenues and expenses was derived in other currencies. For fiscal years ~~2012,~~ 2013, 2014 and ~~2014,~~2015, we derived approximately ~~8.7%~~8.3%, ~~8.3%~~10% and ~~10%~~9% of our revenues in dollars, ~~43.6%~~45.5%, ~~45.5%~~46% and ~~46%~~48% in NIS, ~~38.7%~~37.3%, ~~37.3%~~36.5% and ~~36.5%~~33% in Brazilian Reals and 9%8.9%, ~~8.9%~~7.6% and ~~7.6%~~10% in Argentine Pesos, respectively. In fiscal years ~~2012,~~ 2013, 2014 and ~~2014, 18%~~2015, 20.1%, ~~20.1%~~14.8% and ~~14.8%~~17% of our expenses were incurred in dollars, ~~38.5%~~41%, ~~41%~~46.7% and ~~46.7%~~46% in NIS, ~~34.4%~~29.9%, ~~29.9%~~30.8% and ~~30.8%~~27% in Brazilian Reals and ~~9.1%~~8.9%, ~~8.9%~~7.7% and ~~7.7%~~10% in Argentine Pesos, respectively.

Exchange differences upon conversion from our functional currency to dollars are accumulated as a separate component of accumulated other comprehensive income under stockholders’ equity. In the year 2015, accumulated and other comprehensive income decreased by 15.8 million as compared to the year 2014. In 2014, accumulated and other comprehensive income decreased by ~~11.1~~$11.1 million as compared to the year 2013. In 2013, accumulated and other comprehensive income decreased by $3.2 million as compared to the year 2012. ~~In 2012, accumulated and other comprehensive income decreased by $2.3 million as compared to the year 2011.~~

The fluctuation of the other currencies in which we incur our expenses or generate revenues against the dollar has had the effect of increasing or decreasing (as applicable) reported revenues, cost of revenues and operating expenses in such foreign currencies when converted into dollars from period to period. The following table illustrates the effect of the changes in exchange rates on our revenues, gross profit and operating income for the periods indicated:

	Year Ended December 31,												Year Ended December 31,
	2012				2013				2014				2013				2014				2015
	Actual		At 2011 exchange rates(1)		Actual		At 2012 exchange rates(1)		Actual		At 2013 exchange rates(1)		Actual		At 2012 exchange rates(1)		Actual		At 2013 exchange rates(1)		Actual		At 2014 exchange rates(1
	(In thousands)												(In thousands)

Revenues	$	150,318	$	166,475	$	170,167	$	174,879	$	182,127	$	193,977	$	170,167	$	174,879	$	182,127	$	193,977	$	175,628	$	209,186
Gross profit		75,558		84,935		89,302		91,937		97,133		103,871		89,302		91,937		97,133		103,871		89,881		107,375
Operating income		29,947		34,496		37,930		39,630		45,870		49,437		37,930		39,630		45,870		49,437		40,647		50,749

(1) Based on average exchange rates during the period.

LIQUIDITY AND CAPITAL RESOURCES

We fund our operations primarily from cash generated from operations. In ~~2012,~~ 2013, 2014 and ~~2014,~~2015, we had ~~$34.4 million,~~ $46.7 million, $40.8 million and ~~$40.8~~$29.1 million in cash, marketable securities and deposit in escrow (long and short term) and ~~$44.1 million,~~ $57.2 million, $56.9 million and ~~$56.9~~$50.1 million in working capital, respectively. We hold our cash and cash equivalents in US dollars or the local currency of their location.

In 2015, 2014 and 2013 we did not have any long term borrowings from banks; and in ~~2012 our long term borrowings from banks amounted to 0.2$~~. In ~~2012,~~ 2013, 2014 and ~~2014,~~2015, we also had ~~$0.5~~$0.7 million, ~~$0.7~~$0.5 million and $0.5 million respectively, available to us under existing lines of ~~credit of which we have utilized $0.2 million in 2012.~~credit. In 2013 2014 and in ~~2014,~~2015, we have not utilized our lines of credit.

For a reference concerning our use of financial instruments for hedging purposes, please see Item 5.A – Operating Results under the captions "financing expenses (income), net" and "Impact of Currency Fluctuations on Results of Operations, Liabilities and Assets."

We believe that our cash flow from operations, availability under our lines of credit and cash and marketable securities will be adequate to fund our capital expenditures, contractual commitments and other demands and commitments for the foreseeable future as well as for the long-term. We believe that cash flow generated from operations and cash available to us from our credit facilities will be sufficient to cover future expansion of our various businesses into new geographical markets or new products, as currently contemplated and as we describe herein. However, if existing cash and cash generated from operations are insufficient to satisfy our liquidity requirements, we may seek financing elsewhere by selling additional equity or debt securities or by obtaining additional credit facilities.

We had long-term liabilities in ~~2012,~~ 2013, 2014 and ~~2014~~2015 of ~~$7.9 million,~~ $9.6 million, $10.2 million and ~~$10.2~~$10.6 million, respectively, for employee ~~pension costs~~rights upon retirement for certain of our employees that become payable upon their retirement. Our Israeli employees are entitled to one month’s salary, equal to the applicable monthly salary at the time of such employee’s retirement, for each year of employment, or a portion thereof, upon retirement. This liability is partially funded by deposit balances maintained for these employee benefits in the amount of ~~$5.5~~$6.6 million, $6.6 million and ~~$6.6million~~$7.2 million in ~~2012,~~ 2013, 2014 and ~~2014~~2015 respectively. The deposited funds include profits accumulated up to the balance sheet date and may be withdrawn upon the fulfillment of the obligation pursuant to Israeli severance pay laws or labor agreements.

In Argentina, since the end of 2012, there are several government regulations applied to foreign trade that affects the Company operation. The regulations been somewhat relaxed by the new president, since the end of 2015.

The global scheme is an effort of the government to stop or reduce the needs of foreign currency sending outside the country by people and corporations.

The regulations are:

Foreign Exchange Market:

1.a.

ItSince December 10, 2015, the dollar and other currencies float free, and any citizen or company is ~~not allowed for Companies~~authorized to ~~buy~~purchase up to the equivalent of US$ 2,000,000 per month.

As a consequence of the previous action, the Dollar Exchange Rate increase from 9 pesos per US$ to 13 pesos per US$ until the end of 2015.

Exchange rate variations apply to all transactions in foreign currency ~~for savings,~~at the price of the day (Collections and payments abroad, purchase of foreign exchange, etc.).

ItImportation:

The Importing Authorization System (DJAI) was replaced by a new Information System called SIMI. The main difference is ~~mandatory to get formal authorization to import goods,~~that any good can be imported freely without the requirement of prior government authorization.

The importation of Services and their payment is also unregulated.

Both type of imports (goods and services) request previous registration and compliance with Transferring Prices and Tax regulations.

~~If the importation is admitted, it is mandatory to obtain a formal authorization to pay it abroad. The exchange rate is at Official Dollar,~~Dividends:

4.a.

~~It is mandatory to obtain previous authorization, for paying abroad Services to providers,~~

~~It is mandatory to obtain previous authorization, for paying~~Paying abroad dividends to ~~shareholders. Getting this Authorization practically~~shareholders is not possible.

6.b.

Since September 23, 2013, there is an additional rate of 10% Income Tax applied on dividends payments that should be withheld at ~~the payment moment, In addition there is an inflation in pesos of about 30%-38% per year, while it is difficult to adjust our prices at the same rate.~~source.

As of November 16, 2009, our dividend policy provided for an annual dividend distribution in an amount not less than 50% of our net profits, calculated based on the audited financial statements for the period ending on December 31 of the fiscal year with respect to which the relevant dividend is paid. According the adopted dividend policy and Israeli law, an annual dividend will only be declared and paid if, in the discretion of our Board of Directors, there is no reasonable foreseeable concern that the distribution will prevent us from being able to meet the terms of our existing and contingent liabilities, as and when due, all based on our needs as will be determined from time to time and subject to the provisions of the Israeli laws concerning lawful distribution of dividends. According to ~~our~~such dividend policy, we distributed NIS 78.8 million (approximately $21.8 million) on April 6, 2011 and NIS 96 million (approximately $25.8 million) on April 4, 2012.

On February 21, 2012, we revised our dividend policy so that our dividends will be declared and distributed on a quarterly basis in an amount not less than 50% of our net profits, calculated on the basis of our reviewed quarterly financial statements each fiscal year.

Following the revision of our dividend policy in 2012, we declared and paid ~~the following~~regularly quarterly dividends in ~~2012: on May 29,~~ 2012, we declared a dividend in the amount of NIS 9.7 million or $2.5 million, which was paid on June 27, 2012, on August 14, 2012 we declared a dividend in the amount of NIS 20 million or $5.2 million, which was paid on October 10, 2012,2013, and ~~on November 18, 2012 we declared a dividend in the amount of NIS 9.7 million, or $2.6 million, which was paid on January 9, 2013; and~~2015. On 2015 we declared and paid ~~the following quarterly~~such dividends ~~in 2013: on~~as follows:

On February 17, 2013, we declared a dividend in the amount of NIS 25.4 million or $7 million, which was paid on April 4, 2013, on May 13, 2013, we declared a dividend in the amount of NIS 10.5 million or $3 million, which was paid on July 11, 2013, on August 5, 2013, we declared a dividend in the amount of NIS 12.6 million or $3.6 million, which was paid on October 3, 2013, and on November 13, 2013, we declared a dividend in the amount of NIS 12.6 million or US$3.6 million, which was paid on January 8, 2014. In addition, on February 19, 20142, 2015 we declared a quarterly dividend in the amount of NIS 27.3 million or $8$7 million, which ~~will be~~was paid on April ~~10, 2014,~~8, 2015, with respect to the fourth quarter of ~~2013.~~2014. On May ~~15, 2014~~18, 2015 we declared a quarterly dividend in the amount of NIS ~~13.8~~12.8 million or $4$3.4 million, which was paid on July ~~3, 2014,~~2, 2015, with respect to the first quarter of ~~2014.~~2015. On August ~~11, 2014~~13, 2015 we declared a quarterly dividend in the amount of NIS ~~13.8~~11.1 million or $4$3.0 million, which was paid on October 7, ~~2014,~~2015, with respect to the second quarter of ~~2014.~~2015. On November 18, ~~2014~~2015 we declared a quarterly dividend in the amount of NIS ~~17.2~~12.2 million or ~~$4.5~~$3.1 million, which was paid on January ~~7, 2015,~~6, 2016, with respect to the third quarter of ~~2014.~~

2015. On February 24, 2016 we declared a quarterly dividend in the amount of NIS 25.4 million or $6.5 million, which was paid on April 6, 2016, with respect to the fourth quarter of 2015.

Until the date of this report, we have repurchased 2,507,314 of our shares.

The following table sets forth the components of our historical cash flows for the periods indicated:

	Year ended December 31,									Year ended December 31,
	2014			2013			2012			2015			2014			2013
	(In thousands)									(In thousands)

Net cash provided by operating activities		37,731		$	46,697		$	32,215			35,914			37,731			46,697
Net cash used in investing activities		(13,244	)		(15,466	)		(9,559	)		(25,706	)		(13,244	)		(15,466	)
Net cash used in financing activities		(22,426	)		(17,547	)		(27,341	)		(18,659	)		(22,426	)		(17,547	)
Effect of exchange rate changes on cash and cash equivalents		(5,340	)		(1,440	)		(1,132	)		(2,951	)		(5,340	)		(1,440	)
Net increase (decrease) in cash and cash equivalents		(3,279	)	$	12,244		$	(5,817	)		(11,402	)		(3,279	)		12,244

Pursuant to our articles of association as presently in effect, our board of directors generally consists of twelve directors, including at least three independent directors in accordance with the listing rules of Nasdaq concerning the composition of audit committees, of whom two directors are external directors as required by Israeli law. Our independent directors, as such term is defined under the Nasdaq listing rules, are Mr. Baron, Mr. Kotler, Mr. Koren, Mr. Yoav Kahane and Ms. Tal Sheratzky - Jaffa, Pursuant to our articles of association, other than the external directors, for whom special election requirements apply (see “External directors” below), our directors are elected, and may in certain circumstances be removed, by the majority of our shareholders. However, see Item 6.A – Directors and Senior Management for a description of our staggered board and the shareholders agreement and articles of association of Moked Ituran Ltd. Our board of directors may at any time and from time to time appoint any other person as a director to fill a vacancy until the general meeting of shareholders in which the term of service of the replaced director was scheduled to expire.

Pursuant to the Israeli Companies Law, our chairman convenes and presides over the meetings of the board. In addition, any two directors may convene a meeting of the board of directors, as well as a director who becomes aware of a company's matter that allegedly involves a breach of the law or an improper business conduct. A quorum consists of a majority of the members of the board, and decisions are taken by a vote of the majority of the members present. Our articles of association provide that such quorum will in no event be less than two directors.

We are incorporated in Israel and are therefore subject to the provisions of the Israeli Companies Law, including certain corporate governance provisions. Our ordinary shares are listed on the Nasdaq Global Select Market and on the Tel Aviv Stock Exchange (Our shares are scheduled to be delisted from the Tel Aviv stock exchange on May 25, 2016, for additional information see Item 9.A – Price History of Our Shares), and we are therefore subject to certain provisions of the Israeli securities laws, the U.S. securities Law and the Nasdaq listing rules. See also Item 16.G. – Corporate Governance below for additional information concerning our compliance with the Nasdaq listing rules and exemptions therefrom.

External directors

Under Israeli law, the board of directors of companies whose shares are publicly traded are required to include at least two members who qualify as external directors. External directors are to be elected by a majority vote at a shareholders’ meeting, provided that either:

n	such majority includes at least the majority of the shares held by all non-controlling shareholders or those having personal interest in the nomination, except personal interest which is not resulting from connections with controlling shareholders, present and voting at such meeting; or

the total number of shares voted against the election of the external director and held by shareholders other than controlling shareholders or those having personal interest in the nomination, except personal interest which is not resulting from connections with controlling shareholders, must not exceed 2% of the shares whose holders are entitled to vote at any meeting of shareholders.

External directors are generally elected to serve an initial term of three years and may be re-elected to serve in that capacity for two additional three-year terms; however, companies whose securities are listed on recognized foreign exchanges, such as Nasdaq, may extend the service terms of their external directors for additional unlimited terms, each of no more of than three years , subject to the approval of the audit committee and the board of directors that such extension is for the benefit of the company in view of the directors’ expertise and special contribution to the operation of the board and its committees and these reasons together with the term served by the external director were presented to the shareholders prior to their approval (see the Israeli Companies Regulations (Allowances for Companies with Securities Listed on an Exchange Outside Israel), 2000-5760). The appointment of an external director for additional terms may be brought for the approval of the shareholders either by the board of directors or by a shareholder that holds at least 1% of the company’s voting rights, provided that the nominee is not a related or competing shareholder (as defined below) or a relative thereof, at the time of the appointment, and does not have an affinity to such shareholder (as defined below) at the time of the appointment or the two years preceding such appointment. The term "related or competing shareholder" means the shareholder who proposed the appointment or a 5% shareholder of the company if, at the time of the appointment, his controlling person or a company controlled by either of them, has business relations with the company, or if he, his controlling person or a company controlled by either of them are competitors of the company. The term "affinity" means the on-going existence of work relationship, business or professional relationship or control and the service as an officer.

External directors may generally be removed from office by the same majority of shareholders required for their election or by a court, in each case, only under limited circumstances, including if they cease to meet the statutory qualification for their appointment or violate the duty of loyalty to the company.

If at the time of the appointment of an external director, all directors who are not controlling persons or their relatives are of the same gender, then the elected external director must be of the other gender.

Each committee of the board of directors that is vested with an authority of the board must include at least one external director, except that the audit committee and compensation committee must include all external directors then serving on the board of directors. The Israeli Companies Law prohibits external directors from receiving, directly or indirectly, any compensation other than for services as an external director pursuant to the provisions and limitations set forth in the applicable regulations promulgated under the Israeli Companies Law.

Israeli law provides that a person is not qualified to serve as an external director if he is a relative (as defined in the Israeli Companies Law) of the company's controlling person, or if, at the time of his/her appointment and/or at any time during the two years preceding his or her appointment, that person, a relative, partner or employer of that person, or any entity under that person’s control, has or has had an affinity (as defined above) to the company, its controlling person or its relative or to any entity that, as of the date of appointment, or at any time during the two years preceding that date, is controlled by the company or by its controlling person. In addition, no person may serve as an external director if that person’s professional activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as a director; and, a person already serving as a director of one company may not be appointed as an external director of the company if at that time a director of the company is serving as an external director of the first company. In addition, a company, controlling shareholder and any other entity controlled by the controlling shareholder may not grant to such external director, its spouse or child, any benefits, directly or indirectly, and the external director, its spouse or child may not be appointed to serve in any position, may not be employed by and may not, directly or indirectly, render any professional services to the company, such controlling shareholder or any other entity controlled by the controlling shareholder, during the first two years following such external director’s termination of tenure of office, and with respect to a relative who is not the external director’s spouse or child – during the first year following such termination.

