================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                       for the Year ended January 31, 1999


                         Commission File Number 0-15502


                            COMVERSE TECHNOLOGY, INC.
             (Exact name of registrant as specified in its charter)


           NEW YORK                                             13-3238402
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

                            170 CROSSWAYS PARK DRIVE
                            WOODBURY, NEW YORK 11797
                    (Address of principal executive offices)

        Registrant's telephone number, including area code: 516-677-7200


           Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each exchange
     Title of each class                                on which registered 
     -------------------                                ------------------- 

       Not applicable                                      Not applicable


           Securities registered pursuant to Section 12(g) of the Act:

                     COMMON STOCK, $.10 PAR VALUE PER SHARE
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                              Yes: [X]   No: [ ]

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<PAGE>
        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
                                      [X]


        The aggregate market value of the voting stock held by non-affiliates of
the registrant on April 22, 1999 was approximately $4,390,000,000. The closing
price of the registrant's common stock on the NASDAQ National Market System on
April 22, 1999 was $63.25 per share.

       There were 69,730,005 shares of the registrant's common stock outstanding
on April 22, 1999.


                       DOCUMENTS INCORPORATED BY REFERENCE

        The registrant hereby incorporates by reference in this report the
information required by Part III appearing in the registrant's proxy statement
or information statement distributed in connection with the 1999 Annual Meeting
of Shareholders of the registrant or in an amendment to this report on Form
10K/A.








                          ----------------------------



         TRILOGUE and Access NP are registered trademarks and TRILOGUE INfinity,
AUDIODISK, ULTRA, and SignalWare are trademarks of the Company.



                                     - ii -
<PAGE>
                                     PART I

ITEM 1.  BUSINESS.

THE COMPANY

         Comverse Technology, Inc. ("Comverse" and, together with its
subsidiaries, the "Company") designs, develops, manufactures, markets and
supports computer and telecommunications systems and software for multimedia
communications and information processing applications. The Company's products
are used in a broad range of applications by fixed and wireless telephone
network operators, government agencies, call centers, financial institutions and
other public and commercial organizations worldwide.

         The Company's line of enhanced services platform ("ESP") products
enable telecommunications network operators to offer a variety of
revenue-generating services that are accessible to large numbers of simultaneous
users, including a broad range of integrated messaging, information distribution
and personal assistant services, such as call answering, voice mail, fax mail,
unified messaging (voice, fax and e-mail in a single mailbox), pre-paid
services, wireless data and Internet-based services such as Internet messaging,
short text messaging, and audiotext. The Company's principal market for ESP
systems consists of organizations that use the systems to provide services to
the public, often on a subscription or pay-per-usage basis, and includes both
fixed and wireless telephone network operators and other telecommunications
services organizations.

         The Company markets its ESP systems throughout the world, with its own
direct sales force and in cooperation with a number of leading international
vendors of telecommunications infrastructure equipment. The Company is the
market-share leader in providing large capacity ESP systems for wireless and
wireline telecommunications network operators. More than 290 fixed and wireless
telephone network operators in more than 75 countries, including 13 of the 20
largest telephone companies in the world, have selected the Company's platforms
to provide enhanced telecommunications services to their public customers. Major
network operators using the Company's ESP systems include, among others, AT&T
(USA), Bell Atlantic (USA), BellSouth (USA), Cable & Wireless (UK), DDI (Japan),
Deutsche Telekom (Germany), Hongkong Telecom (Hong Kong), Mannesmann D2
(Germany), NTT (Japan), SBC Communications (USA), SFR (France), Sprint PCS
(USA), Telecom Italia (Italy), Telmex (Mexico) and Telstra (Australia).

         The Company also manufactures multiple channel, multimedia digital
monitoring systems, which support the monitoring, recording, surveillance, and
information gathering and analysis activities of law enforcement and
intelligence agencies, and digital recording systems which support the voice,
fax and data recording and analysis activities of call centers and a variety of
other commercial and governmental organizations. The Company's monitoring
systems enable many simultaneous users to monitor, record and process voice,
image (facsimile) and data communications from multiple channels in a variety of
analog and digital formats, provide facilities for archiving large volumes of


                                       1
<PAGE>
recorded information and allow the use of computer database processing
techniques for analysis, management and retrieval operations. The systems have
been sold to law enforcement, military and intelligence agencies that monitor
and record communication channels for a variety of purposes, such as
surveillance in support of police actions and the collection and processing of
information for intelligence analysis. Customers such as inbound and outbound
call centers, emergency service (e.g., "911") providers, correctional
facilities, public health and safety organizations and financial institutions
use the Company's call recording systems to record and process large volumes of
audio, image and data communications. Traditionally, analog tape recorders,
alone or coupled with a variety of special purpose devices, have been used for
these applications. The worldwide growth in telecommunications traffic in
general and digital communications in particular, and the increasing use of a
variety of digital transmission formats in telecommunications networks, have
created a need for user organizations to modernize their monitoring, recording
and processing capabilities. The Company's systems provide a number of
advantages over analog, tape recorder-based equipment, including improvements in
capacity, reliability, accuracy, processing efficiency and archiving and
retrieval capabilities. Most importantly, the systems enable users to adapt
efficiently to the emergence of new telecommunications technologies, such as
digital transmission and enhanced signaling systems, for which analog, tape
recorder-based equipment was not designed. These products have been sold to
end-users in more than 30 countries.

         The Company markets a variety of proprietary telecommunications
software products, including products that are integrated with its systems and
products that work in combination with other systems to support intelligent
network ("IN") and advanced intelligent network ("AIN") applications, such as
800 number translation, Internet routing, short text messaging, local number
portability, cellular roaming and emergency "911" services, as well as
"interactive voice response" based enhanced services, such as virtual private
network, network announcement, customer service/customer care, operator-free
collect calling, call forwarding and directory services. Telecommunications
software customers of the Company include, among others, Alcatel USA, British
Telecom, Compaq, Ericsson, Level 3, Lucent, MCI, Nokia, Qualcomm, Siemens and
Sun Microsystems.

         Through subsidiaries and affiliates, the Company is also involved in
the development of technologies and products incorporating video compression and
networking, the design and development of systems for telephone answering
service bureaus, the operation of telemessaging service bureaus and capital
market activities for its own account.

         Throughout this document, references are made to technologies,
features, capabilities, capacities and specifications in conjunction with the
Company's products and technological resources. Such references do not
necessarily apply to all product lines, models and system configurations.

         The Company was incorporated in the State of New York in October 1984.
Its principal executive offices are located at 170 Crossways Park Drive,
Woodbury, New York 11797, where its telephone number is (516) 677-7200.


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<PAGE>
THE COMPANY'S PRODUCTS

ENHANCED SERVICES PLATFORMS ("ESPS")

         The market for network-based ESP systems has grown rapidly over the
past several years. The Company believes that a number of factors have
contributed to this growth, including the heightened emphasis among wireless and
wireline telecommunications network operators on offering new services for
revenue-generation and competitive differentiation, the increasing public
awareness and acceptance of multimedia messaging services, the expanding
availability from the major telephone companies of call answering services, and
the growing use of wireless telephone services, which almost universally offer a
mailbox-based call answering service.

         The Company's primary focus has been on supplying large-capacity ESP
systems, which are marketed under the names Access NP and TRILOGUE INfinity, to
fixed and wireless telecommunications network operators. These organizations
benefit from the ability to offer their customers, often on a subscription or
pay-per-call basis, a variety of revenue-generating services provided by the
Company's systems, such as automated call answering, voice and fax messaging,
unified messaging, pre-paid services, wireless data and Internet-based services
such as Internet messaging, short text messaging, audiotext, voice activated
dialing, call screening, personal number service, one-touch call return,
automated personal assistant services and "virtual telephone" service. With call
answering and voice and fax messaging, telephone operating companies benefit not
only from service subscription fees, but also from traffic revenue generated by
the increase in billable completed calls. In addition, these services improve
overall network efficiency by reducing congestion from repeated unbillable
busy/no-answer calls. Wireless telephone service operators are almost
universally adding voice mailboxes to their service offerings, and often as part
of their basic service package, not only because of these benefits, but also
because wireless messaging services directly increase billable airtime by
stimulating outbound calls.

         The Company's ESP systems have been designed and packaged to meet the
capacity, reliability, scalability, maintainability and physical requirements of
large telephone network operators. The systems are offered in a variety of sizes
and configurations, extending to a single-system capacity of up to 6,000 ports
and 1,000,000 mailboxes, and can be clustered for larger capacity installations.
The systems also offer redundancy of critical components, so that no single
failure will interrupt the service. The Company's platforms are available in
both centralized and widely distributed configurations, and maintain their
integrity as a single system in distributed configurations. The Company's
distributed architecture incorporates Voice Over Internet Protocol ("VoIP") and
Wide Area Networking ("WAN") technologies to reduce the cost of long distance
message transmissions, message retrievals, voice signature transmissions, and
pre-paid service database inquiries. This architecture utilizes lower cost
Packet Switched networks, such as the Internet, rather than more costly,
traditional circuit switched methods, to reduce the network operators' cost of
operation.


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<PAGE>
         The Company's systems also incorporate components that are compatible
with the IN and AIN protocols for Intelligent Peripherals ("IP"), permitting the
Company's network operator customers to develop and deploy services based on the
overall IN/AIN architecture. In addition, when the system is configured as a
Service Node ("SN"), it enables customers to offer next-generation IN/AIN-based
services such as personal number, call screening/caller introduction, one-touch
call return and pre-paid. The incorporation of IN and AIN-related software also
allows a customer, which has not yet implemented intelligent network
infrastructure, to purchase an ESP system from the Company with the confidence
that it contains a built-in migration path to IN/AIN standards, should the
network operator decide to implement IN/AIN infrastructure in the future.