Mr. Israel Baron is now serving his fifth term as an external director of the Company, who was reelected on of December 14, 2014 for a term of 3 years. Mr. Gidon Kotler was appointed on April 30, 2014 by an extraordinary shareholders meeting as our new external director, following the death of our former external director, Dr. Orna Ophir, in January 2014.

Audit committee

Under Israeli law, the board of directors of a public company must appoint an audit committee. The audit committee must comprise of at least three directors, including all of the external directors and the chairman of the audit committee must be an external director. In addition, the majority of the members of the audit committee must be independent directors. Under the Israeli Companies Law, a director is considered "independent" if he/she is an external director or if he/she meets the qualifications of an external director, has not served as a director of the company for over 9 consecutive years, and has been classified as such. The audit committee may not include the chairman of the board, any director who is employed by the company or regularly provides services to the company (other than as a board member), a controlling shareholder or any relative of such person. All audit committee decisions must be approved by a majority of the committee members of which the majority of members present are independent directors. Furthermore, a person who is not eligible to serve on the audit committee is restricted from participating in its meetings and votes, unless the chairman of the audit committee determines that such person’s presence is necessary in order to present a certain matter, provided however, that the company employees who are not controlling shareholders or relatives of such shareholders may be present in the meetings but not in the actual votes and likewise, company counsel and secretary who are not controlling shareholders or relatives of such shareholders may be present in meetings and decisions of such present is requested by the audit committee.

Our audit committee must also meet the requirements of the Nasdaq listing rules concerning audit committees.

Our board of directors has formed an audit committee that is empowered, among other things, to exercise the powers of the board of directors concerning our accounting, reporting and financial control practices. Our audit committee operates in accordance with a charter, which complies with the provisions of the Israeli Companies Law and the Nasdaq listing rules. The members of the audit committee are currently Messrs. Israel Baron, Gidon Kotler and Yoav Kahane, all of whom are independent as required of members of the audit committee under the Nasdaq listing rules Mr. Gidon Kotler was appointed on April 30, 2014 to replace Dr. Orna Ophir who passed away in January 2014. Our board of directors has determined that Mr. Israel Baron possesses financial sophistication as required by Rule 5605(c)(2) under the Nasdaq listing rules, and that both Mr. Baron and Mr. Kotler possess accounting and financial expertise as defined by Israeli regulations.

Pursuant to the Israeli Companies Regulations (Provisions and Conditions regarding the Financial Statements’ Authorization Process), 2010, a reporting entity, except for a reporting entity that is subject to Chapter E(3) of the Israeli Securities Act, is required to establish a committee of the board of directors for the examination of financial statements. Since we are a reporting entity under Chapter E(3), we are not obliged to constitute a committee for the examination of financial statements; and therefore, commencing with the financial statements for the first quarter of 2013, we ceased holding meetings of the examination of financial statements committee; and instead, our audit committee considers the financial statements prior to their approval by the board.

Pursuant to the 22nd amendment in the Israeli Company law, which was set to define new rules to approve transaction of the public company with its controlling shareholders, or the transaction in which the controlling shareholder has interest. The law requires from our Audit committee to set up rules to define the criteria for classification of transactions, which are neither Insignificant Transactions nor extraordinary transactions, and their procedures of approval that will be determined per each year in advance. In addition the law requires from the Audit Committee to set methods of examining transactions with the controlling shareholders, in order to enable their classification and their comparison to the conditions in the free market. The Audit Committee resolved on September 29, 2014 as follows:

Transaction that is neither extraordinary, nor insignificant.

Definition: the relevant criteria that is calculated for the transaction is such transaction which is higher than 0.25% of the equity of the company according its last combined financial reports, or higher than 1% of average net revenue of the past 3 years of the company in their absolute value, in the last 2 calendar years prior to the date of the transaction is being reported according the last financial report of the company.

Methods of approval: approval by the senior management of the company (from vice chief executive officer and higher) and report to the Board. The following transactions will require also the approval of the Audit Committee:

(1)

Transaction which is higher than 4.5% of the equity of the company according its last combined financial reports which were published prior to the approval of the transaction.

(2)

Transaction that involves risks or significant exposure beyond mere monetary liabilities or obligations.

(3)

Transaction in which the company enters a new activity field or exits from an existing activity field.

Insignificant transaction:

Definition: such transaction which is not higher than 0.25% of the equity of the company according its last combined financial reports, or is not higher than 1% of average net revenue of the past 3 years of the company in their absolute value, in the last 2 calendar years prior to the date of the transaction is being reported according the last financial report of the company.

Methods of approval: Approval by the management of the company or by the in charged officer in the company (vice chief executive officer, other officer or other in charged body in the company according the decisions of the company.

General rules:

(1)

Any transaction with a controlling shareholder or any transaction that a controlling shareholder has an interest in, will be brought before the Audit Committee, which will determine its type and decide on case by case basis on defining it as an insignificant transaction or other kind of transaction, and will decide on its review and on its approval.

(2)

According the adopted criteria, transactions with Tzivtit Insurance Agency (1998) Ltd. and with Rinat Yogev Nadlan Ltd. shall be classified as Insignificant transactions. If the extent of such transactions will remain similar during the following years, our management shall be deemed qualified to approve such transactions and to report them to the Audit Committee.

(3)

Every year the criteria for classifying transactions as set up above shall be brought for reapproval by the Audit Committee.

Compensation committee

The Israeli Companies Law mandates the appointment of a compensation committee comprising of at least three directors. The compensation committee must include all of the external directors, who shall constitute the majority of the members thereof, and its remaining members shall be directors whose terms of service comply with the provisions promulgated concerning the remuneration of external directors. The chairman of the committee must be an external director. The members of the Compensation committee are currently Israel Baron, Gidon Kotler and Yoav Kahane. Mr. Gidon Kotler was appointed on April 30, 2014 to replace Dr. Orna Ophir who passed away in January 2014. All members of our compensation committee are independent directors as defined by the Nasdaq listing rules, and all of whom meet the composition requirements under the Israeli Companies Law. Since February 2016, the Israeli Companies Law permits that Audit Committee can serve also as a Compensation committee, provided that it will comply with requirements of the Compensation Committee as explained above.

Under the Israeli Companies Law, the compensation committee is responsible for: (i) making recommendations to the board of directors with respect to the approval of the compensation policy for office holders and any extensions thereto; (ii) periodically reviewing the implementation of the compensation policy and providing the board of directors with recommendations with respect to any amendments or updates thereto; (iii) reviewing and resolving whether or not to approve arrangements with respect to the terms of office of office holders; and (iv) determining whether or not to exempt a transaction with a candidate for chief executive officer from shareholders approval.

Furthermore, our compensation committee oversees, on behalf of the Board, the management of Ituran's compensation and other human resources-related issues and otherwise carries out on behalf of the Board its responsibilities relating to these issues. The committee is responsible for establishing annual and long-term performance goals and objectives for our executive officers. In addition, as required under the Nasdaq listing rules, our compensation committee is responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the committee; and may retain such advice only after taking into account the considerations set forth in the Nasdaq listing rules in this respect. Our compensation committee operates in accordance with a charter, which complies with the provisions of the Israeli Companies Law and the Nasdaq listing rules.

According to our compensation committee charter, the compensation committee, among its other duties, is responsible on reviewing the disclosure in this form which concerns the Compensation Policy and the sections describing the Terms of Service of Officers, controlling persons and their relatives.

Internal auditor

Under the Israeli Companies Law, the board of directors of a public company must appoint an internal auditor nominated by the audit committee. An internal auditor may not be:

n	a person (or a relative of a person) who holds more than 5% of the company's shares or voting rights;

n	a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;

n	an executive officer, director or other affiliate of the company; or

n	a member of the company's independent accounting firm.

The role of the internal auditor is to examine, among other things, the compliance of the company’s conduct with applicable law and orderly business procedures. Our internal auditor is Simon Yarel, CPA, who has served as our internal auditor since January 1999.

EMPLOYEES

The following table sets forth the total number of our employees at the end of each of the past three years, and a breakdown of such employees by main category of activity and by geographic location:

		Year Ended December 31,							Year Ended December 31,
		2014		2013		2012			2015		2014		2013
By area of activity:
Control Center			401		361		346			379		401		361
Research and Development			54		33		27			39		54		33
Sales and Marketing			127		110		96			125		127		110
Technical support and IT			271		254		234			296		271		254
Finance, Administration and Management			209		216		217			232		209		216
Private enforcement and operations			395		356		353			393		395		356
Manufacturing			65		62		47			80		65		62
Total			1,522		1,392		1,320			1,544		1,522		1,392

By geographic location (out of total):	By geographic location (out of total):							By geographic location (out of total):
Israel			703		628		599			719		703		628
Brazil			617		550		519			612		617		550
Argentina			162		183		171			182		162		183
United States			40		31		31			31		40		31
Total			1,522		1,392		1,320			1,544		1,522		1,392

We consider our relations with our employees to be satisfactory and have no ongoing major labor disputes or material labor-related litigation. Our employees are subject to local labor laws and regulations, which in some countries are more stringent than others. Some of our senior executives also have employment agreements that may grant them rights in excess of those provided by the applicable laws.

Israel

Our employees in Israel are subject to Israeli labor laws and regulations and employment customs. The applicable labor laws and regulations principally concern matters such as paid annual vacation, paid sick days, length of the workday, payment for overtime and severance pay. Israeli law generally requires severance pay equal to one month’s salary for each year of employment upon retirement or death of an employee or termination of employment without cause. Furthermore, Israeli employees and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the United States Social Security Administration. Since January 1, 1995, these amounts also include payments for national health insurance.

Israeli labor laws impose on employers increased liability, including monetary sanctions and criminal liability, in cases of violations of certain labor laws and certain violations by contractors providing maintenance, security and cleaning services.

Brazil

Our employment agreements in Brazil are subject to Brazilian labor laws and regulations, to collective labor agreements or bargaining arrangements with unions and contract. The laws and regulations in Brazil govern almost all aspects of an employment relationship and do not leave much room to be negotiated with the employee. Still, employment contracts create obligations to the parties if they are in compliance with the law. The Labor Code mainly governs the employees’ right to paid annual vacation, paid sick days, the maximum length of a workday, minimum payment for overtime and statutory severance pay. Brazilian law generally requires severance pay equal to 50% of the balance of the employee’s FGTS account (a mandatory fund to guarantee severance and unemployment). The FGTS can also be withdrawn when the employee retires, dies or his employment is terminated without cause, among others. Brazilian employers are required to purchase health insurance for employees only in the event it is set forth by the applicable collective labor agreement, contract or company policy, and are required to cover employees’ food and travel costs whenever a business trip is required, and to make deposits into the a Guarantee Severance Fund (the so-called “FGTS”). Furthermore, Brazilian employees and employers are required to make contributions to the National Insurance Institute (“INSS”), similar to the United States Social Security Administration. Our collections to the National Insurance Institute amount to 34.8% to 39.8% of the payrolls, out of which 8% to 11% (limited to R$4,159,000 of individual salary) corresponds to contributions by the employees deducted from salaries and 26.8% is the fixed part we pay. Our contribution of 26.8% includes mandatory contribution to the Public Insurance for Labor Accidents and Diseases (SAT). According to Decree Law 6957/2009 such portion, which varies from 1% to 3% of payroll, should be multiplied by another factor (FAP) from 0.5 to 2 in order to reduce or increase our burden to reflect statistics of occupational accidents and diseases in our business.

All of our employees in Brazil, excluding the chief executive officer, some directors (VPs) and one manager, are represented by a labor union and the employees’ mandatory contributions to their union are paid by us. The law authorizes us to deduct mandatory contributions to unions from the respective salaries.

Argentina

Our employees in Argentina are subject to Argentine labor laws and regulations and other special practices and employment customs. The laws and regulations in Argentina control all aspects of labor relations and designate a general Employment Contract with which all employees and employers must comply. This general Employment Contract adopts by reference the provisions of the Labor Law which principally concerns matters such as paid annual vacation, paid sick days, the length of the workday, and payment for overtime and severance pay. Argentinean law generally requires severance pay equal to one month per year of service upon the termination of employment without a justified cause. Argentine employers are also required to contribute for the following items: (a) Pension funds 21% (b) health insurance for employees 6% (c) occupational accident insurance ~~2.88%~~2.74%; and (d) Retirement fund insurance 3.5% (only this item is for Union Employees). All the rates should be applied on the gross salary.

Our employees in Argentina, excluding the chief executive officer and a number of other employees, are members of a labor union and the employee member fees are paid by ~~them.~~them

United States

We have no collective bargaining agreements with any of our employees in the United States and none of our employees are members of a union.

SHARE OWNERSHIP

The following sets forth, as of March 31, ~~2015~~2016 the share ownership of our directors and executive officers listed in Item ~~6.B~~6.A above. All of the information with respect to beneficial ownership by our directors and executive officers has been furnished by the respective director or executive officer, as the case may be.

Name of Director/Officer(1)	Number of Ordinary Shares Beneficially Owned (2)		Percentage of beneficial ownership(3)		Number of Ordinary Shares Beneficially Owned (2)		Percentage of beneficial ownership(3)

Izzy Sheratzky(4)		4,146,747		19.8		4,146,747		19.8
Professor Yehuda Kahane (5)		1,647,021		7.9		1,622,021		7.7
Zeev Koren		-		-		-		-
Efraim Sheratzky (6)		279,867		1.3		277,466		1.3
Yigal Shani (7)		316,010		1.5		311,010		1.5
Eyal Sheratzky		-		-		-		-
Nir Sheratzky		-		-		-		-
Gil Sheratzky		-		-		-		-
Yoav Kahane		-		-		-		-
Tal Sheratzky- Jaffa		*		*		*		*
Israel Baron		-		-		-		-
Gidon Kotler		-		-		-		-
Ami Saranga		-		-		-		-
Eli Kamer		-		-		-		-
Guy Aharonov		-		-		-		-
Udi Mizrahi		-		-		*		*

Financial liability imposed on him or her in favor of another person pursuant to a judgment, settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria.

Reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding, and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent or in connection with monetary penalty.

Reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent. Under the Israeli Companies Law, a company may obtain insurance for an office holder against liabilities incurred in his or her capacity as an office holder if and to the extent provided in the company’s articles of association.

A breach of duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company.

A breach of duty of care to the company or to a third party, including a breach arising out of the negligent conduct of the office holder.

A financial liability imposed on the office holder in favor of a third party.

An Israeli company may not indemnify or insure an office holder against any of the following:

a breach of duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;

a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

an act or omission committed with intent to derive illegal personal benefit; or

a fine, civil fine, monetary penalty or forfeit levied against the office holder.

Under the Israeli Companies Law, exculpation, indemnification and insurance of office holders must be approved by our compensation committee and our board of directors and, in respect to our chief executive officer, directors and controlling persons, by our shareholders. However due to the change in the Israeli Company law, from February 2016, the extension or renewal of terms of office (which includes exculpation, indemnification and insurance) of chief executive officer, which terms are not improving the previous terms or not significantly different, and are according to the compensation policy, shall not require approval by the shareholders meeting. In addition, according to changes in Israeli Company law from March 2016, chief executive officer can decide upon insignificant change in the terms of office of his subordinate officers, subject to additional conditions and requirement to include such right in the compensation policy of the company.

Our articles of association allow us to indemnify and insure our office holders to the fullest extent permitted by the Israeli Companies Law. Our articles of association also allow us to insure or indemnify any person who is not an office holder, including any employee, agent, consultant or contractor who is not an office holder.

We currently have directors’ and officers’ liability insurance covering our officers and directors (including the officers and directors of our subsidiaries) against certain claims. No claims for liability have been filed under this policy to date.

Our compensation committee, board of directors and shareholders have resolved to indemnify our directors and officers to the fullest extent permitted by law and by our articles of association for liabilities that are of certain enumerated types of events, subject to an aggregate sum equal to 25% of the shareholders equity outstanding at the time a claim for identification is made as indicated by our then latest financial statements (which sum also includes all insurance amounts received by such directors and officers under directors and officers insurance policies maintained by us). For further details, see Item 7.B – Related Party Transactions above.

Change in Capital.

Our articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Israeli Companies Law and must be approved by a resolution duly passed by our shareholders at a general meeting and voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits and an issuance of shares for less than their nominal value, require a resolution of the Board of Directors and court approval.

MATERIAL CONTRACTS

For information concerning our ~~recently entered into~~ service contracts with our President and Co-Chief Executive Officers, see Item 7.B – Related Party Transactions.

EXCHANGE CONTROLS

ordinary shares purchased by nonresidents of Israel with certain non-Israeli currencies (including dollars) and any amounts payable upon the dissolution, liquidation or winding up of our affairs, as well as the proceeds of any sale in Israel of our securities to an Israeli resident, may be paid in non-Israeli currencies (including US dollars) or, if paid in NIS, may be converted into freely repatriable currencies at the rate of exchange prevailing at the time of conversion – pursuant to the general permit issued under the Israeli Currency Control Law, 1978, provided that Israeli income tax has been paid on (or withheld from) such payments. Because exchange rates between the NIS and the U.S. dollar fluctuate continuously, U.S. shareholders will be subject to any such currency fluctuation during the period from when a dividend is declared through the date payment is made in U.S. dollars. Investments outside Israel by our company no longer require specific approval from the Controller of Foreign Currency at the Bank of Israel.

~~E. TAXATION~~

TAXATION

The following describes certain income tax issues relating to us and also certain income tax consequences arising from the purchase, ownership and disposition of our ordinary shares. This discussion is for general information only and is not intended, and should not be construed, as legal or professional tax advice and does not cover all possible tax considerations. To the extent that the discussion is based on legislation yet to be judicially or administratively interpreted, there can be no assurance that the views expressed herein will accord with any such interpretation in the future. Accordingly, holders of our ordinary shares should consult their own tax advisor as to the particular tax consequences arising from your purchase, ownership and disposition of ordinary shares, including the effects of applicable Israeli, United States and other laws and possible changes in the tax laws.

The following discussion represents a summary of the material United States & Israeli tax laws affecting us and our shareholders.

United States Tax Considerations

The following discussion is a description of the material United States, or US, federal income tax considerations applicable to the acquisition, ownership and disposition of our ordinary shares by US Holders who hold such ordinary shares as “capital assets”. As used in this section, the term “US Holder” means a beneficial owner of an ordinary share who is:

n	an individual citizen or resident of the United States;

a corporation or partnership created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia (other than a partnership, including any entity treated as a partnership for U.S. tax purposes, that is not treated as a US person under any applicable Treasury regulations);

n	an estate, the income of which is subject to United States federal income taxation regardless of its source; or

a trust if the trust has elected validly to be treated as a US person for United States federal income tax purposes or if a US court is able to exercise primary supervision over the trust’s administration and one or more US persons have the authority to control all of the trust’s substantial decisions.

The term “Non-US Holder” means a beneficial owner of an ordinary share who is not a US Holder. The tax consequences to a Non-US Holder may differ substantially from the tax consequences to a US Holder. This discussion does not address any aspects of US federal income tax which may be relevant to a Non-US Holder. Accordingly, Non-US Holders are strongly urged to consult with their own tax advisors.

This description is based on provisions of the United States Internal Revenue Code of 1986, as amended, existing, proposed and temporary US Treasury regulations and administrative and judicial interpretations thereof, each as available and in effect as of the date of this report. These sources may change, possibly with retroactive effect, and are open to differing interpretations. This description does not discuss all aspects of US federal income taxation that may be applicable to investors in light of their particular circumstances or to investors who are subject to special treatment under US federal income tax law, including:

n	insurance companies;

n	dealers or traders in stocks, securities or currencies;

n	financial institutions and financial services entities;

n	real estate investment trusts;

n	regulated investment companies;

n	grantor trusts;

n	persons that receive ordinary shares as compensation for the performance of services;

n	tax-exempt organizations;

n	persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument;

n	individual retirement and other tax-deferred accounts;

n	expatriates of the United States;

n	persons having a functional currency that is not the US dollar; or

n	direct, indirect or constructive owners of 10% or more, by voting power or value, of our ordinary shares.

This description also does not consider the US federal gift or estate tax or alternative minimum tax consequences of the acquisition, ownership and disposition of our ordinary shares.

If a partnership (or any other entity treated as a partnership for US federal income tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner should consult its tax advisor as to its tax consequences.

We urge our shareholders to consult with your own tax advisor regarding the tax consequences of acquiring, owning or disposing of our ordinary shares, including the effects of US federal, state, local and foreign and other tax laws. This summary does not constitute, and should not be construed as, legal or tax advice to holders of our shares.

Medicare Tax

Beginning January 1, 2013, certain individuals, estates and trusts, which have income above the statutory threshold amounts, generally will be subject to a 3.8% Medicare tax on their investment income and gain, with limited exceptions. US Holders should consult their own tax advisors concerning Medicare tax consequences, if any, of owning or disposing of our ordinary shares.

Distribution Paid on the Ordinary Shares

As of November 16, 2009, our dividend policy provides for an annual dividend distribution in an amount not less than 50% of our net profits, calculated based on the audited financial statements for the period ending on December 31 of the fiscal year with respect to which the relevant dividend is paid. On February 21, 2012, we revised our dividend policy so that our dividends will be declared and distributed on a quarterly basis in an amount not less than 50% of our net profits, calculated on the basis of our reviewed quarterly financial statements each fiscal year.

Subject to the discussion below under “Passive Foreign Investment Company Considerations”, US Holders, for US federal income tax purposes, will generally be required to include in their gross income as ordinary dividend income (unless qualifies as “qualified dividend income”) in the amount of any distributions made to them in cash or property (other than certain distributions, if any, of our ordinary shares distributed pro rata to all our shareholders), with respect to their ordinary shares, before reduction for any Israeli taxes withheld (without regard to whether any portion of such tax may be refunded to them by the Israeli tax authorities), to the extent that those distributions are paid out of our current or accumulated earnings and profits as determined for US federal income tax purposes. Subject to the discussion below under “Passive Foreign Investment Company Considerations”, distributions in excess of our current and accumulated earnings and profits as determined under US federal income tax principles will be applied first against, and will reduce their tax basis in, your ordinary shares and, to the extent they exceed that tax basis, will then be treated as capital gain. We do not maintain calculations of our earnings and profits under US federal income tax principles. Our dividends will not qualify for the dividends-received deduction generally available to corporate US Holders.

For a US Holder, if we pay a dividend in NIS, any such dividend, including the amount of any Israeli taxes withheld, will be includible in such US Holder’s income in a US dollar amount calculated by reference to the currency exchange rate in effect on the day the distribution is includible in your income, regardless of whether the NIS are converted into US dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend is includible in such US Holder’s income to the date that payment is converted into US dollars generally will be treated as ordinary income or loss.

A non-corporate US Holder’s “qualified dividend income” currently is subject to tax at reduced rates not exceeding 23.8% (including, if applicable, Medicare tax at a rate of 3.8%). For purposes of determining whether a non-corporate US Holders will have “qualified dividend income,” “qualified dividend income” generally includes dividends paid by a foreign corporation if either:

n	the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market in the US, or

that corporation is eligible for benefits of a comprehensive income tax treaty with the US that includes an information exchange program and is determined to be satisfactory by the US Secretary of the Treasury. The Internal Revenue Service has determined that the US-Israel Tax Treaty is satisfactory for this purpose.

In addition, under current law, a non-corporate US Holder must generally hold his ordinary shares for more than 60 days during the 121-day period beginning 60 days prior to the ex-dividend date in order for the dividend to qualify as “qualified dividend income.”

Dividends paid by a foreign corporation will not be treated as “qualified dividend income”, however, if such corporation is treated, for the tax year in which the dividend is paid or the preceding tax year, as a “passive foreign investment company” for US federal income tax purposes. We do not believe that we will be classified as a “passive foreign investment company” for US federal income tax purposes for our current taxable year. However, see the discussion under “Passive Foreign Investment Company Considerations” below.

Foreign Tax Credit

Any dividends paid by us to a US Holder with respect to our ordinary shares generally will be treated as foreign source passive income for US foreign tax credit purposes. Subject to the foreign tax credit limitations, a US Holder may elect to credit any Israeli income taxes withheld from dividends paid on our ordinary shares against such shareholder’s US federal income tax liability (provided, inter alia, such shareholder satisfies certain holding requirements with respect to our ordinary shares). Amounts withheld in excess of the Treaty tax rate, however, will not be creditable against such shareholder’s US federal income tax liability. As an alternative to claiming a foreign tax credit, such shareholder may instead claim a deduction for any withheld Israeli income taxes, but only for a year in which such shareholder elects to do so with respect to all foreign income taxes. The amount of foreign income taxes that may be claimed as a credit in any year is subject to complex limitations and restrictions, which must be determined on an individual basis by each shareholder. Accordingly, our shareholders should consult their own tax advisor to determine whether their income with respect to their ordinary shares would be foreign source income and whether and to what extent they would be entitled to the credit.

Disposition of Ordinary Shares

Upon the sale or other disposition of ordinary shares, subject to the discussion below under “Passive Foreign Investment Company Considerations”, if a holder of our shares is a US Holder, such shareholder generally will recognize capital gain or loss equal to the difference between the amount realized on the disposition and such shareholder’s adjusted tax basis in the ordinary shares, which is usually the cost of such shares, in dollars. US Holders should consult their own advisors with respect to the tax consequences of the receipt of a currency other than dollars upon such sale or other disposition.

Gain or loss upon the disposition of the ordinary shares will be treated as long-term if, at the time of the disposition, the ordinary shares were held for more than one year. Long-term capital gains realized by non-corporate US Holders generally are subject to a lower maximum marginal US federal income tax rate than the maximum marginal US federal income tax rate applicable to ordinary income, other than qualified dividend income, as defined above, generally , not exceeding 23.8% (including, if applicable, Medicare tax at a rate of 3.8%). The deductibility of capital losses by a US Holder is subject to limitations. In general, any gain or loss recognized by a US Holder on the sale or other disposition of ordinary shares will be US source income or loss for US foreign tax credit purposes. US Holders should consult their own tax advisors concerning the source of income for US foreign tax credit purposes and the effect of the US-Israel Tax Treaty on the source of income.

Passive Foreign Investment Company Considerations

Special US federal income tax rules apply to US Holders owning shares of a “passive foreign investment company”, or a PFIC, for US federal income tax purposes. A non-US corporation will be considered a PFIC for any taxable year in which, after applying look-through rules, either

n	75% or more of its gross income consists of specified types of passive income, or

n	50% or more of the average value of its assets consists of passive assets, which generally means assets that generate, or are held for the production of, “passive income.”

Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions and includes amounts derived by reason of the temporary investment of funds. If we were classified as a PFIC, and you are a US Holder, you could be subject to increased tax liability upon the sale or other disposition of ordinary shares or upon the receipt of amounts treated as “excess distributions” (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distribution received by you either in the shorter of the three preceding years or your holding period). Under these rules, the excess distribution and any gain would be allocated ratably over our shareholders’ holding period for the ordinary shares, and the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income. The amount allocated to each of the other taxable years would be subject to tax at the highest marginal rate in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed on the resulting tax allocated to such other taxable years. In addition, holders of stock in a PFIC may not receive a “step-up” in basis on shares acquired from a decedent. If any of our shareholders are US Holders who hold ordinary shares during a period when we are a PFIC, such shareholders be subject to the foregoing rules even if we cease to be a PFIC.

We believe that we will not be classified as a PFIC for US federal income tax purposes for our current taxable year and we anticipate that we will not become a PFIC in any future taxable year based on our financial statements, our current expectations regarding the value and nature of our assets, and the sources and nature of our income. This conclusion, however, is a factual determination that must be made annually based on income and assets for the entire taxable year and thus may be subject to change. It is not possible to determine whether we will be a PFIC for the current taxable year until after the close of the year and our status in future years depends on our income, assets and activities in those years. In addition, because the market price of our ordinary shares is likely to fluctuate and the market price of the shares of technology companies has been especially volatile, and because that market price may affect the determination of whether we will be considered a PFIC, we cannot assure any US Holder that we will not be considered a PFIC for any taxable year.

If we were a PFIC, our shareholders could avoid certain tax consequences referred to above by making an election to treat us as a qualified electing fund or by electing to mark the ordinary shares to market. A US Holder may make a qualified electing fund election only if we furnish the US Holder with certain tax information and we do not presently intend to prepare or provide this information. Alternatively, a US Holder of PFIC stock that is publicly traded may elect to mark the stock to market annually and recognize as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair market value of the PFIC stock and the US Holder’s adjusted tax basis in the PFIC stock. Losses would be allowed only to the extent of net mark-to-market gain previously included by the US Holder under the election for prior taxable years. This election is available for as long as our ordinary shares constitute “marketable stock,” which includes stock that is “regularly traded” on a “qualified exchange or other market.” We believe that the Nasdaq Global Select Market will constitute a qualified exchange or other market for this purpose. However, no assurances can be provided that our ordinary shares will continue to trade on the Nasdaq Global Select Market or that the shares will be regularly traded for this purpose.

According to law amendments effective in 2010, US persons that are shareholders in a PFIC generally will be required to file an annual report disclosing the ownership of such shares and certain other information.

The rules applicable to owning shares of a PFIC are complex, and our shareholders should consult with their own tax advisor regarding the tax consequences that would arise if we were treated as a PFIC.

Information Reporting and Back-up Withholding

Dividend payments with respect to ordinary shares and proceeds from the sale or disposition of ordinary shares made within the United States or by a US payor or US middleman may be subject to information reporting to the Internal Revenue Service and possible US backup withholding. Certain exempt recipients (such as corporations) are not subject to these information reporting requirements. Backup withholding also will not apply to a US Holder who furnishes a correct taxpayer identification number and makes any other required certification or otherwise is exempt from US backup withholding requirements. US Holders who are required to establish their exempt status must provide such certification on Internal Revenue Service Form W-9. US Holders should consult their tax advisors regarding the application of the US information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be credited against a US Holder’s US federal income tax liability and a US Holder may obtain a refund of any excess amounts withheld by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information in a timely manner. The above description is not intended to constitute a complete analysis of all tax consequences relating to acquisition, ownership and disposition of our ordinary shares. Our shareholders are urged to consult their own tax advisor concerning the tax consequences of their particular situation.

Israeli Tax Considerations

The following is a summary of the current material Israeli tax laws applicable to companies in Israel with special reference to its effect on us. This section also contains a discussion of certain Israeli government programs from which we may benefit and some Israeli tax consequences to persons acquiring ordinary shares. This summary does not discuss all the acts of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel, traders in securities or persons that own, directly or indirectly, 10% or more of our outstanding capital, all of whom are subject to special tax regimes not covered in this discussion. Some parts of this discussion are based on new tax legislation that has not been subject to judicial or administrative interpretation. Accordingly, we cannot assure you that the views expressed in the discussion will be accepted by the tax authorities in question. The discussion is not intended and should not be construed as legal or professional tax advice and does not cover all possible tax considerations.

The discussion below should not be construed as legal or professional tax advice and does not cover all possible tax considerations. Potential investors are urged to consult their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership and disposition of our ordinary shares, including in particular, the effect of any foreign, state or local taxes.

General Corporate Tax Structure in Israel

Israeli companies are generally subject to corporate tax on their taxable income. In 2013 the corporate tax rate was 25%. On August 5, 2013 the Israeli Parliament amended the Income Tax Ordinance, by which, inter alia, the corporate tax rate was raised by 1.5% to a rate of 26.5% as from 2014. Capital gains derived after January 1, 2010 are subject to a corporate tax rate imposed in the sale year.

On January 4, 2016, the plenary Knesset passed the Law for Amendment of the Income Tax Ordinance No. 216 which provides, inter alia, for a reduction of the Companies Tax rate commencing from 2016 and thereafter by the rate of 1.5% such that the rate will be 25%.

Tax Benefits Under the Law for the Encouragement of Capital Investments, 1959, as amended

Under the Israeli law, Israeli subsidiaries of the company are entitled to various tax benefits by virtue of the "Preferred Enterprise" status that was granted to their production under the "Investment Law". There can be no assurance that those Israeli subsidiaries will continue to qualify as "Preferred Enterprises" in the future or that the benefits will be granted in the future.

Reform of the Investments Law under the 2010 and 2013 Amendments

On December 29, 2010, the Israeli parliament approved an amendment to the Investments Law, effective as of January 1, 2011, which introduces a new status of "Preferred Company" and "Preferred Enterprise". The amendment allows enterprises meeting certain required criteria to enjoy grants as well as tax benefits. The amendment also introduces certain changes to the map of geographic development areas for purposes of the Investments Law, which will take effect in future years. The amendment generally abolishes the previous tax benefit routes that were afforded under the Investment Law, specifically the tax-exemption periods previously allowed, and introduces new tax benefits for industrial enterprises meeting the criteria of the law, which include among others the following:

A reduced corporate tax rate for industrial enterprises, provided that more than 25% of their annual income is derived from export, which will apply to the enterprise’s entire preferred income so that in the tax years 2011-2012 the reduced tax rate will be 15% for preferred income derived from industrial facilities located in located in areas which are not classifies as area A. In the tax year 2013 the reduced tax rate was 12.5%.

On August 5, 2013 the Israeli Parliament amended the Investments Law, by which, inter alia, it canceled the scheduled progressive reduction in the corporate tax rate for Preferred Enterprises and set it at 16% for enterprises located elsewhere as of January 1, 2014.

Rates listed above are for activities performed in the "development area A".