             The Company's platforms incorporate proprietary and third-party
software, and industry standard and proprietary hardware, in an open,
standards-based system architecture. Most hardware is based on Industry Standard
Architecture ("ISA"), which facilitates the integration of commercially
available ISA technologies with the Company's core proprietary technologies. The
systems support a wide variety of digital telephony interfaces and signaling
systems, enabling them to adapt to a variety of different telephony environments
and IN/AIN applications, and provide a "universal port" -- a single port that
supports any combination of voice and fax services at any time during a single
call. The Company has also introduced Internet messaging capabilities, enabling
end-users to access their voice, fax and e-mail text messages from anywhere in
the world via the World Wide Web.


MONITORING AND RECORDING SYSTEMS

         The Company's AUDIODISK systems are multiple channel, multimedia
digital monitoring systems, sold primarily to law enforcement and intelligence
agencies, which enable multiple users simultaneously to monitor, record and
process audio, image (facsimile) and data communications over multiple channels
in a variety of analog and digital formats, and provide facilities for archiving
large volumes of recorded information. The systems automatically decode and
record a variety of signals without operator intervention and store the recorded
information on magnetic and optical disks to permit quick and easy random access
and the use of computer database techniques for analysis, archival and retrieval
operations. AUDIODISK also enables multiple users to access the same recorded
information simultaneously for processing and analysis.

         The Company's ULTRA line of multiple channel, multimedia digital
recording systems are marketed primarily to call centers, financial
institutions, emergency "911" service providers, correctional institutions, and
other organizations that record large volumes of communications, and require
fast and easy retrieval of recorded information.

         Traditionally, analog tape recorders, alone or coupled with a variety
of other special purpose devices, have been utilized for communications
monitoring, recording and related applications. The limited capacity and


                                       4
<PAGE>
processing capability inherent in these systems have imposed constraints on
organizations that process large amounts of multimedia information from multiple
channels and that need to store the processed information for long periods while
keeping it available for rapid retrieval. The Company's systems interface with a
variety of analog and digital communications protocols and automatically
recognize and adapt to voice, fax or modem content on each recorded channel.
Most importantly, they also enable users to adapt efficiently to the emergence
of new telecommunications technologies, such as digital transmission and
enhanced signaling systems, for which analog, tape recorder-based equipment was
not designed. The systems provide a number of advantages over analog, tape
recorder-based systems, including improvements in capacity, reliability,
accuracy, processing efficiency and archiving and retrieval capabilities.

         The AUDIODISK product design is based on open system architecture and
client/server concepts, and supports a broad range of multimedia monitoring
capabilities. AUDIODISK capabilities include the recording, processing and
retrieval of analog audio signals, such as telephone and radio channels; analog
facsimile and modem communications; digital audio and data signals, including
ISDN, T1 and, E1; and telephony signaling, including Pulse Dialing, DTMF,
Calling Line Identification and Call Progress Tones (such as busy, no-answer and
ringback). AUDIODISK systems interface with most central office telephone
switches for legal monitoring applications. AUDIODISK systems simultaneously
process incoming signals over multiple channels, apply digital signal processing
technologies and use magnetic and optical disks for temporary and long-term
digital storage. Digital signal processing technologies that are employed by
AUDIODISK to enhance monitoring applications include, among others, signal
compression, automatic signal identification, automatic signal interpretation
and noise cancellation. Magnetic and optical disks permit virtually
instantaneous retrieval and sharing of stored information among many users. The
systems also enable users to transmit multimedia information among multiple
sites over communication links. AUDIODISK is designed to support various
communications links, including T1, E1, ISDN, Dial-up telephone lines (over
modems), satellite links and TCP/IP over Ethernet (with routers). AUDIODISK
systems also provide a facility for archiving large volumes of recorded
information on rewritable optical disks. This archive function allows a single
recording session, groups of sessions, a single recording channel, selected
channels or all channels to be stored on the same disk. The archive disk records
all the signals on a particular channel and automatically associates the
signal-related information ("SRI") as well as the date and time with the
recorded information. For larger AUDIODISK systems, automatic disk library
systems, referred to as "jukeboxes", provide very large amounts of on-line
storage. The product employs a database management system to provide a central
facility for access to all stored information. This feature allows any operator
to use computer database query techniques to retrieve the audio and SRI data
quickly and efficiently.

         The Company offers AUDIODISK systems in a range of configurations,
which share substantially the same hardware, software and user interface. The
AUDIODISK systems' multimedia server can be configured in a variety of models to
support a range of applications, including large, fixed-site audio monitoring
platforms. Moreover, several AUDIODISK multimedia servers may be networked for


                                       5
<PAGE>
increased capacity or to satisfy redundancy requirements. Storage configurations
include magnetic disks, optical drives and optical jukebox devices. Removable
optical cartridges are used for archiving, with each cartridge capable of
storing up to 180 compressed audio hours. Multiple jukebox configurations
provide automated management of optical media, with virtually unlimited audio
and fax storage capacity available for rapid automated retrieval.

         ULTRA systems provide Computer-Telephony Integration ("CTI") enabled
recording, including integration with major PBX/ACDs, Predictive Dialers and
middleware products. The CTI connection allows the customer to easily search
calls through database queries. In addition, selective recording is possible
through time-driven schedules or event triggers. ULTRA systems support high
volume of simultaneous playbacks over the telephone or through LANs, WANs, and
the Internet. Immediate access to recordings is possible through advanced
optical disk technology and jukeboxes. The ULTRA Series comprises six products,
tailored to customer-specific requirements for capacity, storage and special
features.


TELECOMMUNICATIONS SOFTWARE PRODUCTS

         The Company's telecommunications software products are marketed through
its DGM&S Telecom ("DGM&S") and Amarex Technology ("Amarex") subsidiaries. DGM&S
provides Signalling System Number 7 ("SS7") telecommunications software marketed
under the name SignalWare. DGM&S's SignalWare products support IN/AIN
applications for voice, data and mobility communications services such as 800
number translation, Internet routing, local number portability and cellular
roaming. DGM&S's products enable global connectivity, inter-platform
portability, client/server flexibility and clustering reliability. The products
provide the global standards and national variants needed to communicate between
the disparate signaling protocols worldwide, and enable operators to use either
a UNIX or Windows NT platform. Amarex, acquired by Comverse on February 26,
1999, develops software-based intelligent peripherals and service nodes for
telecommunications network operators, which enable a wide range of interactive
voice response-based services. Amarex also develops software for call
center-based customer service applications. The Company licenses its
telecommunications software products to leading services providers and
manufacturers of telecommunications infrastructure equipment worldwide,
including, among others, Alcatel USA, British Telecom, Compaq, Ericsson, Level
3, Lucent, MCI, Nokia, Qualcomm, Siemens and Sun Microsystems.


MARKETS, SALES AND MARKETING

         The Company's ESP systems are marketed by the Company throughout the
world, with its own direct sales force as well as local distributors, and in
cooperation with a number of leading international vendors of telecommunications
infrastructure equipment. The Company is a market share leader in providing
large capacity messaging systems for telephone network operators around the
world.


                                       6
<PAGE>
         More than 290 fixed and wireless telephone network operators in more
than 75 countries, including 13 of the 20 largest telephone companies in the
world, have selected the Company's platforms to provide enhanced
telecommunications services to their public customers. Major network operators
using the Company's ESP systems include, among others, AT&T (USA), Bell Atlantic
(USA), BellSouth (USA), Cable & Wireless (UK), DDI (Japan), Deutsche Telekom
(Germany), Hongkong Telecom (Hong Kong), Mannesmann D2 (Germany), NTT (Japan),
SBC Communications (USA), SFR (France), Sprint PCS (USA), Telecom Italia
(Italy), Telmex (Mexico) and Telstra (Australia).

         The Company provides its customers with programs of marketing
consultation, seminars and materials designed to assist them in marketing
enhanced telecommunications services, and also undertakes to play an ongoing
supporting role in their business and market planning processes.

         The Company's AUDIODISK and ULTRA systems are marketed by the Company
worldwide through its direct sales force and, where appropriate, through agents,
distributors and system integrators. The Company sells AUDIODISK systems
primarily to the law enforcement, military and intelligence markets. Primary
target markets for the ULTRA Series include call centers, public safety and
emergency services organizations and financial institutions.


TECHNOLOGIES

         The Company's research and development efforts focus particularly on
the design of very large, high throughput systems, digital signal processing
technologies for voice, image and data communications, development of various
network and OMAP interfaces, and application development. The Company's products
use advanced technologies in the areas of digital signal processing, Voice Over
Internet Protocol, facsimile protocols, telephony interfaces, mass storage,
digital networking, multi-processor computer architecture and real-time software
design. The Company also possesses considerable technology and expertise in the
development of software products, solutions and applications within the IN and
AIN environment.

         The Company's products are based upon flexible system architectures
specifically designed to handle multiple channel, multimedia communication and
processing applications. Multimedia processing computers require a much higher
throughput than conventional data processing systems, especially when a large
number of channels have to be processed simultaneously. The Company's products
employ open system, modular architectures, which use distributed processors,
rather than one large central processor, as well as multiple storage devices and
digital networking. The product design is intended to be readily adaptable to
the usage and capacity requirements of the individual end-user. The product
architectures also allow the Company to add enhancements and new technologies to
its systems without rendering existing products obsolete. The Company's
distributed architecture incorporates VoIP and WAN technologies to reduce the


                                       7
<PAGE>
cost of long distance message transmissions, message retrievals, voice signature
transmissions, and pre-paid service database inquiries. This architecture
utilizes lower cost Packet Switched networks rather than more costly,
traditional circuit switched methods, to reduce the network operators' cost of
operation.