The reduced tax rates will no longer be contingent upon making a minimum qualifying investment in productive assets.

A definition of “preferred income” was introduced into the Investments Law to include certain types of income that are generated by the Israeli production activity of a preferred enterprise.

A Preferred Company (as defined in the Investments Law) may generally elect to apply the provisions of the amendment to preferred income produced or generated by it commencing from January 1, 2011. The amendment provides various transitional provisions which allow, under certain circumstances, to apply the new regime to investment programs previously approved or elected under the Investments Law in its previous form, or to continue existing investment programs under the provisions of the Investment Law in its previous form for a certain period of time.

The subsidiaries elected to adopt the Investments Law's instructions as amended, commencing 2011.

Taxation of Non-Israeli Subsidiaries

Non-Israeli subsidiaries are generally taxed based upon tax laws applicable in their countries of residence. In accordance with the provisions of Israeli-controlled foreign corporation rules, certain income of a non-Israeli subsidiary, if the subsidiary’s primary source of income is passive income (such as interest, dividends, royalties, rental income or income from capital gains), may be deemed distributed as a dividend to the Israeli parent company and consequently is subject to Israeli taxation. An Israeli company that is subject to Israeli taxes on such deemed dividend income of its non-Israeli subsidiaries may generally receive a credit for non-Israeli income taxes paid by the subsidiary in its country of residence or are to be withheld from the actual dividend distributions.

On December 23, 2013 the Israeli Parliament amended the Income Tax Ordinance, with profound changes to the tax treatment of CFC, mainly with regard to the following:

Reducing the tax rate criterion: a company is considered CFC If the tax rate applicable to passive income does not exceed 15 % (instead of 20 %).

Sale of a security will be considered passive income, unless the holding duration is less than one year and it has been shown that the security served in a business.

Cancel the notional credit mechanism and replacing it with dividend deduction against the actual dividend distribution. Tax refund may be allowed under certain conditions.

Dividends derived from income that was taxed at a rate of at least 15% shall not be considered "passive income" under certain conditions.

Taxation of our shareholders

Capital Gains Taxes Applicable to Israeli Resident Shareholders

The income tax rate applicable to Real Capital Gain derived by an Israeli individual from the sale of shares which had been purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “Substantial Shareholder” (as defined below) at the time of sale or at any time during the preceding 12-month period, such gain will be taxed at the rate of 30%. A “substantial shareholder” is generally a person who alone, or together with his relative or another person who collaborates with him on a permanent basis, hold, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, and all regardless of the source of such right.

Generally, as of January 1, 2012, the tax rate applicable to capital gains derived from by Israeli resident company on the sale of shares, whether listed on a stock market or not, is the corporate tax rate in Israel (26.5% and commencing from January 1, 2016, 25%).

Commencing as of January 1, 2013, an individual whose taxable income during a tax year is in excess of NIS ~~812 thousand~~811,560 (in ~~2014)~~2015), will be liable for an additional 2% on the portion that is in excess of NIS ~~812 thousand.~~811,560.

Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary business income, are taxed in Israel at ordinary income rates (currently up to 48% for individuals in 2014).

Taxation of Israeli shareholders on receipt of dividends

Israeli resident individuals are subject to Israeli income tax on the receipt of dividends paid, at the rate of 25%, or 30% for a shareholder that is considered a "Substantial Shareholder” (as defined above). at any time during the 12-month period preceding such distribution. A distribution of dividend to Israeli resident individuals from income attributed to a Preferred Enterprise will be generally subject to a withholding tax rate of 20%. An individual whose taxable income during a tax year is in excess of NIS ~~812 thousand,~~810,720, will be liable for an additional 2% on the portion that is in excess of NIS ~~812 thousand.~~810,720.

Dividends paid from income derived from Preferred Enterprises are subject to withholding at the rate of 20%.

Dividends paid on our ordinary shares to Israeli companies are exempt from such tax, except for dividends distributed from income derived outside of Israel, which are subject to the corporate tax rate.

Taxation of non-Israeli shareholders on receipt of dividends.

As of the beginning of 2012, non-residents of Israel are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, which tax will be withheld at the source, unless a different rate is provided in a treaty between Israel and the shareholder’s country of residence. With respect to a person who is a “substantial shareholder” (as defined above) at the time receiving the dividend or on any date in the 12 months preceding such date, the applicable tax rate is 30% at any time during the 12-month period preceding such distribution. Dividends paid from income derived from Preferred Enterprises are subject to withholding at the rate of 20%. Under the U.S.-Israel Tax Treaty, the maximum rate of tax withheld in Israel on dividends paid to a holder of our ordinary shares who is a U.S. resident (for purposes of the U.S.-Israel Tax Treaty) is 25%. However, generally, the maximum rate of withholding tax on dividends that are paid to a U.S. corporation holding 10% or more of our outstanding voting capital throughout the tax year in which the dividend is distributed as well as the previous tax year is 12.5% , provided, however, that no more than 25% of our gross income for such previous tax year (if any) consists of interest or dividends (other than dividends or interest received from subsidiary corporations, 50% or more of the outstanding shares of the voting stock of which is owned by us at the time such dividends or interest is received). We cannot assure you that we will designate the profits that are being distributed in a way that will reduce shareholders’ tax liability. The reduced treaty rate, if applicable, is 15% in the case of dividends paid from income derived from Preferred Enterprise.

A distribution of dividend to non-Israeli resident from income attributed to a Preferred Enterprise will be generally subject to withholding tax rates of 20%, subject to a reduced rate under the provisions of any applicable double tax treaty.

A non-resident of Israel who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of such income, provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income in Israel.

Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders.

Israeli law generally imposes a capital gains tax on the sale of securities and any other capital asset. Shareholders that are not Israeli residents are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of our ordinary shares provided that (1) such shareholders did not acquire their shares prior to our initial public offering, (2) the shares are listed for trading on the Tel Aviv Stock Exchange, and (3) such gains did not derive from a permanent establishment of such shareholders in Israel. Furthermore, non-Israeli corporations will not be entitled to the foregoing exemptions if Israeli residents (i) hold 25% or more of their means of control (i.e., the right to vote at the general meeting or to nominate directors or the chief executive officer), or (ii) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly; In such case, the sale, exchange or disposition of ordinary shares would be subject to Israeli tax, to the extent applicable. However, under the U.S.-Israel Tax Treaty, U.S. resident would be permitted to claim a credit for the Israeli taxes against the U.S. federal income tax impose with respect to the sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. The U.S.-Israel Tax Treaty does not relate to U.S. state or local taxes. In addition, under the U.S.-Israel Tax Treaty, the sale, exchange or disposition of our ordinary shares by a shareholder who is a U.S. resident (for purposes of the U.S.-Israel Tax Treaty) holding the ordinary shares as a capital asset is exempt from Israeli capital gains tax unless either (i) the shareholder holds, directly or indirectly, shares representing 10% or more of our voting capital during any part of the 12-month period preceding such sale, exchange or disposition or (ii) the capital gains arising from such sale are attributable to a permanent establishment of the shareholder located in Israel. Certain other tax treaties to which Israel is a party also grant exemptions from Israeli capital gains taxes.

DIVIDENDS AND PAYING AGENTS

Not applicable

STATEMENT BY EXPERTS

Not applicable.

DOCUMENTS ON DISPLAY

We are required to file reports and other information with the Securities and Exchange Commission under the Securities Exchange Act of 1934 and the regulations thereunder applicable to foreign private issuers. Reports and other information filed by us with the Securities and Exchange Commission may be inspected and copied at the Securities and Exchange Commission’s public reference facilities described below. We are not required to file periodic information as frequently or as promptly as United States companies. As a foreign private issuer, we are also exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements; and our officers, directors and principal shareholders are exempt from the reporting and other provisions of Section 16 of the Exchange Act.

You may review a copy of our filings with the Securities and Exchange Commission, including any exhibits and schedules, at the Securities and Exchange Commission’s public reference facilities at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of such materials at prescribed rates by writing to the Public Reference Section of the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. You may call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms. As a foreign private issuer we are now required to file through the Securities and Exchange Commission’s EDGAR system and our periodic filings are therefore available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. You may read and copy any reports, statements or other information that we file with the Securities and Exchange Commission at the Securities and Exchange Commission facilities listed above. These Securities and Exchange Commission filings are also available to the public from commercial document retrieval services.

We also ~~files~~file annual and special reports and other information with the Israeli Securities Authority through its fair disclosure electronic system called the MAGNA. You may review these filings on the website of the MAGNA system operated by the Israeli Securities Authority at www.magna.isa.gov.il or on the website of the TASE at www.tase.co.il. Our reporting requirements with the Israeli Securities Authority will discontinue on May 25, 2016 due to our scheduled delisting on that date. For an information on the delisting from Tel-Aviv Stock Exchange, see Item 9.A – Price History of Our Shares.

SUBSIDIARY INFORMATION

Not applicable

ITEM 11. ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal market risks to which we are exposed as a result of our operations are foreign exchange rate risks and interest rate risks.

Foreign exchange rate risk

Exchange differences upon conversion from our functional currency to dollars are accumulated as a separate component of accumulated other comprehensive income under shareholders’ equity. In the year 2015, accumulated other comprehensive income decreased by 15.8 million compared to the year 2014. In the year 2014, accumulated other comprehensive income decreased by $11.1 million compared to the year 2013. In the year 2013, accumulated and other comprehensive income decreased by $3.2 million compared to the year 2012. ~~In the year 2012, accumulated other comprehensive income decreased by $2.3 million compared to the year 2011.~~

9091

Year Ended December 31,

2012 2013 2014
Actual
At 2011
exchange
rates(1)
Actual
At 2012
exchange
rates(1)
Actual
At 2013
exchange
rates(1)

(In thousands)
Revenues $ 150,318 $ 166,475 $ 170,167 $ 174,879 $ 182,127 $ 193,977
Gross profit 75,558 84,935 89,302 91,937 97,133 103,871
Operating income 29,947 34,496 37,930 39,630 45,870 49,437

~~(1)~~

	Year Ended December 31,
	2013				2014				2015
	Actual		At 2012 exchange rates(1)		Actual		At 2013 exchange rates(1)		Actual		At 2014 exchange rates(1)
	(In US$ thousands)
Revenues		170,167		174,879		182,127		193,977		175,628		209,186
Gross profit		89,302		91,937		97,133		103,871		89,881		107,375
Operating income		37,930		39,630		45,870		49,437		40,644		50,749

(1) Based on average exchange rates during the period.

Our policy remains to reduce exposure to exchange rate fluctuations by entering into foreign currency forward transactions that qualify as hedging transactions under ASC Topic 815, "Derivatives and Hedging" the results of which are reflected in our income statements as revenues or cost of revenues. Currently, the item most likely to be affected by the foreign currency risk is our inventory purchase price. Therefore, from time to time, we enter into such forward contracts, generally of 3 to 20 months’ duration in order to hedge a portion of our foreign currency risk on the inventory purchase price. The result of these transactions, which are affected by fluctuations in exchange rates, could cause our cost of revenues, gross profit and operating income to fluctuate. See Note 19 to our consolidated financial statements included elsewhere in this report.

Interest rate risk

We invest our cash balances primarily in NIS, Brazilian real and Argentine peso bank deposits and therefore, we are exposed to interest rate fluctuation in those currencies, but we do not believe such risks to be material. We do not use derivative financial instruments to limit exposure to interest rate risk.

ITEM 12. ~~DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES~~

DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. ~~DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES~~

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable

ITEM 14.A ~~MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS~~

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None

9192

ITEM 15. ~~CONTROLS AND PROCEDURES~~

CONTROLS AND PROCEDURES

(A) Disclosure Controls and Procedures

Our co-chief executive officers and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of December 31, ~~2014,~~2015, have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our co-chief executive officers and chief financial officer, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the periods specified by the SEC’s rules and forms.

(B) Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is designed to provide reasonable assurance to our management and the board of directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurances with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decline.

Our management assessed the effectiveness of our internal control over financial reporting, as of December 31, ~~2014.~~2015. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Framework).

Based on such assessment, our management has concluded that, as of December 31, ~~2014,~~2015, our internal control over financial reporting is effective.

Fahn Kanne & Co. Grant Thornton Israel, our independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting, as of December 31, ~~2014~~2015 and such report is included elsewhere in this Form 20 -F.

Change in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the year ended December 31, ~~2014~~2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

9293

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

ITURAN LOCATION AND CONTROL LTD. AND SUBSIDIARIES

Fahn Kanne & Co.

Head Office

~~Levinstein Tower~~32 Hamasger Street

~~23 Menachem Begin Road~~

Tel-Aviv ~~66184,~~6721118, ISRAEL

~~P.O.B.~~PO Box 36172, ~~61361~~6136101

T ~~+972~~+972 3 7106666

F ~~+972 3 7106660~~

F +972 3 7106660

www.gtfk.co.il

We have audited the internal control over financial reporting of Ituran Location and Control Ltd. and Subsidiaries (the “Company”) as of December 31, ~~2014,~~2015, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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 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 did not audit the internal control over financial reporting of Ituran Argentina S.A. (Ituran Argentina), a wholly-owned subsidiary of the Company, whose financial statements reflect total assets and revenues constituting ~~8.7~~9.2 and ~~7.6~~9.9 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, ~~2014.~~2015. Ituran Argentina's internal control over financial reporting was audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to Ituran Argentina's internal control over financial reporting in relation to the Company taken as a whole, is based solely on the report of other auditors.

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 and the report of other auditors provide 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.

9394

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, based on our audit and the report of the other auditors, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2014,~~2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended December 31, ~~2014~~2015 and our report dated April ~~28, 2015,~~20, 2016, expressed an unqualified opinion on those financial statements.

/s/FAHN KANNE & CO. GRANT THORNTON ISRAEL

Certified Public Accountants (Isr.)

Tel-Aviv, Israel

April ~~28, 2015~~20, 2016

9495

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Ituran de Argentina S.A.

We have audited the internal control over financial reporting of Ituran de Argentina S.A. (the “Company”) as of December 31, ~~2014,~~2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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 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.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2014,~~2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of the Company as of and for the year ended December 31, 2015 and our report dated February 17, 2016 expressed an unqualified opinion on those financial statements.

	Gonzalo Urien Berri Estudio Urien & Asociados Buenos Aires, Argentina
	February ~~12, 2015~~17, 2016

9697

~~ITEM~~ ~~16. [RESERVED]~~

ITEM 16.

[RESERVED]

ITEM 16A. ~~AUDIT COMMITTEE FINANCIAL EXPERT~~

AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors determined that Mr. Israel Baron, one of our independent directors, is an “audit committee financial expert”, as defined by the applicable regulations promulgated under Section 407 of the Sarbanes-Oxley Act. For information concerning the experience of Mr. Baron, please refer to Item 6.A – Directors and Senior Management, above.

ITEM 16B. ~~CODE OF ETHICS~~

CODE OF ETHICS

In 2005, we adopted a Code of Ethics that applies to our senior management, including chief executive officer, chief financial officer, internal auditor and other individuals performing similar functions. This code of ethics has been posted on our website at www.ituran.com.

ITEM 16C. ~~PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fahn Kanne & Co. Grant Thornton Israel ("Grant Thornton"), has served as our independent auditors. On December ~~15, 2014~~24, 2015 they been re-elected by our shareholders to serve as our independent auditors for the year 2015, until the next general meeting of the shareholders. The following table presents aggregate fees for professional audit services and other services rendered by Grant Thornton, for ~~2013~~2014 and ~~2014:~~2015:

	2013		2014		2014		2015
	(in thousands, USD)				(in thousands, USD)
Audit Fees (1)		262		290		290		242
Tax Fees (2)		27		24		24		0
Total		289		314		314		242

(1)

The audit fees for the years ended December 31, ~~2013~~2014 and ~~2014~~2015 respectively, were for professional services rendered for the audits of our annual consolidated financial statements, review of consolidated quarterly financial statements, statutory audits of Ituran.

(2)

Consists of all tax related services.

Our audit committee has pre-approved the above audit and non-audit services provided by Grant Thornton, during the years ~~2013~~2014 and ~~2014,~~2015, up to a certain amount.

ITEM 16D. ~~EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES~~

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. ~~PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS~~

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

During 2013, the Company did not purchase any of its shares.

ITEM 16F.

CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT

Not applicable.