         A primary focus of the Company's research and development efforts has
been digital signal processing technologies required for voice, image and data
communications. Computer systems designed for signal processing applications,
such as processing of voice and image communications, handle information
differently from conventional data processing systems and require greater
processing and storage resources. The computer must be designed to function at a
fast and efficient rate to produce a form of speech acceptable to the human ear.
The Company has developed a number of speech compression algorithms, which
provide the Company's products with optimal compression taking into account the
level of speech quality required for each application. The Company also has
developed a special signal detector, which identifies signals as voice, fax or
modem. Voice processing algorithms currently available with the Company's
products include speech enhancement (noise reduction) and variable playback
speed with pitch compensation. Fax and modem processing algorithms offered by
the Company enable communication and interception of a large number of standard
and non-standard communications protocols.

         The Company has developed interfaces for its products to most telephony
environments used around the world, including digital interfaces, such as T1, E1
and ISDN, and SS7 interfaces designed to encompass both basic network
connectivity and the IN/AIN capabilities of Intelligent Peripherals and Service
Nodes. The Company has also developed Internet Protocols, including VPIM, POP3,
HTTP and HTML. The Company has implemented facsimile communication and intercept
protocols for Group 3 facsimile. Certain of the Company's products incorporate
local area network and wide area network technologies used for the transfer of
digitized voice, fax and modem information, as well as for the transfer of data
among various network elements.

         The Company utilizes state-of-the-art mass storage technologies in many
of its products. Proprietary algorithms developed by the Company are utilized
for storage of multimedia information to facilitate real-time processing of
large amounts of information and optimal use of media. A variable number of
disks may be configured in a disk array to serve large numbers of users and to
provide full or partial disk redundancy for critical applications. Special
algorithms utilized by the Company to handle optical disks within a number of
jukebox devices include automatic channel-to-disk allocation, automatic
retrieval of multimedia information from any disk located in the jukeboxes and
redundant archiving on two or more cartridges simultaneously.


RESEARCH AND DEVELOPMENT

         Because of the continuing technological changes that characterize the
telecommunications and computer industries, the Company's success will depend,
to a considerable extent, upon its ability to continue to develop competitive
products through its research and development efforts. The Company currently
employs more than 1,350 scientists, engineers and technicians in its research


                                       8
<PAGE>
and development efforts, with broad experience in the areas of digital signal
processing, computer architecture, facsimile protocols, telephony, digital
networking, multi-processing, mass storage, and real-time software design.

         A portion of the Company's research and development operations benefit
from financial incentives provided by government instrumentalities to promote
research and development activities, including its research and development
activities situated in Israel. The cost of such efforts is affected by the
continued availability of funding under such programs. During the past















                                       9
<PAGE>
fiscal year, the Company's research and development activities included projects
submitted for partial funding under a program administered by the Office of the
Chief Scientist of the Ministry of Industry and Trade of the State of Israel,
under which reimbursement of a portion of the Company's research and development
expenditures will be made subject to final approval of project budgets. The
percentage of the Company's total research and development expenditures
reimbursed under these programs has declined in recent years, and will continue
to decline with the growth in the Company's overall operations, the increasing
amount of research and development conducted by the Company at locations other
than those in which reimbursement programs are available to it and general
reductions in program budgets. The Company pays royalties on its sales of
certain products developed in part with funding supplied under such programs.
Permission from the government of Israel is required for the Company to
manufacture outside of Israel products resulting from research and development
activities funded under such programs, or to transfer outside of Israel related
technology rights, and in order to obtain such permission the Company may be
required to increase the royalties to the applicable funding agencies and/or
repay certain amounts received as reimbursement of research and development
costs. See "Business--Licenses and Royalties" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."


PATENTS AND INTELLECTUAL PROPERTY RIGHTS

         The Company currently holds a total of 18 United States patents and a
number of foreign patents. While the Company files patent applications
periodically, no assurance can be given that patents will be issued on the basis
of such applications or that, if patents are issued, the claims allowed will be
sufficiently broad to protect the Company's technology. In addition, no
assurance can be given that any patents issued to the Company will not be
challenged, invalidated or circumvented or that the rights granted under the
patents will provide significant benefits to the Company.

         In order to safeguard its unpatented proprietary know-how, trade
secrets and technology, the Company relies primarily upon trade secret
protection and non-disclosure provisions in agreements with employees and others
having access to confidential information. There can be no assurance that these
measures will adequately protect the Company from disclosure or misappropriation
of its proprietary information.

         The Company and its customers from time to time receive communications
from third parties, including some of the Company's competitors, alleging
infringement by the Company of such parties' patent rights. While such
communications are common in the computer and telecommunications industries and
the Company has in the past been able to obtain any necessary licenses on
commercially reasonable terms, there can be no assurance that the Company would
prevail in any litigation to enjoin the Company from selling certain of its
products on the basis of such alleged infringement, or that the Company would be
able to license any valid patents on reasonable terms.



                                       10
<PAGE>
LICENSES AND ROYALTIES

         The Company licenses certain technology, know-how and related rights
for use in the manufacture and marketing of its products, and pays royalties to
third parties under such licenses and under other agreements entered into in
connection with research and development financing. The Company believes that
its rights under such licenses and other agreements are sufficient for the
manufacturing and marketing of its products and, in the case of licenses, extend
for periods at least equal to the estimated useful lives of the related
technology and know-how. The Company currently pays royalties on most of its
product sales. The royalties vary in amount based upon the revenues attributable
to the various components of such products.

INTERNATIONAL SALES

         The Company sells a significant amount of its products outside of North
America. International sales and marketing efforts may be adversely affected by
a number of factors, including the need for system customization and special
integrations, government approvals and export licenses; instability in
international trading relations; currency fluctuations; and additional costs of
marketing, service and support due to lack of proximity with the end-users. In
certain cases, the Company's contracts are denominated in local currencies, and
as such, the Company may be adversely affected by fluctuations in those
currencies. International sales of certain systems manufactured by the Company
also are subject to a variety of legal restrictions governing the export of such
products.

         The Company believes that prevailing economic conditions in the Far
East and Southeast Asia have reduced the demand for its systems in certain
countries. The Company cannot currently predict the effect on its business
should regional economic conditions fail to improve.

         For additional information regarding foreign operations, see Note 19 of
Notes to Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Certain Trends and
Uncertainties" appearing elsewhere in this report.


BACKLOG

         At January 31, 1999, the backlog of the Company amounted to
approximately $164,144,000. Substantially all of the current backlog is expected
to be delivered within the next 12 months.


SERVICE AND SUPPORT

         The Company has a strong commitment to provide product service and
support to its customers and emphasizes such commitment in its marketing.
Because of the intensity of use of systems by telephone network operators and


                                       11
<PAGE>
other customers of the Company's products, and their low tolerance for
down-time, the Company is required to make a greater commitment to service and
support of systems used by these customers, and such commitment increases
operating costs.

         The Company's general warranty policy is to replace or repair any
component that fails during a specified warranty period. Broader warranty and
service coverage is provided in certain instances, and is usually made available
to customers on a contractual basis for an additional charge.

         The Company provides technical assistance from several locations around
the world. Technical support is available for the Company's customers 24
hours-a-day, seven days-a-week.


COMPETITION

         The Company faces strong competition in the markets for all of its
products. The market for ESP systems is highly competitive, and includes
numerous products offering a broad range of features and capacities. The primary
direct competitors are manufacturers of stand-alone voice mail systems,
including, among others, Brite Voice Systems, Inc., Centigram Communications
Corporation, Glenayre Electronics, Inc., the Octel Messaging division of Lucent
Technologies, Inc., Tecnomen Oy, Unisys Corporation, and manufacturers of
central office telecommunications equipment, including Telefonaktiebolaget LM
Ericsson. In certain applications, such as prepaid telephone service and short
text messaging, the Company faces additional competition from switch vendors and
other suppliers of telecommunications equipment, such as Logica, CMG and Sema.
Competitors of the Company that manufacture other telecommunications equipment
may derive a competitive advantage in selling voice processing and message
management systems to customers that are purchasing or have previously purchased
other compatible equipment from such manufacturers.

         Indirect competition is provided by voice and fax messaging products
employed at end-user sites as an alternative to the use of services available
through telephone network operators. This "customer premises equipment" includes
a broad range of products, such as stand-alone voice mail systems, products
offering "call processing" services that are supplied with voice mail features
or integrated with other voice mail systems, as well as personal computer modems
and add-on cards and software designed to furnish voice processing and message
management features.

         The Company believes that competition in the sale of ESP systems is
based on a number of factors, the most important of which are product features
and functionality, system capacity and reliability, marketing and distribution
capability and price. Other important competitive factors include service and
support and the capability to integrate systems with a variety of central office
and cellular switches and other communications systems. The Company believes
that the range of features provided by, and the ease of use of, its systems
compare favorably with other platforms currently being marketed, and that its


                                       12
<PAGE>
ESP systems are the leading systems designed specifically for telephone network
operators. The Company anticipates that a number of its direct and indirect
competitors will be introducing new or improved ESP systems during the next
several years.