9798

~~ITEM~~ ~~16F.CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT~~

~~Not applicable.~~

ITEM 16G. ~~CORPORATE GOVERNANCE~~

CORPORATE GOVERNANCE

Under NASDAQ Marketplace Rule 5615(a)(3), foreign private issuers, such as our company, are permitted to follow certain home country corporate governance practices instead of certain provisions of the Rule 5600 series and the requirement to distribute annual and interim reports. A foreign private issuer that elects to follow a home country practice instead of any of such provisions, must disclose in its annual reports each requirement that it does not follow, describe the home country practice followed by the company in lieu of such requirements,satisfy the voting rights (Rule 5640) requirements,have an audit committee that satisfies Rule 5605(c)(3), and ensure that such audit committee's members meet the independence requirement in Rule 5605(c)(2)(A)(ii)... In reliance upon Rule 5615(a)(3), as a foreign private issuer, we have elected to follow our home country practices, absent home country rules requiring otherwise, in lieu of certain Nasdaq Marketplace Rules. Specifically, in Israel, it is not required that a public company have (i) a majority of independent board members or that independent directors have regularly scheduled meetings at which only independent directors are present , or (iii) independent oversight of director nominations As a result, we have elected to follow Israeli law regarding the independence requirements of our board of directors. See “External directors” above. In addition, our board of directors has not appointed a nominating committee and, instead, elects to follow Israeli law, which provides that a company may determine its method of nominating its directors. In our case, board of directors members are nominated by our board of directors, as is the custom in Israel.

ITEM 16H. ~~MINE SAFETY DISCLOSURE~~

MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17. ~~FINANCIAL STATEMENTS~~

FINANCIAL STATEMENTS

See “Item 18—Financial Statements.”

ITEM 18. ~~FINANCIAL STATEMENTS~~

FINANCIAL STATEMENTS

The following consolidated financial statements and related registered public accounting firms’ reports are filed as part of this annual report:

	Page

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3-F-4
Consolidated Statements of Income	F-5
Statements of Comprehensive Income	F-6
Statement of Changes in Equity	F-7-F-8
Consolidated Statements of Cash Flows	F-9-F-10
Notes to Consolidated Financial Statements	~~F-11-F-46~~F-11-F-45

ITEM 19. ~~EXHIBITS~~

EXHIBITS

	Description of Document
1.1	Amended and Restated Articles of Association of the Company
1.2	Form of Memorandum of Association of the Company (English Translation) (1)
2.1	Shareholders Agreement, dated May 18, 1998, by and between Moked Ituran Ltd., Moked Services, Information, Management, Investments, Yehuda Kahane Ltd., F.K. Generators and Equipment Ltd., Gideon Ezra, Ltd., Efraim Sheratzky, and Yigal Shani (English translation). (1)
2.2	Form of Amendment to Shareholders Agreement dated May 18, 1998, by and between Moked Ituran Ltd., Moked Services, Information, Management and Investments, Yehuda Kahane Ltd., F.K. Generators and Equipment Ltd., Gideon Ezra, Ltd., Efraim Sheratzky and/or T.S.D. Holdings Ltd., and Yigal Shani and/or G.N.S. Holdings Ltd. (English translation). (1)
2.3	Form of the second Amendment to Shareholders Agreement dated May 18, 1998, by and between Moked Ituran Ltd., Moked Services, Information, Management and Investments, Yehuda Kahane Ltd., F.K. Generators and Equipment Ltd., Gideon Ezra, Ltd., Efraim Sheratzky and/or T.S.D. Holdings Ltd., and Yigal Shani and/or G.N.S. Holdings Ltd. (English translation). (65)

4.1	Agreement dated January 23, 2007, between E-Com Global Electronic Commerce Ltd. and Gil Sheratzky (English translation) (3)
4.2	Agreement with an Independent Contractor, dated February 1, 2003, by and between the Registrant, Izzy Sheratzky, and A. Sheratzky Holdings Ltd. (English translation). (1)
4.3	Agreement with an Independent Contractor, dated September 5, 2002, by and between the Registrant, Eyal Sheratzky, and A. Sheratzky Holdings Ltd., addendum thereof, dated October 28, 2002, and resolution of the Registrant's shareholders dated February 24, 2004 (English translation)(1)
4.4	Agreement with an Independent Contractor, dated September 5, 2002, by and between the Registrant, Nir Sheratzky, and A. Sheratzky Holdings Ltd., addendum thereof, dated October 28, 2002, and resolution of the Registrant's shareholders dated February 24, 2004 (English translation). (1)
4.5	Addendum No. 2 dated December 13, 2007 (effective January 8, 2003) and Addendum No. 3 dated April 6, 2011 to the agreement between the Company and A. Sheratzky Holdings Ltd., and Nir Sheratzky (3)
4.6	Addendum No. 2 dated December 13, 2007 (effective January 8, 2003) and Addendum No. 3 dated April 6, 2011 to the agreement between the Company and A. Sheratzky Holdings Ltd., and Eyal Sheratzky (3)
4.7	Addendum No. 1 dated April 6, 2011 to the agreement between the Company and A. Sheratzky Holdings Ltd. and Izzy Sheratzky (3)
4.8	Consulting Services Agreement, dated March 23, 1998, by and between the Registrant and Yehuda Kahane Ltd., including addendum thereof, as of May 25, 2003 (English translation). (1)
4.9	Unprotected Lease Agreement, dated February 7, 2002, by and between Mofari Ltd. and the Registrant and addendum thereof, dated February 19, 2002 (English translation) (1)
4.9(a)	Addendum to February 7, 2002 Unprotected Lease Agreement, by and between Mofari Ltd. and the Registrant, dated October 31, 2012. (76)
4.10	Lease Agreement, dated May 29, 2002, by and between Rinat Yogev Nadlan and Ituran Cellular Communication Ltd. (English translation). (1)( 54)
4.11	Lease Agreement, dated March 16, 2000, by and between Teleran Localizacao e Controle Ltda. and T4U Holding B.V., and addendum thereof, dated May 31, 2000. (1)
4.12	Form of Directors' Letter of Indemnity (English translation). (7) (6)
4.13	Frame Product and Services Purchase Agreement dated January 1, 2008 by and between ~~IturanLocation~~Ituran Location and Control Ltd. and Telematics Wireless Ltd. (2) *
4.14	Radio Location System License Agreement, dated July 13, 2004, by and between Teletrac, Inc., and Telematics Wireless Ltd. (1)
4.15	Ituran Location & Control Compensation Policy, as approved on October 31, 2013 (76)
4.16	~~Agreement dated February 23, 2012 between Ituran Systems De Monitoramento Ltda. and Mr. Avner Kurz (~~4)
~~4.17~~	Service Agreement, dated as of February 1, 2014, by and among Ituran Location &Control Ltd., Izzy Sheratzky and A. Sheratzky Holdings Ltd. (English Translation). (76)
~~4.18~~4.17	Service Agreement, dated as of February 1, 2014, by and among Ituran Location &Control Ltd., ORAS Capital Ltd. and Eyal Sheratzky. (76)
~~4.19~~4.18	Service Agreement, dated as of February 1, 2014, by and among Ituran Location &Control Ltd., Galnir Management and Investments Ltd. and Nir Sheratzky. (76)
~~4.20~~4.19	Service Agreement, dated as of February 1, 2014, by and among E-Com Global Electronic Commerce Ltd., ZERO-TO-ONE S.B.L. INVESTMENTS LTD. and Gil Sheratzky. (7) (6)

8	List of significant subsidiaries
12.1	Certifications by co-chief executive officers as required by Rule 13a-14(a).
12.2	Certification by person serving in the capacity of chief financial officer as required by Rule 13a-14(a).
13	Certifications by the co-chief executive officers and the person serving in the capacity of chief financial officer as required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

(1)

Filed as an exhibit to the Registrant’s Registration Statement on Form F-1 (File No. 333-128028) filed on September 23, 2005, and incorporated herein by reference.

(2)

Filed as an exhibit to the annual report on Form 20-F for the year ended December 31, 2007 and incorporated herein by reference.

(3)

Filed as an exhibit to the annual report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference.

(4)

~~Filed as an exhibit to Form 6-K for the month of April 2012, filed on April 5, 2012, and incorporated herein by reference.~~

~~(5)~~

The current lessee under this agreement is the Registrant.

~~(6)~~(5)

Filed as an exhibit to Form 13G of Yehuda Kahane for the year ended December 31, 2014, filed on February 17, 2015, and incorporated herein by reference.

~~(7)~~(6)

Filed as an exhibit to the annual report on Form 20-F for the year ended December 31, 2013 and incorporated herein by reference.

* Certain portions of this exhibit have been omitted pursuant to an order granting confidential treatment by the United States Securities and Exchange Commission. The omitted non-public information has been filed with the United States Securities and Exchange Commission

100

ITURAN LOCATION AND CONTROL LTD.

Consolidated Financial Statements

as of December 31, ~~2014~~2015

ITURAN LOCATION AND CONTROL LTD.

Consolidated Financial Statements

as of December 31, ~~2014~~2015

Table of Contents

	Page

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Balance Sheets	F-3
Statements of Income	F-5
Statements of Comprehensive Income	F-6
Statements of Changes in Equity	F-7
Statements of Cash Flows	F-9
Notes to Consolidated Financial Statements	F-11

REPORT OF INDEPENDENT REGISTERED PUBLIC ~~ACCOUNTING~~ ACFICOUNTIRMNG FIRM

BOARD OF DIRECTORS AND STOCKHOLDERS

ITURAN LOCATION AND CONTROL LTD.

Fahn Kanne & Co.

Head Office

~~Levinstein Tower~~32 Hamasger Street

~~23 Menachem Begin Road~~

Tel-Aviv ~~66184,~~6721118, ISRAEL

~~P.O.B.~~PO Box 36172, ~~61361~~6136101

T +972 3 7106666

F +972 3 7106660

www.gtfk.co.il

We have audited the accompanying consolidated balance sheets of Ituran Location and Control Ltd. and Subsidiaries (the "Company") as of December 31, ~~2014~~2015 and ~~2013,~~2014, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, ~~2014.~~2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Ituran Argentina S.A. (Ituran Argentina), a subsidiary of the Company, which statements reflect total assets constituting ~~8.7%~~9.2% and ~~8.6%~~8.7%, respectively, of consolidated total assets as of December 31, 2015 and 2014, and ~~2013, and total~~ revenues of ~~7.6%~~9.9%, ~~8.9%~~7.6% and 9%8.9%, respectively, of consolidated total revenues for the years ended December 31, 2015, 2014 and 2013 ~~and 2012.~~respectively. Those financial statements were audited by other auditors, whose ~~reports~~report thereon have been furnished to us, and our opinion insofar as it relates to the amounts included for Ituran Argentina, is based solely on the ~~reports~~report of the other auditors.

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 and the ~~reports~~report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the ~~reports~~report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ituran Location and Control Ltd. and Subsidiaries as of December 31, ~~2014~~2015 and ~~2013,~~2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2014,~~2015, in conformity with accounting principles generally accepted in the United States of America.

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, ~~2014,~~2015, based on criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated April ~~28, 2015~~20, 2016 expressed an unqualified opinion.

FAHN KANNE & CO. GRANT THORNTON ISRAEL

Certified Public Accountants (Isr.)

Tel-Aviv, Israel

April ~~28, 2015~~20, 2016

F - 2

ITURAN LOCATION AND CONTROL LTD.

CONSOLIDATED BALANCE SHEETS

	US dollars
	December 31,
(in thousands)	2015		2014

Current assets
Cash and cash equivalents		27,016		38,418
Investment in marketable securities		2,035		2,362
Accounts receivable (net of allowance for doubtful accounts)		27,436		27,960
Other current assets (Note 2)		22,437		22,318
Inventories (Note 3)		12,781		12,164
		91,705		103,222

Long-term investments and other assets
Investments in affiliated company (Note 4A)		4,705		1,016
Investments in other company (Note 4B)		78		79
Other non-current assets (Note 5)		1,166		2,091
Deferred income taxes (Note 15)		2,279		2,886
Funds in respect of employee rights upon retirement		7,174		6,642
		15,402		12,714

Property and equipment, net (Note 6)		31,514		31,908

Intangible assets, net (Note 7)		26		452

Goodwill (Note 8)		3,356		4,041

Total assets		142,003		152,337

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

~~F-2~~F - 3

~~ITURAN~~ LO~~CATION AND CONTROL LTD.~~

~~CONSOLIDATED BALANCE SHEETS~~

US dollars
December 31,
(in thousands) 2014 2013

Current assets
Cash and cash equivalents 38,418 41,697
Deposit in Escrow (Note 11A1) - 4,982
Investment in marketable securities 2,362 -
Accounts receivable (net of allowance for doubtful accounts) 27,960 29,239
Other current assets (Note 2) 22,318 18,437
Inventories (Note 3) 12,164 14,506
103,222 108,861
Long-term investments and other assets
Investments in affiliated company (Note 4A) 1,016 1,423
Investments in other company (Note 4B) 79 88
Other non-current assets (Note 5) 2,091 1,022
Deferred income taxes (Note 15) 2,886 3,781
Funds in respect of employee rights upon retirement 6,642 6,649
12,714 12,963

Property and equipment, net (Note 6)
31,908 32,546

Intangible assets, net (Note 7)
452 739

Goodwill (Note 8)
4,041 5,433

Total assets 152,337 160,542

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

~~F-3~~

ITURAN LOCATION AND CONTROL LTD.

CONSOLIDATED BALANCE SHEETS

	US dollars						US dollars
	December 31,						December 31,
(in thousands, except share data)	2014			2013			2015			2014

Current liabilities
Credit from banking institutions (Note 9)		-			38			155			-
Accounts payable		11,658			11,436			10,466			11,658
Deferred revenues		9,401			9,852			9,210			9,401
Other current liabilities (Note 10)		25,253			30,276			21,750			25,253
		46,312			51,602			41,581			46,312
Long-term liabilities
Liability for employee rights upon retirement		10,229			9,607			10,637			10,229
Provision for contingencies		-			2,599			622			-
Deferred revenues		1,063			1,033			973			1,063
Deferred income taxes (Note 15)		150			216			-			150
		11,442			13,455
Other non-current								369			-
								12,601			11,442
Contingent liabilities (Note 11)

Equity:
Stockholders’ equity (Note 12)
Share capital – ordinary shares of NIS 0.33⅓ par value:		1,983			1,983			1,983			1,983
Authorized – December 31, 2014 and 2013 – 60,000,000 shares
Issued and outstanding – December 31, 2014 and 2013 – 23,475,431 shares
Authorized – December 31, 2015 and 2014 – 60,000,000 shares
Issued and outstanding – December 31, 2015 and 2014 – 23,475,431 shares
Additional paid- in capital		71,550			71,550			71,550			71,550
Accumulated other comprehensive income		(1,850	)		8,608			(17,520	)		(1,850	)
Retained earnings		49,067			38,831			57,739			49,067
Treasury stock at cost – December 31, 2014 and 2013 – 2,507,314 shares		(30,054	)		(30,054	)
Treasury stock at cost – December 31, 2015 and 2014 – 2,507,314 shares								(30,054	)		(30,054	)
Stockholders’ equity		90,696			90,918			83,698			90,696
Non-controlling interests		3,887			4,567			4,123			3,887
Total equity		94,583			95,485			87,821			94,583

Total liabilities and equity		152,337			160,542			142,003			152,337

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

~~F-4~~F - 4

ITURAN LOCATION ANDAND CONTROL LTD.

CONSOLIDATED STATEMENTS OF INCOME

	US dollars									US dollars
	Year ended December 31,									Year ended December 31,
(in thousands except earnings per share)	2014			2013			2012			2015			2014			2013

Revenues:
Location based services		133,692			126,951			114,565			127,683			133,692			126,951
Wireless communications products		48,435			43,216			35,753			47,945			48,435			43,216
		182,127			170,167			150,318			175,628			182,127			170,167

Cost of revenues:
Location based services		46,852			44,850			44,974			46,823			46,852			44,850
Wireless communications products		38,142			36,015			29,786			38,924			38,142			36,015
		84,994			80,865			74,760			85,747			84,994			80,865

Gross profit		97,133			89,302			75,558			89,881			97,133			89,302
Research and development expenses		2,526			2,414			2,066			2,401			2,526			2,414
Selling and marketing expenses		9,264			9,715			8,489			9,303			9,264			9,715
General and administrative expenses		38,617			34,483			33,439			37,801			38,617			34,483
Other expenses, net (Note 13)		856			4,760			1,617
Other (income) expenses, net (Note 13)											(268	)		856			4,760
Operating income		45,870			37,930			29,947			40,644			45,870			37,930
Other (expenses) income, net (Note 11A2)		-			(166	)		6,755
Other (expenses) income, net											-			-			(166	)
Financing income, net (Note 14)		1,704			238			987			1,189			1,704			238
Income before income tax		47,574			38,002			37,689			41,833			47,574			38,002
Income tax expenses (Note 15)		(14,246	)		(12,447	)		(11,690	)		(12,822	)		(14,246	)		(12,447	)
Share in losses of affiliated companies, net (Note 4A)		(421	)		(1	)		(39	)		(2,439	)		(421	)		(1	)
Net income for the year		32,907			25,554			25,960			26,572			32,907			25,554
Less: Net income attributable to non-controlling interest		(2,478	)		(1,792	)		(1,080	)		(1,601	)		(2,478	)		(1,792	)
Net income attributable to the Company		30,429			23,762			24,880			24,971			30,429			23,762

Basic and diluted earnings per share attributable to Company’s stockholders (Note 16)		1.45			1.13			1.19			1.19			1.45			1.13

Basic and diluted weighted average number of shares outstanding		20,968			20,968			20,968			20,968			20,968			20,968

In accordance with ASC Topic 323-10-40-1, a change in the Company’s proportionate share of an investee’s equity, resulting from issuance of shares by the investee to third parties, is accounted for as if the Company had sold a proportionate share of its investment. Any gain or loss resulting from an investee’s share issuance is recognized in earnings.

Management evaluates investments in affiliated companies, for evidence of other-than-temporary declines in value. Such evaluation is dependent on the specific facts and circumstances and includes analysis of relevant financial information (e.g. budgets, business plans, financial statements, etc.). During 2015 and 2014, no impairment was identified.

Investments in companies in which the company no longer has significant influence, are classified as "investments in other companies". See J.I. below.

J.I.

Investment in other ~~companies~~company

Non-marketable ~~investments~~investment in other ~~companies~~company in which the Company does not have a controlling interest nor significant influence are accounted for at cost, net of write down for any permanent decrease in value.

K.J.

Derivatives

The group applies the provisions of ASC Topic 815, "Derivatives and Hedging". In accordance with ASC Topic 815, all the derivative financial instruments are recognized as either assets or liabilities on the balance sheet at fair value. The accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For derivative financial instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.

From time to time the Company carries out transactions involving foreign exchange derivative financial instruments (mainly forward exchange contracts) which are designed to hedge the cash flows expected to be paid with respect to forecasted monthly purchases of inventory, denominated in currencies other than the functional currency of the Company. Such transactions were designated as hedging instruments on the date that the Company entered into such derivative contracts, and qualify as cash flow hedges under ASC Topic 815.

~~F-13~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 1~~ -

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)~~

~~Derivatives (cont.)~~

The effective portion of the changes in fair value of the derivative instruments designated for hedging purposes are reported as other comprehensive income (loss), net of tax under the caption "unrealized gains (losses) in respect of derivative financial instruments designated for cash flow hedge" and are reclassified to the statements of income when the hedged transaction ~~realizes (i.e when the related inventory is sold).~~realizes. During the reporting periods, the gains or losses that were recognized in earnings for hedge ineffectiveness were insignificant.

All other derivatives which do not qualify for hedge accounting, or which have not been designated as hedging instruments, are recognized in the balance sheet at their fair value, with changes in the fair value carried to the statements of income as incurred in financing income (expenses), net.

See also Note 19B for further information.

F - 13

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

L.K.

Property and equipment

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. Leasehold improvements are depreciated on the straight-line method over the shorter of the estimated useful life of the property or the duration of the lease.

Rates of depreciation:

		%
Operating equipment (mainly 20%-33%)		6.5-33
Office furniture, equipment and computers		7-33
Buildings		2.5
Vehicles		15
Leasehold improvements		Duration of the lease which is less or equal to useful life.

M.L.

Impairment of long-lived assets

The Group’s long-lived assets (including finite-lived intangible assets) are reviewed for impairment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. 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 asset exceeds its fair value (see also Note 1N and Note 7).

The Group’s long-lived assets are reviewed for impairment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. 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 asset exceeds its fair value (see also Note 1O and Notes 7 and 8).

N.M.

Income taxes

The Group accounts for income taxes in accordance with ASC Topic 740-10, "Income Taxes". According to this guidance, deferred income taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the tax rates expected to be in effect at the time when these differences reverse. Valuation allowances in respect of the deferred tax assets are provided for if, based upon the weight of available evidence, it is more likely than not that all or a portion of the deferred income tax assets will not be realized.

~~F-14~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 1~~ -

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)~~

~~Income taxes (cont.)~~

US GAAP provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is "more-likely-than-not" to be sustained were to be challenged by a taxing authority. The assessment of a tax position is based solely on the technical merits of the position, without regard the likelihood that the tax position may be challenged. If an uncertain tax position meets the "more-likely-than-not" threshold, the largest amount of tax benefit that is greater than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded. See also Note ~~15K.~~15L.

The Company recognizes interest as interest expenses (among financing expenses) and penalties, if any, related to unrecognized tax benefits in its provision for income tax.

O.N.

Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in business combinations accounted for in accordance with the "purchase method" and is allocated to reporting units at acquisition. Goodwill is not amortized but rather tested for impairment at least annually in accordance with the provisions of ASC Topic 350, "Intangibles - Goodwill and Other". The Company performs its goodwill annual impairment test for the reporting units at December 31 of each year, or more often if indicators of impairment are present.

F - 14

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Goodwill and intangible assets (cont.)

(cont.)

As required by ASC Topic 350, , the Company chooses either to perform a qualitative assessment whether the two-step goodwill impairment test is necessary or proceeds directly to the two-step goodwill impairment test. Such determination is made for each reporting unit on a stand-alone basis. The qualitative assessment includes various factors such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, earnings multiples, gross margin and cash flows from operating activities and other relevant factors. When the Company chooses to perform a qualitative assessment and determines that it is more likely than not ~~(a more~~(more than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, then the Company proceeds to the two-step goodwill impairment test. If the Company determines Otherwise, no further evaluation is necessary.

When the Company decides or is required to perform the two-step goodwill impairment test, the Company compares the fair value of the reporting unit to its carrying value ("step 1"). If the fair value of the reporting unit exceeds the carrying value of the reporting unit net assets (including the goodwill allocated to such reporting unit), goodwill is considered not to be impaired, and no further testing is required. If the carrying value exceeds the fair value of the reporting unit, then the implied fair value of goodwill is determined by subtracting the fair value of all the identifiable net assets from the fair value of the reporting unit. An impairment loss is recorded for the excess, if any, of the carrying value of the goodwill allocated to the reporting unit over its implied fair value ("step 2").

There are a number of generally accepted methods used for valuing a reporting unit:

The ‘income approach’ utilizes discounted forecasted cash flows, the ‘Market – approach which utilize pricing multiples of business entities with publicly traded securities whose business and financial risks are comparable to those of the reporting unit being valued and the ‘Asset - based approach’ which establishes a value based on the cost of reproducing or replacing the asset being valued. These methods described may be used alone or in combination with one another.

The Company applies assumptions that market participants would consider in determining the fair value of each reporting unit and the fair value of the identifiable assets and liabilities of the reporting units, as applicable.

~~F-15~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 1~~ -

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)~~

~~Goodwill and intangible assets (cont.)~~

~~(cont.)~~

The Company performed a qualitative assessment for two reporting units as of December 31, ~~2014~~2015 and ~~2013,~~2014, and concluded that the qualitative assessment did not result in a more likely than not indication of impairment, and therefore no further impairment testing was required, with respect to such units.

For other reporting ~~unit (three different~~ units (two in ~~2013)~~2014, one in 2015), operating in Israel, the Company elected to bypass the qualitative assessment and proceeded directly to performing the first step of the goodwill impairment test.

In order to determine the fair value of ~~that~~such reporting ~~unit,~~units, the Company utilized the "income approach". According to the income approach expected future cash flows are discounted to their present value using an appropriate rate of return. Judgments and assumptions related to future cash flows (projected revenues, operating expenses, and capital expenditures), future short-term and long-term growth rates, and weighted average cost of capital, which are based on management's internal assumptions, and believed to be similar to those that would be utilized by market participants under the circumstances and to represent both the specific risks associated with the business, and capital market conditions, are inherent in developing the discounted cash flow model.

During 2015, 2014 ~~2013~~ and ~~2012,~~2013, the Company recorded a goodwill impairment loss in an amount of US$ 674,000, US$ 879,000 and US$ 3,093,000, ~~and US$ 672,000,~~ respectively. See Note 8.

F - 15

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Goodwill and intangible assets (cont.)

		Years
GIS database		10
~~Customer base~~	5
Brand name		15
Other		3-10

Recoverability of intangible assets is measured as described in Note 1M1L above. During ~~2014,~~2015, the Company recorded an intangible assets impairment loss in an amount of US$ ~~43,000.~~255,000. See Note 7.

P.O.

Contingencies

The Company and its subsidiaries are involved in certain legal proceedings that arise from time to time in the ordinary course of their business and in connection with certain agreements with third parties. Except for income tax contingencies, the Company records accruals for contingencies to the extent that the management concludes that the occurrence is probable and that the related liabilities are estimable. Legal expenses associated with contingencies are expensed as incurred.

~~F-16~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 1~~ -

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)~~

Q.P.

Funds in respect of, and liability for employee rights upon retirement

The Company's liability for employee rights upon retirement with respect to its Israeli employees is calculated, pursuant to Israeli severance pay law, based on the most recent salary of each employee 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 makes monthly deposits to insurance policies and severance pay funds. The liability of the Company is fully provided for.

The deposited funds include profits or losses accumulated up to the balance sheet date. The deposited funds may be withdrawn upon the fulfillment of the obligation pursuant to Israeli severance pay laws or labor agreements. The value of the deposited funds is based on the cash surrender value of these policies, and includes profits or losses.

The liability for employee rights upon retirement in respect of the employees of the non-Israeli subsidiaries of the Company, is calculated on the basis of the labor laws of the country in which the subsidiary is located and is covered by an appropriate accrual.

Severance expenses for the years ended December 31, 2015, 2014 ~~2013~~ and ~~2012,~~2013, amounted to US$ 1,386,000 US$ 1,460,000 and US$ 882,000, ~~and US$ 1,204,000,~~ respectively.

R.Q.

Revenue recognition

Revenues are recognized when delivery has occurred and, where applicable, after installation has been completed, there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured and no further obligations exist. In cases where delivery has occurred but the required installation has not been performed, the ~~Company~~company does not recognize the revenues until the installation is completed.

The Company’s revenues are recognized as follows:

Revenues from sales are recognized when title and risk of loss of the product pass to the customer (usually upon delivery).

F - 16

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Revenue recognition (cont.)

The Company applies the provisions of ASC Topic 605-25, "Revenue Recognition - Multiple-Element Arrangements", as amended. ASC Topic 605-25 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. For such arrangements, each element of the contract is accounted for as a separate unit when it provides the customer value on a stand-alone basis and if an arrangement includes a right of return relative to a delivered item, delivery or performance of the undelivered item or items is considered probable and substantially in the control of the Company. According to ASC 605-25, as amended, when neither "vendor specific objective evidence" of selling price, nor third party price exists, the Company is required to develop a best estimate of the selling price of the deliverables and the entire arrangement consideration is allocated to the deliverables based on the relative selling prices.

Revenues from SVR services subscription fees and from installation services, sold to customers within a single contractually binding arrangement were accounted for revenue recognition purposes as a single unit of accounting in accordance with ASC Topic 605-25, since the installation services element was determined not to have a value on a stand-alone basis to the customer. Accordingly, the entire contract fee for the two deliverables is recognized ratably on a straight-line basis over the subscription period.

Amounts earned by the Brazilian subsidiary for arranging a bundle transaction of SVR services subscription and installation services together with insurance services to be supplied by a third party insurance company, are recognized ratably on a straight-line basis over the subscription period, since the amount allocated to the company, is contingent upon the delivery of the SVR services. As the insurance company is the primary obligor of the insurance component, the company recognizes only the net amounts as revenues, after deduction of amounts related to the insurance component.

Deferred revenues include unearned amounts received from customers (mostly for the provision of installation and subscription services) but not yet recognized as revenues. Such deferred revenues are recognized as described in paragraph 2, above.

4.5.

Extended warranty

Revenues from extended warranty which are provided for a monthly fee and are sold separately are recognized over the duration of the warranty periods.

~~F-17~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 1~~ -

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)~~

S.R.

Warranty costs

The Company provides a standard warranty for its products to end-users at no extra charge. The Company estimates the costs that may be incurred under its warranty obligation and records a liability at the time the related revenues are recognized.

Among the factors affecting the warranty liability are the number of installed units and historical percentages of warranty claims. The Company periodically assesses the adequacy of the recorded warranty liability and adjusts the amount to the extent necessary. To date, warranty costs and the related liabilities have not been material.

T.S.

Research and development costs

Research and development costs (other than computer software related expenses) are expensed as incurred.

Software Development Costs

ASC Topic 985-20, "Costs of Software to Be Sold, Leased, or Marketed" requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. Research and development costs incurred in the process of developing product improvements or new products, are generally expensed as incurred, net of grants received from the Government of Israel for development of approved projects. Costs incurred by the Company between the establishment of technological feasibility and the point at which the product is ready for general release are usually insignificant.

F - 17

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

U.T.

Advertising costs

Advertising costs are expensed as incurred.

Advertising expenses for the years ended December 31, 2015, 2014 ~~2013~~ and ~~2012~~2013 amounted to US$ ~~6.7~~6.8 million, US$ ~~7.6~~6.7 million and US$ ~~6.6~~7.6 million, respectively. Advertising expenses are presented among "selling and marketing expenses".

V. U.

Earnings per share

Basic earnings per share are computed by dividing net income attributable to the common shares, by the weighted average number of shares outstanding during the year, net of the weighted average number of treasury stock.

In computing diluted earnings per share, basic earnings per share are adjusted to reflect the effect of any potential ~~dilution that could occur upon~~dilutive ordinary shares. During the ~~exercise of options granted under employee stock option plans, using the treasury stock method, and the conversion of the convertible capital notes, using the if converted method.~~reporting periods there were no such potential shares.

W. V.

Fair value measurements

The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market based measurement that is required to be determined based on the assumptions that market participants would use to determine the price of an asset or a liability.

~~F-18~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 1~~ -

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)~~

~~Fair value measurements (cont.)~~

As a basis for considering such assumptions, the fair value accounting standard establishes the following fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3 - Unobservable inputs are used when little or no market data is available. Level 3 inputs are considered as the lowest priority under the fair value hierarchy.

In determining fair value, companies are required to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as to consider counterparty credit risk in the assessment of fair value.

Regarding the fair value measurements of financial assets and liabilities and the fair value hierarchy of such measurements, see Note 19C.

The Company also measures certain non-financial assets, consisting mainly goodwill and intangible assets at fair value on a nonrecurring basis. These assets are adjusted to fair value when they are considered to be impaired (see 1O1N and 1M1L above). As of December 31, ~~2014,~~2015, the Company measured the fair value of goodwill with a total carrying amount of US$ ~~1.5~~0.7 million (before the recognition of an impairment loss) that is allocated to one reporting unit. As a result of the above impairment test, the Company recorded an impairment loss of goodwill in an amount of US$ ~~0.8~~0.7 million, to its implied fair value of US$ 0 million. The fair value measurement of the non-financial assets is classified as level 3.

As of December 31, 2014, the Company measured the fair value of goodwill with a total carrying amount of US$ 1.5 million (before the recognition of an impairment loss) that was allocated to ~~such~~two reporting ~~unit~~units. As a result of the above impairment test, the Company recorded an impairment loss of goodwill in amount of US$ 0.9 million to its ~~imputed~~implied fair value of US$ 0.7 million. The fair value measurement of the non-financial assets is classified as level 3.

As of December 31, 2013, the Company measured the fair value of goodwill with a total carrying amount of US$ 4.8 million (before the recognition of an impairment loss) that was allocated to three reporting units. As a result of the above impairment test, the Company recorded an impairment loss of goodwill with a carrying amount of US$ 2.6 million, US$ 0.5 million and US$ 1.7 million allocated to three different reporting units to their imputed fair value of US$ 1.7 million, US$ 0 and US$ 0, respectively, resulting in an aggregate impairment charge of US$ 3.1 million. The fair value measurement of the non-financial assets is classified as level 3.See also Notes 1O and 8.

F - 18

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

X.W.

Deferred installation expenses and prepaid expenses

Direct installation expenses incurred at the inception of specific subscription arrangements in Brazil with specific customers, to enable the Company's subsidiary in Brazil to perform under the terms of the arrangement (i.e. directly attributable to obtaining a specific subscriber), which their costs can be measured reliably, are capitalized and presented as "Deferred installation expenses" within the balances "Other current assets" and "Other non-current assets", as applicable.

Such installation activities has determined not to represent separate earnings process for revenue recognition purposes in accordance with the principles of ASC Topic 605-25, "Multiple-Element Arrangements" as they has been determined not to have a value on a stand-alone basis to the customer.

The deferred expenses that are capitalized are limited to the higher of value of the amount of nonrefundable deferred revenue, if any or to the amount of the minimum contractual subscription revenue, net of direct costs.

The deferred expenses are amortized over the ~~contractual~~estimated life of the related subscription arrangements by the straight-line method (usually 20 months). Costs that do not meet the aforementioned criteria, are recognized immediately as expenses.