         The Company is aware of a relatively small number of manufacturers of
products that compete with the AUDIODISK product line at the present time.
Manufacturers of products that have been offered in competition with the
AUDIODISK system include Applied Signal Technology, Inc., Atis Uher, the
E-Systems division of Raytheon Corporation, GTE Government Systems Division,
Harris Corporation, JSI Corporation and Nice Systems, Ltd. Competition also has
been provided by manufacturers and integrators of custom designed computer and
telecommunications systems in response to particular government procurements in
specific markets where they have entrenched customer relationships. The Company
believes that it derives a competitive advantage over many potential competitors
of its AUDIODISK product line by reason of its ability to offer prospective
customers a family of products that can provide a solution to most customer
requirements without extensive special development effort. The government market
in general is highly competitive and difficult to penetrate, and the Company may
be at a competitive disadvantage in respect of certain customers and market
segments as a result of its small size in relation to other potential vendors
and the existence of entrenched customer relationships with other vendors. The
market in which ULTRA products are sold is also highly competitive. Primary
competitors include Atis Assmann GmbH, Dictaphone Corporation, Eyretel Ltd.,
Kreutler GmbH, Nice Systems, Ltd., Racal Recorders Ltd., TEAC America, Inc.,
Teknekron Infoswitch Corporation and Witness Systems, Inc.

         Many of the Company's present and potential competitors are
considerably larger than the Company, are more established, have a larger
installed base of customers and have greater financial, technical, marketing and
other resources.


MANUFACTURING AND SOURCES OF SUPPLIES

         The Company's manufacturing operations consist primarily of final
assembly and testing, involving the application of extensive testing and quality
control procedures to materials, components, subassemblies and systems. The
Company uses third parties to perform printed circuit board assembly and sheet
metal fabrication. Although the Company generally uses standard parts and
components in its products, certain components are presently available only from
a limited number of sources. To date, the Company has been able to obtain
adequate supplies of all components in a timely manner from existing sources or,
when necessary, from alternative sources. However, the inability to obtain
sufficient quantities of components or to locate alternative sources of supply
if and as required in the future, would adversely affect the Company's
operations.

         The Company maintains organization-wide quality assurance procedures,
coordinating the quality control activities of the Company's research and


                                       13
<PAGE>
development, manufacturing and service departments. The Company's primary
manufacturing and research and development facilities have received
certification to Quality Standard ISO 9001.


CAPITAL MARKET ACTIVITIES

         The Company has organized a wholly-owned subsidiary, CTI Capital Corp.
("CTI Capital"), that directly and through a wholly-owned subsidiary in Israel,
Comverse Investments Ltd., seeks to identify and implement suitable investments
for the Company, and engages in portfolio investment and capital market
activities, primarily in Israel. Such activities include, in addition to direct
investment in public and private companies, investment and merchant banking
activities and short-term trading of debt and equity securities. Through ComSor
Investment Fund N.V., formed by CTI Capital in partnership with Quantum
Industrial Holdings Ltd., an investment company managed by Soros Fund Management
LLC., the Company invests venture capital in high technology firms, primarily
located in Israel, and engages in other investment activities. Comverse also
engages in direct strategic and capital management investment activities for its
own account.


OPERATIONS IN ISRAEL

         A substantial portion of the Company's research and development and
manufacturing operations are located in Israel and, accordingly, may be affected
by economic, political and military conditions in that country. To date, the
Company's operations have not been materially affected by armed conflict in the
Middle East, but no assurances can be given that escalation of hostilities in
the future might not have a significant negative impact on the Company's
business.

         Israel is a member of the United Nations, the International Monetary
Fund, the International Bank for Reconstruction and Development, and the
International Finance Corporation, and is a signatory to the General Agreement
on Tariffs and Trade, which provides for reciprocal lowering of trade barriers
among its members. In addition, Israel has been granted preferences under the
Generalized System of Preferences from the United States, Australia, Canada, and
Japan. These preferences allow Israel to export the products covered by such
programs either duty-free or at reduced tariffs.

         Israel and the European Union are parties to a Free Trade Agreement
pursuant to which, subject to rules of origin, Israel's industrial exports to
the European Union are exempt from customs duties and other non-tariff barriers
and import restrictions. Israel also has an agreement with the United States to
establish a Free Trade Area ("FTA") which is intended ultimately to eliminate
all tariff and certain non-tariff barriers on most trade between the two
countries. Under the FTA agreement, most products received immediate duty-free
status in 1985, and all tariffs have since been eliminated. In 1993, Israel
entered into an agreement with the European Free Trade Association ("EFTA"),
which includes Austria, Norway, Finland, Switzerland, Iceland and Liechtenstein,
that established a free-trade zone between Israel and EFTA nations exempting


                                       14
<PAGE>
manufactured goods and some agricultural goods and processed foods from customs
duties, while reducing duties on other goods. Israel is the only country which
has free-trade area agreements with the United States as well as with the
European Union and EFTA states. The end of the Cold War has also enabled Israel
to establish commercial and trade relations with a number of nations, including
Russia, China and the nations of Eastern Europe, with whom Israel had not
previously had such relations.

         The Company's business is also dependent to some extent on trading
relationships between Israel and other countries. Certain of the Company's
products incorporate components imported into Israel from the United States and
other countries and most of the Company's products are sold outside of Israel.
Accordingly, the Company's operations would be adversely affected if major
hostilities involving Israel should occur or if trade between Israel and its
current trading partners were interrupted or curtailed. The Company benefits
from various policies of the Government of Israel, including reduced taxation
and special subsidy programs, designed to stimulate economic activity,
particularly high technology industry, in that country. As a condition of its
receipt of funds for various research and development projects conducted under
programs sponsored by the Government of Israel, the Company has agreed that
products resulting from these projects may not be manufactured, nor may the
technology developed in the projects be transferred, outside of Israel without
government consent.

         Israel's economy has from time to time been subject to significant
inflation. This inflation, and the associated increases in salaries that are
linked by Israeli law to increases in the consumer price index, have increased
the cost of the Company's operations in Israel, and salary costs have further
increased as a result of the growing competition for qualified scientific,
engineering and technical personnel in Israel. The increases in costs in recent
periods have not, in each instance, been offset by proportional devaluation of
the Israeli shekel against the U.S. dollar, and accordingly have had a negative
impact on the Company's overall results of operations.

         The results of operations of the Company have been favorably affected
by participation in Israeli Government programs related to research and
development, as well as utilization of certain tax incentives and other
incentives available under applicable Israeli laws and regulations, some of
which have been reduced, discontinued or otherwise modified in recent years. In
addition, the Company's ability to obtain benefits under various discretionary
funding programs has declined and may continue to decline as its internal
financial and operational resources increase relative to other applicants. The
results of operations of the Company could be adversely affected if these
programs were further reduced or eliminated and not replaced with equivalent
programs or if its ability to participate in these programs were to be reduced
significantly.


                                       15
<PAGE>
EMPLOYEES

         At January 31, 1999, the Company employed 3,220 individuals,
approximately 71% of whom are scientists, engineers and technicians engaged in
research and development, marketing and support activities.

         The Company is not a party to any collective bargaining or other
agreement with any labor organization; however, certain provisions of the
collective bargaining agreements between the Histadrut (General Federation of
Labor in Israel) and the Coordinating Bureau of Economic Organizations
(including the Industrialists' Association) are applicable to the Company's
Israeli employees by order of the Israeli Ministry of Labor. Israeli law
generally requires the payment by employers of severance pay upon the death of
an employee, his retirement or upon termination of his employment, and the
Company provides for such payment obligations through monthly contributions to
an insurance fund. Israeli employees and employers are required to pay
pre-determined sums to the National Insurance Institute, which payment covers
medical and other benefits similar to the benefits provided by the United States
Social Security Administration.

         The continuing success of the Company will depend, to a considerable
extent, on the contributions of its senior management and key employees, many of
whom would be difficult to replace, and on the Company's ability to attract and
retain qualified employees in all areas of its business. Competition for such
personnel is intense, particularly in the computer and telecommunications
industries. In order to attract and retain talented personnel, and to provide
incentives for their performance, the Company has emphasized the award of stock
options as an important element of its compensation program, including options
to purchase shares in certain of the Company's subsidiaries, and provides cash
bonuses based on several parameters, including the profitability of the
recipients' respective business units.


ITEM 2.  PROPERTIES.

         As of January 31, 1999, the Company leased an aggregate of
approximately 1,007,000 square feet of space for its operations worldwide,
including approximately 510,000 square feet in Tel Aviv, Israel, approximately
199,000 square feet in Wakefield, Massachusetts, approximately 98,000 square
feet in Andover, Massachusetts, approximately 48,000 square feet in Woodbury,
New York, approximately 31,000 square feet in Mt. Laurel, New Jersey,
approximately 22,000 square feet in Irvine, California, and an aggregate of
approximately 99,000 square feet at various other locations in the United
States, Western Europe, the Far East and Australia. The aggregate base monthly
rent for the facilities under lease at January 31, 1999 was approximately
$1,262,000, and all of such leases are subject to various pass-throughs and
escalation adjustments. In February 1999, the Company leased approximately
168,000 additional square feet in Wakefield, Massachusetts, for a base monthly
rent of approximately $236,000, also subject to pass-throughs and escalation
adjustments.


                                       16
<PAGE>
         The Company believes that its facilities currently under lease are
adequate for its current operations, and that additional facilities are
available on competitive market terms to provide for such future expansion of
the Company's operations as may be warranted.


ITEM 3.  LEGAL PROCEEDINGS.

         On November 5, 1998, Comverse's subsidiary, Comverse Network Systems,
Inc. ("CNS"), filed a complaint against Priority Call Management, Inc. ("PCM")
alleging that PCM is infringing and has infringed certain patents owned by CNS.
CNS is seeking a declaratory judgment, injunctive relief, compensatory and
treble damages and attorneys fees. PCM answered the complaint, asserting
numerous affirmative defenses, and is seeking a declaratory judgment that it has
not infringed the CNS patents and that the patents are invalid. On March 16,
1999, PCM filed an amended answer and counterclaim asserting violations of the
Sherman Antitrust Act, tortious interference and patent misuse. In its
counterclaim PCM seeks declaratory judgments, compensatory and treble damages in
unspecified amounts and attorneys fees. Currently, the parties are engaged in
discovery.