Prepaid expenses, consist of amounts paid by the Brazilian subsidiary to insurance companies as a prepaid insurance on behalf of its customers as part of bundle transactions of SVR services together with insurance services to be supplied by a third party insurance company. Under such transactions, the customers are required accordingly to pay the Brazilian subsidiary a monthly fee for all the bundled services (see Note 1R regarding the revenue recognition of bundle transactions). The insurance companies are obligated to refund any unearned insurance amounts to the Brazilian subsidiary in the event of cancelation by the customers. The prepaid expenses are amortized over the contractual life of the insurance service with the insurance company (usually 12 months) by the straight-line method. The amortization is netted against the monthly receipts from customers for the bundled services.

~~F-19~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 1~~ -

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)~~X.

Stock-based compensation

The Company measures and recognizes compensation expense for cash bonuses to senior employees, which are based, or partly based, on the price of the Company’s shares in accordance with ASC 718 -30, "Compensation-Stock Compensation - Awards Classified as Liabilities" (See Note 17 F regarding "Excess Return Cash Incentives").

The awards are measured at the grant date at their fair value and remeasured at the end of each reporting period through settlement, with changes in the fair value recognized as compensation cost over the requisite service period. Compensation cost for awards that are subject to market conditions are be attributed separately for each vesting tranche of the award (generally calendar year).

The fair value of the award is estimated using the Monte-Carlo-pricing model. The effect of market conditions is reflected in the fair value measurements.

Reclassification

Certain comparative figures have been reclassified to conform to the current year presentation. Such reclassifications did not have any significant impact on the Company's equity, net income or cash flows.

~~Recently issued accounting pronouncements~~

~~Accounting pronouncements adopted in 2014~~

~~ASC Topic 830, “Foreign Currency Matters"~~

Effective January 1, 2014, the Group adopted Accounting Standards Update 2013-5, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity ("ASU 2013-5").

ASU 2013-5 clarifies among other things that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in-substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.

For public companies, the amendments in ASU 2013-5 became effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted.

~~The adoption did not have a material impact on the Group's consolidated results of operations and financial condition.~~

~~ASC Topic 740, "Income Taxes"~~

Effective January 1, 2014, the Company adopted Accounting Standard Update 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) ("ASU 2013-11").

The amendments in ASU 2013-11 state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be presented net of deferred tax assets.

ASU 2013-11 applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. For public companies the amendments in this ASU became effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments were applied prospectively to all unrecognized tax benefits that existed at the effective date.

~~The adoption did not have a material impact on the Company's consolidated results of operations and financial condition.~~

~~F-20~~F - 19

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Recently issued accounting pronouncements ~~(cont.)~~

2.1.

Accounting pronouncements not yet effective

Accounting Standard Update 2014-09, ~~“Revenue~~"Revenue from Contracts with ~~Customers”~~Customers"

In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09").

ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.

~~For~~An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.

In accordance with a recent amendment to ASU 2014-09, introduced by Accounting Standards Update 2015-11, "Revenue from Contracts with Customers - Deferral of the Effective Date", for a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period (the first quarter of fiscal year 2018 for the Company). Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated financial statements.

Accounting Standard Update 2015-11, "Simplifying the Measurement of Inventory"

In July, 2015, The FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330) ("ASU 2015-11").

ASU 2015-11 outlines that inventory within the scope of its guidance be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method (RIM) are not impacted by the new guidance. Prior to the issuance of ASU 2015-11, inventory was measured at the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin).

For a public entity, the amendments in ASU 2015-11 are effective, in a prospective manner, for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period (the first quarter of fiscal year 2017 for the Company). Early ~~application~~adoption is ~~not permitted.~~permitted as of the beginning of an interim or annual reporting period.

The Company is in the process of assessing the impact, if any, of ASU ~~2014-09~~2015-11 on its consolidated financial statements.

F - 20

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Recently issued accounting pronouncements (cont.)

Accounting pronouncements not yet effective (cont.)

Accounting Standards Update 2015-17, "Income Taxes: Balance Sheet Classification of Deferred Taxes"

In November 2015, the FASB has issued Accounting Standards Update (ASU) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which changes how deferred taxes are classified on organizations’ balance sheet.

The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, all deferred tax assets and liabilities will be required to be classified as noncurrent.

The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods (i.e., in the first quarter of 2017 for calendar year-end companies).

Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period.

The guidance may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively (i.e., by reclassifying the comparative balance sheet). If applied prospectively, entities are required to include a statement that prior periods were not retrospectively adjusted. If applied retrospectively, entities are also required to include quantitative information about the effects of the change on prior periods.

The Company does not believe this ASU will have a significant impact on its consolidated financial statements.

Accounting Standards Update 2016-02, "Leases"

In February, 2016, the FASB issued its new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842).

Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1. A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and, 2. A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year Company). Early application is permitted for all public business entities upon issuance.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach.

The Company is in the process of assessing the impact, if any, of ASU 2016-02 on its consolidated financial statements.

F - 21

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 2

OTHER CURRENT ASSETS

	US dollars				US dollars
	December 31,				December 31,
(in thousands)	2014		2013		2015		2014
Prepaid expenses and others		9,779		9,314		10,960		9,779
Government institutions		2,694		1,716		1,910		2,694
Deferred installation expenses		2,485		2,905		2,403		2,485
Deferred income taxes (*)		3,649		3,692		2,752		3,649
Advances to suppliers		324		457		84		324
Employees		343		300		389		343
Forward Exchange Contracts		1,580		-		1,063		1,580
Others		1,464		53		2,876		1,464
		22,318		18,437		22,437		22,318

(*)

See Note 15.

NOTE 3

INVENTORIES

US dollars
December 31,
(in thousands) 2014 2013
Finished products 8,845 11,733
Raw materials 3,319 2,773
12,164 14,506

~~F-21~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

	US dollars
	December 31,
(in thousands)	2015		2014
Finished products		8,833		8,845
Raw materials		3,948		3,319
		12,781		12,164

NOTE 4

INVESTMENTS IN AFFILIATED AND OTHER COMPANY

Investment in affiliated companies

	US dollars
	December 31,
(in thousands)	2015			2014
Investment in Bringg (see 1 below)		3,082			1,016
IRT (see 2 below)		1,662			-
Other		(39	)		-
		4,705			1,016

~~Ecomtrade Ltd. (“Ecomtrade”)~~

~~The Company held 50% of the shares of Ecomtrade.~~

~~In December 2013, the Company sold its entire investment in Ecomtrade which amounted to a net amount of US$ 166,000 (including a loan in an amount fo US$ 273,000) for no proceeds.~~

BRINGG Delivery Technologies Ltd. ("BRINGG") Formerly Overvyoo Ltd

In December 2013 the Company ~~purchased 27.5% of BRINGG's shares for an amount of US$ 1.4 million. BRINGG is~~invested $1.4 million in Bringg delivery technologies Ltd. (formerly Overvyoo Ltd.), an Israeli start-up ~~Company~~company developing solutions offor the management of mobile/field workforce. ~~See also Note 20.~~In January and July, 2015 the Company invested additional amounts of $1.1 million and US$ 2 million, respectively. During November 2015, additional investors which are not related to Ituran, invested in Bringg, which reduced the percentage of our Bringg capital we own. Following such investment, the Company now holds 41.18% of Bringg’s share capital. Management has determined that the difference between the cost of the investment and the Company's share in the net assets of the investee relates to in process R&D of the investee.

ITURAN ROAD TRACK MONITORAMENTO De Veiculos Ltda. ("IRT")

In February 2015 IRT was established and is held 50% by the company.

In September 2015, one of the largest global road vehicles manufacturers signed a four years agreement (which may be extended by the manufacturer for additional 2 years) with IRT to offer Ituran's services in the Brazilian market (such as vehicle security, personal safety, remote diagnostic, Web and App application and Concierge). The service was launched through a joint venture with Road Track, called IRT (Ituran Road Track).

As of December 31, 2015, the Company's investment included long-term loans in the amount of US$ 2.3 million. The loan bears an annual interest of Libor plus 3.5%. The maturity of the loan has not been determined.

F - 22

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 4

INVESTMENTS IN AFFILIATED AND OTHER COMPANY (cont.)

Investment in other company

Locationet Systems Ltd. (“Locationet”)

The Company holds 10.64% of the shares of Locationet.

The balance of the Company’s investment in Locationet as of December 31, ~~2014~~2015 and ~~2013~~2014 was US$ ~~79,000~~78,000 and US$ ~~88,000~~79,000 respectively.

NOTE 5

OTHER NON-CURRENT ASSETS

	US dollars				US dollars
	December 31,				December 31,
(in thousands)	2014		2013		2015		2014

Forward Exchange Contracts		984		-		-		984
Government institutions		73		128		-		73
Deferred installation expenses		459		526		488		459
Deposits		575		368		678		575
		2,091		1,022		1,166		2,091

~~F-22~~

~~ITURAN LOCATION AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

NOTE 6

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

	US dollars						US dollars
	December 31,						December 31,
(in thousands)	2014			2013			2015			2014
Cost :
Operating equipment (*)		46,947			46,991			43,740			46,947
Office furniture, equipment and computers		23,858			25,116			24,790			23,858
Land		1,022			1,022			1,022			1,022
Buildings		1,855			2,252			1,845			1,855
Vehicles		3,412			3,197			3,810			3,412
Leasehold improvements		3,088			3,099			3,616			3,088
		80,182			81,677			78,823			80,182

Less – accumulated depreciation and amortization (**)		(48,274	)		(49,131	)		(47,309	)		(48,274	)
		31,908			32,546
Total property and equipment, net								31,514			31,908

(*)

As December 31, ~~2014~~2015 and ~~2013,~~2014, an amount of US$ ~~26.0~~26 million and US$ ~~25.8~~26 million is subject to operating lease transactions, respectively.

(**)

As at December 31, ~~2014~~2015 and ~~2013,~~2014, an amount of US$ 10.4 million and US$ ~~11.3~~10.4 million is subject to operating lease transactions, respectively.

F - 23

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 6

PROPERTY AND EQUIPMENT, NET (cont.)

In the years ended December 31, 2015, 2014 ~~2013~~ and ~~2012,~~2013, depreciation expense was US$ ~~11.2~~10.9 million, US$ ~~11.1~~11.2 million and US$ ~~13.3~~11.1 million, respectively and additional equipment was purchased in an amount of US$ 1518.7 million, US$ 1415 million and US$ 1014.2 million, respectively.

After deduction of the cost and the accumulated depreciation of items fully depreciated.

NOTE 7

INTANGIBLE ASSETS, NET

Intangible assets, net, consist of the following:

	US dollars								US dollars
	December 31,						December 31,		December 31,						December 31,
(in thousands)	2014		2014		2014		2013		2015		2015		2015		2014
	Original amount		Accumulated amortization and impairment charges		Unamortized balance		Unamortized balance		Original amount		Accumulated amortization and impairment charges		Unamortized balance		Unamortized balance
GIS database		3,889		3,594		295		555		3,876		3,876		-		295
Brand name		1,181		1,049		132		163		1,177		1,177		-		132
Others		5,490		5,465		25		21		5,472		5,446		26		25
		10,560		10,108		452		739		10,525		10,499		26		452

Amortization and impairment of intangible assets amounted to US$ 430,000, US$ 231,000 and US$ 367,000 ~~and US$ 703,000~~ for the years ended December 31, 2015, 2014 ~~2013~~ and ~~2012,~~2013, respectively. As of December 31, ~~2014,~~2015, the estimated aggregate amortization of intangible assets for the next five years is as follows: ~~2015~~2016-26,000 and thereafter – ~~US$ 170,000; 2016 – US$ 170,000; 2017 – US$ 80,000, 2018 – US$ 20,000, 2019 – US$ 12,000.~~0.

~~F-23~~

~~ITURAN LOCA~~TI~~ON AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 7~~ -

~~INTANGIBLE ASSETS, NET (cont.)~~

Due to the deteriorating results of a certain Israeli subsidiary and the current expectation of management for further decrease its anticipated performance, during ~~2014~~2015 and ~~2013,~~2014, the Company recorded an impairment charge for its intangible assets which directly relate to the operations of the ~~subsidiary.~~subsidiary (which represent a reporting unit).

In order to determine the fair value of such intangible assets, the Company, based on a valuation performed by the management, with the assistance of a third party appraiser, utilized the "Relief from Royalties" valuation method. Accordingly, certain assumptions and judgments were made in order to determine the future income from which royalties will be derived from and in order to determine the appropriate rate of royalties and rate of discount.

For further details regarding the activities of such subsidiary see note 8B regarding the goodwill impairment recognized in 2015.

As a result of the above, the Company recorded in ~~2014~~2015 and ~~2013,~~2014, an impairment loss in an amount of US$ ~~33,500~~236,000 and US$ ~~1,017,000,~~33,500, respectively, with respect to the GIS database and in ~~2014~~2015 and ~~2013,~~2014, an amount of US$ ~~9,500~~19,000 and US$ ~~511,000,~~9,500, respectively, with respect to the Brand name totaling an aggregate impairment charge of US$ ~~43,000~~255,000 in ~~2014 (of which related to wireless communications products segment)~~2015 and an aggregate impairment charge of US$ ~~1,527,000~~43,000 in ~~2013 (of which US$ 661,000 related to location based services segment and US$ 866,000 is related to wireless communications products segment).~~2014.

The impairment was included in "other expenses, net" (see Note 13).

F - 24

ITURAN LOCATION AND CONTROL LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 8

GOODWILL

The changes in the carrying amount of goodwill for the years ended December 31, ~~2014~~2015 and ~~2013~~2014 are as follows:

	US dollars									US dollars
	Location based services			Wireless communications products			Total			Location based services			Wireless communications products			Total
(in thousands)
Balance as of January 1, 2013 (*)		3,692			4,351			8,043
Changes during 2013:
Balance as of January 1, 2014 (*)											1,730			3,703			5,433
Changes during 2014:
Impairment (see B. below)		(2,155	)		(938	)		(3,093	)		-			(879	)		(879	)
Translation differences		193			290			483			(186	)		(327	)		(513	)
Balance as of December 31, 2013		1,730			3,703			5,433
Changes during 2014:
Balance as of December 31, 2014											1,544			2,497			4,041
Changes during 2015:
Impairment (See B. below)		-			(879	)		(879	)		-			(674	)		(674	)
Translation differences		(186	)		(327	)		(513	)		(5	)		(6	)		(11	)
Balance as of December 31, 2014		1,544			2,497			4,041
Balance as of December 31, 2015											1,539			1,817			3,356

(*)

The accumulated amount of impairment loss as of ~~January 1,~~December 31, 2013, December 31, ~~2013~~2014 and December 31, ~~2014~~2015 was US$ ~~2,452,000,~~5,545,000, US$ ~~5,545,000~~6,424,000 and US$ ~~6,424,000,~~7,098,000, respectively.

~~F-24~~

~~ITURAN LOCA~~TI~~ON AND CONTROL LTD.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)~~

~~NOTE 8~~ -

~~GOODWILL (cont.)~~

During 2015, 2014 ~~2013~~ and ~~2012,~~2013, the Company recorded an amount of US$ 674,000 US$ 879,000 and US$ 3,093,000, ~~and US$ 672,000,~~ respectively, as impairment with respect to goodwill.

The impairment amount was included in "other expenses, net". See Note 13.

The Company performed its annual impairment test as of December 31, 2014 and recorded goodwill impairment in the total amount of US$ 0.9 million in connection with certain reporting unit which is a part of the Wireless communications products segment and operates in the internet portal in the field of local travel and recreation. The impairment was recorded primarily due to a significant decline in current and future forecasted revenues and profitability margins of the GIS services offered by an Israeli subsidiary resulting from the continued weakness in the cellular industry in Israel that has suffered from recent regulatory changes and also the continuing popularity of navigation applications and tools developed by competitors which are offered for no charge. The impairment was based on valuation performed by the management using the assistance of a third party appraiser in accordance with the income approach. The significant assumptions used for the assessment were 3 years of projected net cash flows, a discount rate of 16.9% and a long-term growth rate of 0% (See Note 1W

The Company performed its annual impairment test as of December 31, 2015 and recorded goodwill impairment in the total amount of US$ 0.7 million in connection with certain reporting unit which is a part of the Wireless communications products segment and operates in the internet portal in the field of local travel and recreation. The impairment was recorded primarily due to a significant decline in current and future forecasted revenues and profitability margins of the GIS services offered by an Israeli subsidiary resulting from the continued weakness in the cellular industry in Israel that has suffered from recent regulatory changes and also the continuing popularity of navigation applications and tools developed by competitors which are offered for no charge. The impairment was based on valuation performed by the management using the assistance of a third party appraiser in accordance with the income approach. The significant assumptions used for the assessment were 2 years of projected net cash flows, a discount rate of 20% and a long-term growth rate of 0% (See Note 1V regarding fair value measurements).

The Company performed its annual impairment test as of December 31, 2013 and recorded goodwill impairment in the total amount of US$ 3.1 million in connection with three reporting units within the Location based services segment operating in the internet portal in the field of local travel and recreation. The impairment was based on valuation performed by the management using the assistance of a third party appraiser in accordance with the income approach. The significant assumptions used for the assessment were 3 years of projected net cash flows, a discount rate of 17.5% and a long-term growth rate of 0% (See Note 1W regarding fair value measurements).