         The Company from time to time is subject to claims in legal proceedings
arising in the ordinary course of its business. There are currently no such
claims that individually or in the aggregate are believed by management to pose
any material risk to its business or financial condition.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of security holders during the
fourth quarter of the last fiscal year.








                                       17
<PAGE>
                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY
                  AND RELATED STOCKHOLDER MATTERS.

         The Common Stock trades on the NASDAQ National Market System under the
symbol CMVT. The following table sets forth the range of closing prices of the
Common Stock as reported on NASDAQ for the past three calendar years and for the
period from January 1 through April 22, 1999. All prices have been adjusted to
reflect the three-for-two stock split, effected in the form of a stock dividend
distributed on April 15, 1999.

      YEAR              CALENDAR QUARTER                LOW            HIGH
      ----              ----------------                ---            ----

      1996          1/1/96   -      3/31/96            11.08           16.75
                    4/1/96   -      6/30/96            15.26           20.79
                    7/1/96   -      9/30/96            15.83           27.58
                   10/1/96   -     12/31/96            21.71           25.42

      1997          1/1/97   -      3/31/97            24.58           30.92
                    4/1/97   -      6/30/97            24.33           34.67
                    7/1/97   -      9/30/97            30.63           35.38
                   10/1/97   -     12/31/97            21.50           36.13

      1998          1/1/98   -      3/31/98            20.42           32.67
                    4/1/98   -      6/30/98            28.17           36.71
                    7/1/98   -      9/30/98            24.42           37.96
                   10/1/98   -     12/31/98            19.96           47.33

      1999          1/1/99   -      4/22/99            43.63           64.38


         There were 2,502 holders of record of Common Stock at April 22, 1999.
Such record holders include a number of holders who are nominees for an
undetermined number of beneficial owners; the Company believes that the number
of beneficial owners of the shares of Common Stock outstanding at such date was
approximately 30,000.

         The Company has not declared or paid any cash dividends on its equity
securities and does not expect to pay any cash dividends in the foreseeable
future, but rather intends to retain its earnings to finance the development and
growth of the Company's business. Any future determination as to the declaration
and payment of dividends will be made by the Board of Directors in its
discretion, and will depend upon the Company's earnings, financial condition,
capital requirements and other relevant factors. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."



                                       18
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA.

         The following tables present selected consolidated financial data for
the Company for each of the years in the four years ended December 31, 1997, the
one month period ended January 31, 1998, and the year ended January 31, 1999.
Such information has been derived from the Company's audited consolidated
financial statements and should be read in conjunction with the Company's
consolidated financial statements and the notes to the consolidated financial
statements included elsewhere in this report. All financial information
presented herein for periods prior to the 1995 acquisition of DGM&S has been
retroactively adjusted to account for that transaction as a pooling of
interests. All financial information presented herein has been retroactively
adjusted for the January 1998 merger with Boston Technology, Inc. ("Boston") to
account for that transaction as a pooling of interests. All per share data has
been restated to reflect a three-for-two stock split effected as a 50% stock
dividend to shareholders of record on March 31, 1999, distributed on April 15,
1999.

<TABLE>
<CAPTION>
                                                                                             TRANSITION        YEAR
                                                                                            PERIOD ENDED       ENDED
                                          YEAR ENDED DECEMBER 31,                            JANUARY 31,     JANUARY 31,
         -----------------------------------------------------------------------------------------------------------------
                                           1994(1) (2)    1995 (2)      1996 (2)  1997(3)       1998             1999

                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                     <C>          <C>          <C>           <C>          <C>           <C>
   Statement of Operations Data:
     Sales                               $  197,206   $  242,416   $  389,639    $ 488,940    $   14,401    $  696,094
     Cost of sales                           79,060      104,980      169,524      202,640       21,146  (4)   279,690
     Selling, general and administrative     59,898       72,953       93,604      138,305        51,892 (4)   151,985
     Research and development, net           26,349       41,310       66,228       96,626        13,481       132,820
     Royalties and license fees               2,385        3,321       10,443       12,325           520        16,552
     Non-recurring charges                        -       21,000            -            -        41,877             -
     Interest and other income, net           3,100        5,323        2,376        4,719           175         8,263

     Income (loss) before
           income tax provision              32,352        4,322       52,307       43,923     (114,340)       123,310
     Income tax provision                     7,310        2,162       10,170        9,398           867        11,783
                                         ----------   ----------   ----------    ---------    ----------    ----------
           Net income (loss)             $   25,042   $    2,160   $   42,137    $  34,525    $(115,207)    $  111,527
                                         ==========   ==========   ==========    =========    ==========    ==========

     Earnings per share - diluted        $     0.43   $     0.04   $     0.67    $    0.50    $   (1.77)    $     1.55
                                         ==========   ==========   ==========    =========    ==========    ==========

Weighted average number of
   common and common equivalent
     shares outstanding                      57,909       58,140       66,566       68,954        65,030        71,825

                                                           DECEMBER 31,                               JANUARY 31,     
                                         -----------------------------------------------         ---------------------
                                              1994(5)    1995(5)         1996(5)    1997         1998             1999

                                                                 (IN THOUSANDS)
   Balance Sheet Data:
     Working capital                     $  185,660   $  193,693   $  332,660    $ 395,744     $  280,793    $   707,281
     Total assets                           272,791      306,115      519,074      622,931        527,652      1,031,393
     Long-term debt, including
       current portion                       63,852       61,361      117,605      142,075        124,257        415,247
     Stockholders' equity                   158,405      176,080      288,550      346,161        231,390        381,662

</TABLE>

(1)  Includes results for DGM&S for its fiscal year ended September 30.

(2)  Includes results for Boston for its fiscal year ended January 31.

(3)  Includes results for Boston for the 11 months ended December 31, 1997.

(4)  Includes approximately $7.8 million in cost of sales and $36.1 million in
     selling, general and administrative relating to charges as a result of the
     merger with Boston.

(5)  Includes amounts for Boston as of its fiscal year ended January 31.



                                       19
<PAGE>
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
          AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

INTRODUCTION

On January 14, 1998, Comverse consummated a merger (the "Merger") with Boston
Technology, Inc., a Delaware corporation ("Boston"), in a transaction accounted
for as a pooling of interests. The Company's financial statements for the years
ended December 31, 1996 and 1997 include the operations of Boston for its fiscal
year ended January 31, 1997 and the eleven months ended December 31, 1997,
respectively.

COMPARISON OF YEAR ENDED JANUARY 31, 1999 ("FISCAL 1998") TO
YEAR ENDED DECEMBER 31, 1997 ("FISCAL 1997")

         Sales. Sales increased from Fiscal 1997 to Fiscal 1998 by approximately
$207,154,000 (42%). This increase is primarily attributable to higher volume of
sales of systems and parts of enhanced service platform products.

         Cost of Sales. Cost of sales increased by approximately $77,050,000
(38%) from Fiscal 1997 to Fiscal 1998 primarily as a result of the increase in
sales. Gross margins increased from approximately 58.6% in Fiscal 1997 to
approximately 59.8% in Fiscal 1998.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from Fiscal 1997 to Fiscal 1998 by
approximately $13,680,000 (10%) and as a percentage of sales decreased from
approximately 28% in Fiscal 1997 to approximately 22% in Fiscal 1998. The
increased amount was a result of increased sales, marketing and administrative
activities associated with the overall growth of the Company's operations, and
particularly with the expansion of direct sales and marketing activities.

         Research and Development Expenses. Net research and development
expenses during Fiscal 1998 increased by approximately $36,194,000 (37%) over
Fiscal 1997 due to overall growth of research and development operations, the
initiation of significant new research and development projects and increases in
salaries and other costs associated with research and development operations in
Israel.

         Royalties and License Fees. Royalties and license fees increased from
Fiscal 1997 to Fiscal 1998 by approximately $4,227,000 (34%) due primarily to
growth in sales of royalty-bearing products.

         Income Tax Provision. Provision for income taxes increased from Fiscal
1997 to Fiscal 1998 by approximately $2,385,000 (25%), while the Company's
overall effective tax rate decreased from approximately 21% during Fiscal 1997
to approximately 9% in Fiscal 1998. The Company's overall rate of tax is reduced
significantly by the tax benefits associated with qualified activities of
certain of its Israeli subsidiaries, which are entitled to favorable income tax


                                       20
<PAGE>
rates under a program of the Israeli Government for "Approved Enterprise"
investments in that country.

         Net Income. Net income after taxes increased from approximately
$34,525,000 in Fiscal 1997 to approximately $111,527,000 in Fiscal 1998, an
increase of approximately $77,002,000 (223%), while net income after taxes as a
percentage of sales increased from approximately 7.1% in Fiscal 1997 to
approximately 16.0% in Fiscal 1998. The increases resulted primarily from the
factors described above.


TRANSITION PERIOD

         In 1998, the Company changed its fiscal year from the calendar year to
the fiscal year ending January 31, corresponding to Boston's fiscal year. As a
result of the change in fiscal year, the Company's results of operations for the
one month ended January 31, 1998 have previously been reported separately as a
transition period and included on a transition report on Form 10-K. The Company
had sales of $14,401,000, costs and expenses of $129,608,000, and a net loss of
$115,207,000 for the one month ended January 31, 1998. Included in these results
are $85,763,000 for merger and other related costs.


COMPARISON OF 1996 AND 1997 OPERATIONS

         Sales. Sales increased from 1996 to 1997 by approximately $99,301,000
(25%), primarily resulting from increased sales of enhanced services platform
products.

         Cost of Sales. Cost of sales increased by approximately $33,116,000
(20%) from 1996 to 1997 primarily as a result of the increase in sales. Gross
margins increased from approximately 56.5% in 1996 to approximately 58.6% in
1997.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from 1996 to 1997 by approximately $44,701,000
(48%) and as a percentage of sales increased from approximately 24% in 1996 to
approximately 28% in 1997. The increased amount was a result of increased sales,
marketing and administrative activities associated with the overall growth of
the Company's operations, and particularly with the expansion of direct sales
and marketing activities.

         Research and Development Expenses. Net research and development
expenses during 1997 increased by approximately $30,398,000 (46%) over 1996 due
to overall growth of research and development operations, the initiation of
significant new research and development projects and increases in salaries and
other costs associated with research and development operations in Israel.

         Royalties and License Fees. Royalties and license fees increased from
1996 to 1997 by approximately $1,882,000 (18%) due primarily to growth in sales
of royalty-bearing products.


                                       21
<PAGE>
         Income Tax Provision. Provision for income taxes decreased from 1996 to
1997 by approximately $772,000 (8%), while the Company's overall effective tax
rate increased from approximately 19% during 1996 to approximately 21% in 1997.
The Company's overall rate of tax is reduced significantly by the tax benefits
associated with qualified activities of certain of its Israeli subsidiaries,
which are entitled to favorable income tax rates under a program of the Israeli
Government for "Approved Enterprise" investments in that country.

         Net Income. Net income after taxes decreased from approximately
$42,137,000 in 1996 to approximately $34,525,000 in 1997, a decrease of
approximately $7,612,000 (18%), while net income after taxes as a percentage of
sales decreased from approximately 10.8% in 1996 to approximately 7.1% in 1997.
The decreases resulted primarily from the factors described above.


LIQUIDITY AND CAPITAL RESOURCES

         At January 31, 1999, the Company had cash and cash equivalents of
approximately $583,959,000, bank time deposits and short-term investments of
approximately $73,658,000 and working capital of approximately $707,281,000. The
Company believes that its existing working capital, together with funds
generated from operations, will be sufficient to provide for its planned
operations for the foreseeable future.

         The Company regularly examines opportunities for strategic acquisitions
of other companies or lines of business and anticipates that it may from time to
time issue additional debt and/or equity securities either as direct
consideration for such acquisitions or to raise additional funds to be used (in
whole or in part) in payment for acquired securities or assets. The issuance of
such securities could be expected to have a dilutive impact on the Company's
shareholders, and there can be no assurance as to whether or when any acquired
business would contribute positive operating results commensurate with the
associated investment.

         The Company's liquidity and capital resources have not been, and are
not anticipated to be, materially affected by restrictions pertaining to the
ability of its foreign subsidiaries to pay dividends or by withholding taxes
associated with any such dividend payments.

CERTAIN TRENDS AND UNCERTAINTIES

         The Company has benefited from the growth in its business and capital
base over the past several years to make significant new investment in its
operations and infrastructure intended to enhance its opportunities for future
growth and profitability. The Company intends to continue to make significant
investments in the growth of its business, and to examine opportunities for
additional growth through acquisitions and strategic investments. The impact of
these decisions on future profitability cannot be predicted with assurance, and
the Company's commitment to growth may increase its vulnerability to unforeseen
downturns in its markets, technology changes and shifts in competitive
conditions. However, the Company believes that significant opportunities exist
in the markets for each of its main product lines, and that continued strong
investment in its technical, product development, marketing and sales
capabilities will enhance its opportunities for long term growth and
profitability.

                                       22
<PAGE>
         The telecommunications industry is subject to rapid technological
change. The Company's revenue stream will depend on its ability to enhance its
existing products and to introduce new products on a timely and cost-effective
basis. This includes any customer-requested custom software enhancements
required in the normal course of product delivery and customer demands for the
technological convergence of the Company's products. The Company's products
involve sophisticated hardware and software technology that performs critical
functions to highly demanding standards. There can be no assurance that the
Company's current or future products will not develop operational problems,
which could have a material adverse effect on the Company. In addition, if the
Company were to delay the introduction of new products, or to delay the delivery
of specific custom software enhancements, the Company's operating results could
be adversely affected. The Company sells a majority of its products to companies
in the telecommunications industry. This industry is undergoing significant
change as a result of deregulation and privatization worldwide, reducing
restrictions on competition in the industry. Unforeseen changes in the
regulatory environment may have an impact on the Company's revenues and/or costs
in any given part of the world. The worldwide ESP system industry is already
highly competitive and the Company expects competition to intensify. The Company
believes that existing competitors will continue to present substantial
competition, and that other companies, many with considerably greater financial,
marketing and sales resources than the Company, may enter the ESP system
markets. Moreover, as the Company enters into new markets for enhanced services
as a result of its own research and development efforts or acquisitions, it is
likely to ecounter new competitors. As a result of its significantly greater
concentration on a small number of large telephone company customers, Boston's
business has historically been considerably more volatile than that of Comverse,
and the operations of the combined Company are likely to be less predictable and
subject to greater risks from actions of individual customers than the
operations of Comverse in recent years.

         The market for telecommunications monitoring systems is also in a
period of significant transition. Budgetary constraints, uncertainties resulting
from the introduction of new technologies in the telecommunications environment
and shifts in the pattern of government expenditures resulting from geopolitical
events have increased uncertainties in the market, resulting in certain
instances in the attenuation of government procurement programs beyond their
originally expected performance periods and an increased incidence of delay,
cancellation or reduction of planned projects. The delay and uncertainties
surrounding the Communications Assistance for Law Enforcement Act ("CALEA") have
had a significant negative impact on acquisition plans of law enforcement
agencies in North America engaged in monitoring activities. Competitive
conditions in this sector have also been affected by the increasing use by
certain potential government customers of their own internal development
resources rather than outside vendors to provide certain technical solutions. In
addition, a number of established government contractors, particularly
developers and integrators of technology products, have taken steps to redirect
their marketing strategies and product plans in reaction to cut-backs in their
traditional areas of focus, resulting in an increase in the number of
competitors and the range of products offered in response to particular requests
for proposals. The lack of predictability in the timing and scope of government
procurements have similarly made planning decisions more difficult and have
increased the associated risks.

         The Company has historically derived a significant portion of its sales
and operating profit from contracts for large system installations with major
customers. Boston's operating results, in particular, have often been


                                       23
<PAGE>
characterized by volatility and lack of predictability, reflecting its
traditional customer concentration among major telecommunications services
providers such as the Regional Bell Operating Companies. The Company continues
to emphasize large capacity systems in its product development and marketing
strategies. Contracts for large installations typically involve a lengthy and
complex bidding and selection process, and the ability of the Company to obtain
particular contracts is inherently difficult to predict. The Company believes
that opportunities for large installations will continue to grow in both its
commercial and government markets, and intends to continue to expand its
research and development, manufacturing, sales and marketing and product support
capabilities in anticipation of such growth. However, the timing and scope of
these opportunities and the pricing and margins associated with any eventual
contract award are difficult to forecast, and may vary substantially from
transaction to transaction. The Company's future operating results may
accordingly exhibit a higher degree of volatility than the operating results of
other companies in its industries that have adopted different strategies, and
than the Company has experienced in prior periods. Although the Company is
actively pursuing a number of significant procurement opportunities in the
United States and internationally, both the timing of any eventual procurements
and the probability of the Company's receipt of significant contract awards are
uncertain. The degree of dependence by the Company on large system orders, and
the investment required to enable the Company to perform such orders, without
assurance of continuing order flow from the same customers and predictability of
gross margins on any future orders, increase the risk associated with its
business.

         The Company has significantly increased its expenditures in all areas
of its operations during recent periods, including the areas of research and
development and marketing and sales, and the Company plans to further increase
these expenditures in the foreseeable future. The increase in research and
development expenditures reflects the Company's concentration on enhancing the
range of features and capabilities of its existing product lines and developing
new generations of its products. The Company believes that these efforts are
essential for the continuing competitiveness of its product offerings and for
positioning itself to participate in future growth opportunities in both the
commercial and government sectors. The increase in sales and marketing
expenditures primarily results from the Company's decision to expand its
activities and direct presence in a growing number of world markets. The
Company's costs of operations have also been affected by increases in the cost
of its operations in Israel, resulting both from general inflation and increases
in the cost of attracting and retaining qualified scientific, engineering and
technical personnel in Israel, where the demand for such personnel is growing
rapidly with the expansion of technology-based industries in that country. The
increase in these costs in recent years has not been offset in each instance by
proportional devaluation of the Israeli shekel against the United States dollar,
and accordingly has had a negative impact on the Company's overall results of
operations. Continuation of such trends may have a material adverse effect on
the Company's future results of operations.