The Company performed its annual impairment test as of December 31, 2014 and recorded goodwill impairment in the total amount of US$ 0.9 million in connection with two reporting units within the Location based services segment operating in the internet portal in the field of local travel and recreation. The impairment was based on valuation performed by the management using the assistance of a third party appraiser in accordance with the income approach. The significant assumptions used for the assessment were 3 years of projected net cash flows, a discount rate of 16.9% and a long-term growth rate of 0% (See Note 1V regarding fair value measurements).


	Title of each class	Name of each exchange on which registered

	Ordinary Shares, par value NIS 0.331/3 per share	Nasdaq Global Select Market

	Payments due by period										Payments due by period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		After 5 years		Total		Less than 1 year		1-3 years		3-5 years		After 5 years
	(In USD thousands)										(In USD thousands)

Operating leases		8,423		1,943		2,392		1,877		2,211		6,320		1,613		2,178		1,314		1,215
Long-term loans		-		-		-		-		-		-		-		-		-		-
Purchase Obligations		6,228		6,228		-		-		-		21,273		8,773		12,500		-		-
Total		14,651		8,171		2,392		1,877		2,211		27,593		10,386		14,678		1,314		1,215

Name	Age	Position

Izzy Sheratzky	6869	President and director
Yehuda Kahane	7071	Director
Ze'ev Koren	6970	Chairman of the Board of Directors and an independent director
Efraim Sheratzky*Sheratzky	6263	Director
Eyal Sheratzky	4647	Co-Chief Executive Officer and Director
Nir Sheratzky	4244	Co-Chief Executive Officer and Director
Gil Sheratzky	3738	CEO of our Subsidiary, International Activity and Business Development Officer and a Director
Yoav Kahane(1)(2)	4142	Director and an independent director
Yigal Shani	7071	Director
Israel Baron(1)(2)(3) +	6162	External Director
Gidon Kotler(1)(2)(3)	7475	External Director
Tal Sheratzky- Jaffa **	3738	Director and an independent director
Ami Saranga	5152	Deputy Chief Executive Officer
Eli Kamer	4849	Executive Vice President, Finance; Chief Financial Officer
Guy Aharonov	4950	General Counsel
Udi Mizrahi	4344	VP Finance

	Management fees		Wage		Social components		Car value		Bonus (results based)		Bonus (Share yield based)		Total		Management fees		Wage		Social components		Car value		Bonus (results based)		Bonus (Share yield based)		Total
	Compensation components (in thousand US Dollars)														Compensation components (in thousand US Dollars)
Izi Sheratzky (President)		720		-		-		-		1,241		256		2,217
Izzy Sheratzky (President)																695		-		-		-		1,042		-		1,737
Eyal Sheratzky (Co-Chief Executive Officer)		552		-		-		-		848		199		1,599		540		-		-		-		810		-		1,350
Nir Sheratzky (Co-Chief Executive Officer)		552		-		-		-		848		199		1,599		540		-		-		-		810		-		1,350
Gil Sheratzky (CEO of our Subsidiary. International Activity and Business Development Officer)*		384		26		2		-		577		142		1,131		354		-		-		-		531		-		885
Ami Saranga (Deputy Chief Executive Officer)		-		191		44		46		39		-		320		-		209		43		33		38		-		323
Total of our 5 highest paid officers		2,208		217		46		46		3,553		796		6,866		2,129		209		43		33		3,231		-		5,645

Shareholder	Number of Ordinary Shares Beneficially Owned		% Voting		Number of Ordinary Shares Beneficially Owned		% Voting
Moked Ituran Ltd. (1)		4,075,952		19.44		4,075,952		19.44
All directors and executive officers as a group(2).		4,479,751		21.36		4,453,014		21.24
Vulcan Value Partners(3)		2,379,261		11.35		2,630,231		12.54
Psagot Investments House Ltd.(4)		1,306,644		6.23		1,160,515		5.53
Migdal Insurance & Financial Holdings Ltd .(5)		1,168,026		5.57		1,594,078		7.6
Treasury shares		2,507,314		-		2,507,314		-

USE OF CERTAIN TERMS		IV
FORWARD LOOKING STATEMENTS		IV
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3.	KEY INFORMATION	1
A.	SELECTED FINANCIAL DATA	1
B.	CAPITALIZATION AND INDEBTEDNESS	4
C.	REASONS FOR THE OFFER AND USE OF PROCEEDS	4
D.	RISK FACTORS	4
ITEM 4.	INFORMATION ON THE COMPANY	15
A.	HISTORY AND DEVELOPMENT OF THE COMPANY	15
B.	BUSINESS OVERVIEW	1617
C.	ORGANIZATIONAL STRUCTURE	27
D.	PROPERTY, PLANTS AND EQUIPMENT	28
ITEM 4.A.	UNRESOLVED STAFF COMMENTS	29
ITEM 5:	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	29
A.	OPERATING RESULTS	29
B.	LIQUIDITY AND CAPITAL RESOURCES	41
C.	RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES	4445
D.	TREND INFORMATION	4445
E.	OFF-BALANCE SHEET ARRANGEMENTS	4445
F.	TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS	45
G.	SAFE HARBOR	45

ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	46
A.	DIRECTORS AND SENIOR MANAGEMENT	46
B.	COMPENSATION	50
C.	BOARD PRACTICES	53
D.	EMPLOYEES	5857
E.	SHARE OWNERSHIP	60
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	61
A.	MAJOR SHAREHOLDERS	61
B.	RELATED PARTY TRANSACTIONS	63
C.	INTERESTS OF EXPERTS AND COUNSEL	69
ITEM 8.	FINANCIAL INFORMATION	69
A.	CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION	69
B.	SIGNIFICANT CHANGES	71
ITEM 9.	THE OFFER AND LISTING	7172
A.	OFFER AND LISTING DETAILS	7172
B.	PLAN OF DISTRIBUTION	73
C.	MARKETS	73
D.	SELLING SHAREHOLDERS	73
E.	DILUTION	73
F.	EXPENSES OF THE ISSUE	73
ITEM 10.	ADDITIONAL INFORMATION	73
A.	SHARE CAPITAL	73
B.	MEMORANDUM AND ARTICLES OF ASSOCIATION	7374
C.	MATERIAL CONTRACTS	8182
D.	EXCHANGE CONTROLS	81 82
E.	TAXATION	82

F.	DIVIDENDS AND PAYING AGENTS	8990
G.	STATEMENT BY EXPERTS	90
H.	DOCUMENTS ON DISPLAY	90
I.	SUBSIDIARY INFORMATION	9091
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9091
ITEM 12.	DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES	9192
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	91 92
ITEM 14.A	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	91 92
ITEM 15.	CONTROLS AND PROCEDURES	9293
ITEM 16.	[RESERVED]	9798
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	9798
ITEM 16B.	CODE OF ETHICS	97 98
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	97 98
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	97 98
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	9798
ITEM 16F.	CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT	98
ITEM 16G.	CORPORATE GOVERNANCE	98 99
ITEM 16H.	MINE SAFETY DISCLOSURE	98 99
ITEM 17.	FINANCIAL STATEMENTS	98 99
ITEM 18.	FINANCIAL STATEMENTS	98 99
ITEM 19.	EXHIBITS	99

Company's Profit-Before-Tax Targets (in USD thousands)		Level of Incentive - As a Percentage of the Executive Office Holder's Annual Cost of Pay
24,001 - 27,500		20%
27,501-31,000		45%
31,001-35,000		75%
35,001-39,000		110%
Above 39,001		150%

Executive Office Holders	Target-based Cash Incentive		Deferred Portion for the next 2 years			Total to be paid for 2014:
		(In US$ thousands)
Izzy Sheratzky		1,038		(69	)		968
Eyal Sheratzky		807		(54	)		753
Nir Sheratzky		807		(54	)		753
Gil Sheratzky		576		(38	)		538

	Price per +-ordinary share ($)
	High		Low

During the last six months
March 2016		19.65		17.17
February 2016		18.59		16.62
January 2016		19.27		16.76
December 2015		20.25		17.88
November 2015		22.75		20.20
October 2015		22.36		20.22

During each fiscal quarter of 2014 and 2015 and the first quarter of 2016
First Quarter 2016		19.65		16.62
Fourth Quarter 2015		22.75		17.88
Third Quarter 2015		25.94		20.54
Second Quarter 2015		25.00		22.49
First Quarter 2015		23.29		20.75
Fourth Quarter 2014		22.66		20.13
Third Quarter 2014		24.45		21.07
Second Quarter 2014		25.70		22.78
First Quarter 2014		25.40		21.35

During each of the five most recent full financial years:
2015		25.94		17.88
2014		25.70		20.13
2013		21.64		13.77
2012		15.67		10.70
2011		18.30		11.65

		Price per ordinary share (NIS)				Price per ordinary share ($)					Price per ordinary share (NIS)				Price per ordinary share ($)
		High		Low		High		Low			High		Low		High		Low
Annual:
2015												98.86		70.00		25.95		17.95
2014			89.93		74.02		25.75		21.29			89.93		74.02		25.75		21.29
2013			75.71		51.60		21.81		13.82			75.71		51.60		21.81		13.82
2012			57.85		42.10		15.28		10.72			57.85		42.10		15.28		10.72
2011			65.09		42.00		18.09		11.81			65.09		42.00		18.09		11.81
2010			62.60		48.55		17.54		12.86

Quarterly:	Quarterly:									Quarterly:
First Quarter 2016												74.71		64.34		19.09		16.55
Fourth Quarter 2015												86.27		70.00		22.09		17.95
Third Quarter 2015												98.86		79.85		25.95		20.29
Second Quarter 2015												95.68		88.30		24.77		22.89
First Quarter 2015			92.57		81.61		23.54		20.93			92.57		81.61		23.54		20.93
Fourth Quarter 2014			88.30		76.23		22.51		20.18			88.30		76.23		22.51		20.18
Third Quarter 2014			82.88		74.02		24.19		21.29			82.88		74.02		24.19		21.29
Second Quarter 2014			89.93		80.12		25.75		23.24			89.93		80.12		25.75		23.24
First Quarter 2014			89.60		75.72		25.67		21.67			89.60		75.72		25.67		21.67
Fourth Quarter 2013			75.71		63.50		21.81		17.95
Third Quarter 2013			67.09		60.04		18.56		16.53
Second Quarter 2013			63.11		55.43		17.02		15.27
First Quarter 2013			61.07		51.60		16.54		13.82

Most recent six months:	Most recent six months:									Most recent six months:
March 2015			92.53		87.78		23.33		22.06
February 2015			92.57		81.71		23.54		20.75
January 2015			85.45		81.61		21.97		20.93
December 2014			88.30		83.37		22.51		21.19
November 2014			84.00		76.47		21.60		20.07
October 2014			78.87		76.23		21.11		20.18
March 2016												74.00		66.47		19.65		17.10
February 2016												73.21		64.34		18.74		16.55
January 2016												74.71		66.04		19.09		16.74
December 2015												78.04		70.00		20.12		17.95
November 2015												86.27		75.55		22.09		20.00
October 2015												85.50		78.28		22.21		20.17

	(in thousands)																						(in thousands)
	COMPANY STOCKHOLDERS																						COMPANY STOCKHOLDERS
	Ordinary shares																						Ordinary shares
	Number of shares		Share capital amount		Additional paid in capital			Accumulated other comprehensive income			Retained earnings			Treasury stock			Non-controlling interests			Total			Number of shares		Share capital amount		Additional paid in capital			Accumulated other comprehensive income			Retained earnings			Treasury stock			Non-controlling interests			Total
US dollars (except for number of shares)
Balance as of January 1, 2012		23,476		1,983		71,927			14,153			43,185			(30,054	)		4.158			105,352
Changes during 2012:
Balance as of January 1, 2013																								23,476		1,983		71,927			11,984			32,187			(30,054	)		3,980			92,007
Changes during 2013:
Net income																								-		-		-			-			23,762			-			1,792			25,554
Other comprehensive income (loss)																								-		-		-			(3,376	)		-			-			204			(3,172	)
Acquisition of none controlling interests																								-		-		(377	)		-			-			-			(123	)		(500	)
Dividend paid to non-controlling interests																								-		-		-			-			-			-			(1,286	)		(1,286	)
Dividend paid																								-		-		-			-			(13,502	)		-			-			(13,502	)
Dividend declared																								-		-		-			-			(3,616	)		-			-			(3,616	)
Balance as of December 31, 2013																								23,476		1,983		71,550			8,608			38,831			(30,054	)		4,567			95,485
Changes during 2014:
Net income		-		-		-			-			24,880			-			1,080			25,960			-		-		-			-			30,429			-			2,478			32,907
Other comprehensive loss		-		-		-			(2,169	)		-			-			(117	)		(2,286	)		-		-		-			(10,458	)		-			-			(594	)		(11,052	)
Dividend paid to non-controlling interests		-		-		-			-			-			-			(1,141	)		(1,141	)		-		-		-			-			-			-			(2,564	)		(2,564	)
Dividend paid		-		-		-			-			(33,308	)		-			-			(33,308	)		-		-		-			-			(15,697	)		-			-			(15,697	)
Dividend declared		-		-		-			-			(2,570	)		-			-			(2,570	)		-		-		-			-			(4,496	)		-			-			(4,496	)
Balance as of December 31, 2012		23,476		1,983		71,927			11,984			32,187			(30,054	)		3,980			92,007
Changes during 2013:
Net income		-		-		-			-			23,762			-			1,792			25,554
Other comprehensive loss		-		-		-			(3,376	)		-			-			204			(3,172	)
Acquisition of none controlling interests		-		-		(377	)		-			-			-			(123	)		(500	)
Dividend paid to non-controlling interests		-		-		-			-			-			-			(1,286	)		(1,286	)
Dividend paid		-		-		-			-			(13,502	)		-			-			(13,502	)
Dividend declared		-		-		-			-			(3,616	)		-			-			(3,616	)
Balance as of December 31, 2013		23,476		1,983		71,550			8,608			38,831			(30,054	)		4,567			95,485
Balance as of December 31, 2014																								23,476		1,983		71,550			(1,850	)		49,067			(30,054	)		3,887			94,583

	Exchange rate of one US dollar						Israeli CPI(*)
	NIS			Real
At December 31,
2014		3.889			2.6562		113.96 points
2013		3.471			2.3426		114.18 points
2012		3.733			2.0435		112.15 points
Increase (decrease) during the year:
2014		12.04	%		13.39	%		(0.2	)%
2013		(7.02	)%		(14.63	)%		1.8	%
2012		(2.30	)%		(8.94	)%		1.6	%

	US dollars
	Year ended December 31,
(in thousands)	2015		2014
Deferred taxes included in other current assets:
Provision for employee related obligations		145		130
Provision for legal obligation and other		2,607		3,519
		2,752		3,649

	US dollars
(in thousands)
Balance at January 1, ~~2013~~		~~439~~
~~Translations differences related to the current year~~		33
~~Balance at December 31, 2013~~2014		472
Translations differences related to the current year		(51	)
Balance at December 31, 2014		421
Decrease related tax positions of prior years		(419	)
Translations differences related to the current year		(2	)
Balance at December 31, 2015		-

	Number of shares						Number of shares
	Year ended December 31,						Year ended December 31,
(in thousands)	2014		2013		2011		2015		2014		2013
Weighted average number of shares used in the computation of basic and diluted earnings per share		20,968		20,968		20,968		20,968		20,968		20,968

	Liability derivatives
As of December 31, 2014	Thousands of US dollars
	Balance sheet location	Fair value
Derivatives designated as hedging instruments:
Foreign exchange contracts	Other current Assets		1,580
	Other no current Assets		984
			2,564

Derivatives designated as hedging instruments	~~Liability derivatives~~Location of loss recognized in income	Amount of gain recognized in income
~~As of~~Year ended December 31, ~~2013~~2015		Thousands of US dollars
	~~Balance sheet location~~	~~Fair~~ ~~value~~
~~Derivatives designated as hedging instruments:~~
Foreign exchange contracts	~~Other liabilities~~Cost of revenues		~~(568~~1,616	)

~~Derivatives designated~~ ~~as hedging instruments~~	~~Location of loss recognized in income~~	~~Amount of loss recognized in income~~
~~Year ended December 31, 2013~~		~~Thousands of US dollars~~

~~Foreign exchange contracts~~	~~Cost of revenues~~		~~(295~~	)

	~~Gonzalo Urien Berri~~ ~~Estudio Urien & Asociados~~ ~~Buenos Aires, Argentina~~
	~~February 12, 2015~~

Asset derivatives

As of December 31, 2015

Thousands of US dollars

Balance sheet location

Fair
value

Derivatives designated as hedging instruments:

Foreign exchange contracts

Other current Assets