         A significant portion of the Company's research and development and
manufacturing operations are located in Israel and may be affected by
regulatory, political, military and economic conditions in that country. The
Company's historical operating results reflect substantial benefits from
programs sponsored by the Israeli government for the support of research and
development, as well as favorable tax rates available to "Approved Enterprises"
in Israel. The Israeli government has indicated its intention to reexamine


                                       24
<PAGE>
certain of its policies in these areas. Recently, the government acted to
increase, from between 2% and 3% of associated product sales to 3% of associated
product revenues (including service and other related revenues), the annual rate
of royalties to be applied to repayment of benefits under the conditional grant
program administered by the Office of the Chief Scientist of the Ministry of
Industry and Trade, a program in which the Company has regularly participated
and under which it continues to receive significant benefits through
reimbursement of up to 50% of qualified research and development expenditures.
The Company's repayment of amounts received under the program will be
accelerated through these higher royalty rates until repayment is completed.
Repayment of any amounts received under programs which have been, or will be,
approved by the Office of the Chief Scientist after January 1, 1999 will entail
repayment of the amount received (calculated in US Dollars), plus interest on
such amount at a rate equal to the 12-month LIBOR rate in effect at the time of
the approval of the program. In addition, permission from the government of
Israel is required for the Company to manufacture outside of Israel products
resulting from research and development activities funded under such programs,
or to transfer outside of Israel related technology rights, and in order to
obtain such permission the Company may be required to increase the royalties to
the applicable funding agencies and/or repay certain amounts received as
reimbursement of research and development costs. The Israeli authorities have
also indicated that these research and development funding programs will be
significantly further reduced in the future, particularly for larger entities
such as the Company. The Israeli government has also shortened the period of the
tax moratorium applicable to "Approved Enterprises" from four years to two
years. Although this change has not affected the tax status of the Company's
projects that were eligible for the moratorium prior to 1997, it applies to the
subsequent "Approved Enterprises" of the Company. If further changes in the law
or government policies regarding those programs were to result in their
termination or adverse modification, or if the Company were to become unable to
participate in or take advantage of those programs, the cost to the Company of
its operations in Israel would materially increase and there would be an adverse
effect on the results of the Company's operations as a whole. To the extent the
Company increases its activities outside Israel, such increased activities will
not be eligible for programs sponsored by Israel. Most of the Company's research
and development and manufacturing operations attributable to Boston are expected
to continue to be located in the United States and thus will not be eligible for
the benefits of those programs. Accordingly, the effective cost to the Company
of its future research and development activities in particular, and its
operations in general, could significantly increase relative to that of
Comverse, historically.

         The Company currently derives a significant portion of its total sales
from customers outside of the United States. International transactions involve
particular risks, including political decisions affecting tariffs and trade
conditions, rapid and unforeseen changes in economic conditions in individual
countries, turbulence in foreign currency and credit markets, and increased
costs resulting from lack of proximity to the customer. Volatility in
international currency exchange rates may have a significant impact on the
Company's operating results. The Company has, and anticipates that it will
continue to receive, significant contracts denominated in foreign (primarily
Western European and Japanese) currencies. As a result of the unpredictable
timing of purchase orders and payments under such contracts and other factors,
it is often not practicable for the Company to effectively hedge the risk of
significant changes in currency rates during the contract period. Since the
Company will hedge the exchange rate risks associated with long-term contracts
denominated in foreign currencies only to a limited extent, operating results


                                       25
<PAGE>
can be affected by the impact of currency fluctuations as well as the cost of
such hedging.

         Prevailing economic conditions in the Far East and Southeast Asia have
significantly reduced the demand for the Company's systems in certain countries.
The Company cannot currently predict the effect on its business should regional
economic conditions fail to improve. Moreover, the Company's future operating
results and financial condition will be adversely affected should current
economic instability result in more widespread slowdown or recessionary
conditions in other major world markets, or in severe trade or currency
disruptions.

         The Company has undertaken a comprehensive program to evaluate "Year
2000 compliance" of its products and systems. The Company considers a product to
be "Year 2000 compliant" if the product, when used properly and in conformity
with the product information provided by the Company, will accurately store,
display, process, provide and/or receive data from, into and between the
twentieth and twenty-first centuries, including leap year calculations, provided
that all other technology used in combination with the Company product properly
exchanges date data with the product.

         Although the Company believes that its current products generally
either are, or upon the completion of current modification programs will be,
Year 2000 compliant, no assurance can be given that its Year 2000 compliance
efforts will prove to be fully successful or that unanticipated costs and
problems will not be encountered in such efforts. In addition, the Company has
determined that older generations of certain of its products are not and cannot,
without unreasonable effort and expense, be made Year 2000 compliant. The costs
incurred to date related to the Company's Year 2000 compliance program have been
less than $5,000,000. The program is expected to continue through fiscal 1999,
but is not anticipated to have a material adverse effect on the Company's
business or financial condition.

         The Company anticipates that widespread litigation may be brought in
the future against vendors of systems and components of systems that are unable
to properly manage data related to the Year 2000. The Company's agreements with
customers typically contain provisions designed to limit generally the Company's
liability for customer claims. It is possible, however, that these measures will
not provide protection from Year 2000 liability claims, as a result of existing
or future laws or unfavorable judicial decisions. Any such claims could result
in a material adverse affect on the Company's business, financial condition and
results of operations, including increased warranty costs, customer satisfaction
issues and potential legal damages.

         The Company has initiated a comprehensive program to address Year 2000
readiness in its internal systems and with its customers and suppliers. The
Company's program has been designed to address its most critical internal
systems first and to gather information regarding the Year 2000 compliance of
products supplied to it and into which the Company's products are integrated.
Assessment and remediation are proceeding in tandem, and the Company intends to
have its critical internal systems in Year 2000 compliance by the end of the
third quarter of 1999. These activities are intended to encompass all major
categories of systems in use by the Company, including manufacturing,
engineering, sales, finance and human resources. The costs incurred to date
related to these programs have been less than $5,000,000.


                                       26
<PAGE>
         The Company currently expects that the total cost of its Year 2000
readiness programs over the current fiscal year will not exceed $5,000,000. The
total cost estimate does not include potential costs related to any customer or
other claims or the costs of internal software or hardware replaced in the
normal course of business. The total cost estimate is based on the current
assessment of the Company's Year 2000 readiness needs and is subject to change
as the projects proceed.

         The Company is communicating with its significant suppliers and
financial institutions to determine the extent to which the Company is
vulnerable to those third parties' failure to remedy their own Year 2000
concerns, and has received assurances of Year 2000 compliance from a number of
those contacted. Most of the suppliers under existing contracts with the Company
are under no contractual obligation to provide such information to the Company.
While the Company currently expects that the Year 2000 issue will not pose
significant operational problems, failure to fully identify all Year 2000
dependencies in the Company's systems and in the systems of its suppliers,
customers and financial institutions could have material adverse consequences,
including delays in the delivery or sale of products. The Company has under
consideration various contingency plans which will be developed as needed to
assure continuing operations in the event such problems arise.

         The trading price of the Company's shares may be affected by the
factors noted above as well as prevailing economic and financial trends and
conditions in the public securities markets. Share prices of companies in
technology and government contracting businesses, and particularly smaller and
medium-sized publicly traded companies such as the Company, tend to exhibit a
high degree of volatility. The Company's revenues and earnings may be more
volatile than those of Comverse historically as a result of the greater
concentration of Boston's business on a limited number of large customers.
Shortfalls in revenues or earnings from the levels anticipated by the public
markets could have an immediate and significant effect on the trading price of
the Company's shares in any given period. Such shortfalls may result from events
that are beyond the Company's immediate control, can be unpredictable and, since
a significant proportion of the Company's sales during each fiscal quarter tend
to occur in the latter stages of the quarter, may not be discernible until the
end of a financial reporting period. These factors contribute to the volatility
of the trading value of its shares regardless of the Company's long-term
prospects. The trading price of the Company's shares may also be affected by
developments, including reported financial results and fluctuations in trading
prices of the shares of other publicly-held companies in the telecommunications
equipment industry in general, and the Company's industry in particular, which
may not have any direct relationship with the Company's business or prospects.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

         During 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires that all
derivative financial instruments be recognized as either assets or liabilities
in the balance sheet. Measurement is at fair value, and if the derivative is not
designed as a hedging instrument, changes in fair value (i.e., gains and losses)
are to be recognized in earnings in the period of change. If certain conditions
are met, a derivative may be designed as a hedge, in which case the accounting
for changes in fair value will depend on the specific exposure being hedged. The


                                       27
<PAGE>
method that will be used for assessing the effectiveness of a hedging
derivative, as well as the measurement approach for determining the ineffective
aspects of the hedge, must be established at the inception of the hedge. The
methods must be consistent with the Company's approach to managing risk. SFAS
133 will be effective for fiscal years beginning after June 15, 1999. The
Company is currently evaluating the impact that the adoption of SFAS 133 will
have on its financial statements.

FORWARD-LOOKING STATEMENTS

         From time to time, the Company makes forward-looking statements.
Forward-looking statements include financial projections, statements of plans
and objectives for future operations, statements of future economic performance,
and statements of assumptions relating thereto.

         The Company may include forward-looking statements in its periodic
reports to the Securities and Exchange Commission on Forms 10-K, 10-Q, and 8-K,
in its annual report to shareholders, in its proxy statements, in its press
releases, in other written materials, and in statements made by employees to
analysts, investors, representatives of the media, and others.

         By their very nature, forward-looking statements are subject to
uncertainties, both general and specific, and risks exist that predictions,
forecasts, projections and other forward-looking statements will not be
achieved. Actual results may differ materially due to a variety of factors,
including without limitation those discussed under "Certain Trends and
Uncertainties" and elsewhere in this report. Investors and others should
carefully consider these and other uncertainties and events, whether or not the
statements are described as forward-looking.

         Forward-looking statements made by the Company are intended to apply
only at the time they are made, unless explicitly stated to the contrary.
Moreover, whether or not stated in connection with a forward-looking statement,
the Company undertakes no obligation to correct or update a forward-looking
statement should the Company later become aware that it is not likely to be
achieved. If the Company were in any particular instance to update or correct a
forward-looking statement, investors and others should not conclude that the
Company will make additional updates or corrections thereafter.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company is exposed to market risk from changes in foreign currency
exchange rates, interest rates and equity trading prices, which could impact its
results of operations and financial condition. The Company manages its exposure
to these market risks through its regular operating and financing activities
and, when deemed appropriate, through the use of derivative financial
instruments.

         The Company from time to time uses foreign currency exchange contracts
and other derivative instruments to reduce its exposure to the risk that the
eventual net cash inflows and outflows resulting from the sale of products to
foreign customers will be adversely affected by changes in exchange rates. The
use of these derivative financial instruments allows the Company to reduce its
exposure to exchange rate movements, since the gains and losses on these


                                       28
<PAGE>
contracts substantially offset losses and gains on the assets, liabilities and
transactions being hedged. In many instances, the Company elects not to hedge
these transactions. Management does not expect any significant changes in the
strategies it employs to manage such exposure in the near future. As of January
31, 1999, the Company's foreign currency market exposure that is hedged relates
to the Japanese yen. As of January 31, 1999, a 10% appreciation or depreciation
from the prevailing market rate of the Japanese yen would not have a material
effect on the Company's financial position, results of operations or cash flows.

         Various financial instruments held by the Company are sensitive to
changes in interest rates. Interest rate changes would result in gains or losses
in the market value of the Company's investments in debt securities due to
differences between the market interest rates and rates at the inception of
these financial instruments. Neither a 100 basis point increase nor decrease
from current interest rates would have a material effect on the Company's
financial position, results of operations or cash flows.

         Equity investments held by the Company are subject to equity price
risks. Neither a 10% increase nor decrease in equity prices would have a
material effect on the Company's financial position, results of operations or
cash flows.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial information required by Item 8 is included elsewhere in
this report.

         See Part IV, Item 14.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE.

         Not applicable.


                                    PART III

        The information required by Part III is omitted pursuant to instruction
G(3).




                                       29
<PAGE>
                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES
                  AND REPORTS ON FORM 8-K.

                                                                        Page(s)
  (a)      Documents filed as part of this report.


           (1)      Financial Statements.

                    Index to Consolidated Financial Statements            F-1

                    Independent Auditors' Reports                         F-2

                    Consolidated Balance Sheets as of
                            January 31, 1998 and 1999                     F-4

                    Consolidated Statements of Income
                            for the  Years Ended December 31,
                            1996, 1997 and January 31, 1999               F-5

                    Consolidated Statements of Stockholders' Equity
                            for the  Years Ended December 31, 1996,
                            1997 and January 31, 1999                     F-6

                    Consolidated Statements of Cash Flows for the
                            Years Ended December 31, 1996, 1997
                            and January 31, 1999                          F-7

                    Notes to Consolidated Financial Statements            F-8

           (2)      Financial Statement Schedules.

                    None

           (3)      Exhibits.

                    The Index of Exhibits commences on the
                    following page. Exhibits numbered 10.3
                    through 10.8, 10.13 through 10.16 and 10.24
                    through 10.30 comprise material compensatory
                    plans and arrangements of the registrant.




                                       30
<PAGE>
EXHIBITS

NO.      DESCRIPTION
---      -----------

2.1*     Agreement and Plan of Merger dated as of August 20, 1997, between
         Registrant and Boston Technology, Inc. (Incorporated by reference to
         the Definitive Proxy Materials for the Registrant's Annual Meeting of
         Stockholders held January 13, 1998.)

3        Articles of Incorporation and By-Laws:

         3.1*       Certificate of Incorporation. (Incorporated by reference to
                    the Registrant's Annual Report on Form 10-K under the
                    Securities Exchange Act of 1934 for the year ended December
                    31, 1987.)

         3.2*       Certificate of Amendment of Certificate of Incorporation
                    effective February 26, 1993. (Incorporated by reference to
                    the Registrant's Annual Report on Form 10-K under the
                    Securities Exchange Act of 1934 for the year ended December
                    31, 1992.)

         3.3*       Certificate of Amendment of Certificate of Incorporation
                    effective January 12, 1995. (Incorporated by reference to
                    the Registrant's Annual Report on Form 10-K under the
                    Securities Exchange Act of 1934 for the year ended December
                    31, 1994.)

         3.4*       By-Laws, as amended. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1987.)

4        Instruments defining the rights of security holders including 
         indentures:

         4.1*       Excerpts from Certificate of Incorporation. (Incorporated by
                    reference to the Registrant's Registration Statement on Form
                    S-1 under the Securities Exchange Act of 1933, Registration
                    No. 33-9147.)

         4.2*       Excerpt from Certificate of Amendment of Certificate of
                    Incorporation effective February 26, 1993. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1992.)

         4.3*       Excerpt from Certificate of Amendment of Certificate of
                    Incorporation effective January 12, 1995. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1994.)

         4.4*       Excerpts from By-Laws, as amended. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1992.)

         4.5*       Specimen stock certificate. (Incorporated by reference to
                    the Registrant's Annual Report on Form 10-K under the
                    Securities Exchange Act of 1934 for the year ended December
                    31, 1992.)


                                       31
<PAGE>
         4.6*       Indenture dated as of October 4, 1996 from Comverse
                    Technology, Inc. to The Chase Manhattan Bank, N.A., Trustee.
                    (Incorporated by reference to the Registrant's Current
                    Report on Form 8-K under the Securities Exchange Act of 1934
                    filed October 10, 1996.)

         4.7*       Specimen 5 3/4% Convertible Subordinated Debenture due 2006.
                    (Incorporated by reference to the Registrant's Current
                    Report on Form 8-K under the Securities Exchange Act of 1934
                    filed October 10, 1996.)

         4.8*       Indenture dated as of June 30, 1998 from Comverse
                    Technology, Inc. to The Chase Manhattan Bank, Trustee.
                    (Incorporated by reference to the Registrant's Current
                    Report on Form 8-K under the Securities Exchange Act of 1934
                    filed July 2, 1998.)

         4.9*       Specimen 4 1/2% Convertible Subordinated Debenture due 2005.
                    (Incorporated by reference to the Registrant's Current
                    Report on Form 8-K under the Securities Exchange Act of 1934
                    filed July 2, 1998.)

10       Material contracts:

         10.1*      Proxy Agreement dated as of September 5, 1991 by and among
                    Comverse Government Systems Corporation, James R. Allen,
                    Robert W. Bazley, Robert T. Marsh and Comverse Technology,
                    Inc. (Incorporated by reference to the Registrant's Annual
                    Report on Form 10-K under the Securities Exchange Act of
                    1934 for the year ended December 31, 1991.)

         10.2*      Visitation Approval Procedure Agreement dated as of
                    September 5, 1991 by and among Comverse Government Systems
                    Corporation, James R. Allen, Robert W. Bazley, Robert T.
                    Marsh and Comverse Technology, Inc. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1991.)

         10.3*      Form of Stock Option Agreement pertaining to shares of
                    certain subsidiaries of Comverse Technology, Inc.
                    (Incorporated by reference to the Registrant's Annual Report
                    on Form 10-K under the Securities Exchange Act of 1934 for
                    the year ended December 31, 1993.)

         10.4*      Employment Agreement effective as of July 1, 1994 by and
                    between Comverse Technology, Inc. and Kobi Alexander.
                    (Incorporated by reference to the Registrant's Annual Report
                    on Form 10-K under the Securities Exchange Act of 1934 for
                    the year ended December 31, 1994.)

         10.5*      1994 Stock Option Plan. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1994.)

         10.6*      1995 Stock Option Plan. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1995.)

         10.7*      1996 Stock Option Plan. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1996.)



                                       32
<PAGE>
         10.8*      Form of Incentive Stock Option Agreement. (Incorporated by
                    reference to the Registrant's Registration Statement on Form
                    S-1 under the Securities Act of 1933, Registration No.
                    33-9147.)

         10.9*      Deed of Guarantee from Comverse Technology, Inc. to Bank
                    Hapoalim B.M. dated July 30, 1986. (Incorporated by
                    reference to the Registrant's Registration Statement on Form
                    S-1 under the Securities Act of 1933, Registration No.
                    33-9147.)

         10.10*     Continuing Guarantee from Comverse Technology, Inc. to Bank
                    Leumi le-Israel B.M. (Incorporated by reference to the
                    Registrant's Registration Statement on Form S-1 under the
                    Securities Act of 1933, Registration No. 33-9147.)

         10.11*     Patent License Agreement by and between Efrat Future
                    Technology Ltd. and VMX, Inc. (Incorporated by reference to
                    the Registrant's Registration Statement on Form S-1 under
                    the Securities Act of 1933, Registration No. 33-9147.)

         10.12*     Form of Indemnity Agreement between Comverse Technology,
                    Inc. and its Officers and Directors. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1987.)

         10.13*     1987 Stock Option Plan, as amended. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1987.)

         10.14*     Form of Stock Option Agreement for options other than
                    Incentive Stock Options. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1987.)

         10.15*     1997 Employee Stock Purchase Plan. (Incorporated by
                    reference to the Definitive Proxy Materials for the
                    Registrant's Annual Meeting of Stockholders held January 13,
                    1998.)

         10.16*     1997 Stock Incentive Compensation Plan. (Incorporated by
                    reference to the Definitive Proxy Materials for the
                    Registrant's Annual Meeting of Stockholders held January 13,
                    1998.)

         10.17*     Memorandum of Agreement dated November 22, 1995 between
                    Boston Technology, Inc. and AT&T. (Incorporated by reference
                    to the Annual Report of Boston Technology, Inc. on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    January 31, 1996, confidential treatment requested as to
                    certain portions.)

         10.18*     Lease dated November 5, 1990 between Boston Technology, Inc.
                    and Wakefield Park Limited Partnership. (Incorporated by
                    reference to the Annual Report of Boston Technology, Inc. on
                    Form 10-K under the Securities Exchange Act of 1934 for the
                    year ended January 31, 1991.)

         10.19*     First Amendment dated as of March 31, 1993 to Lease dated
                    November 5, 1990 between Boston Technology, Inc. and
                    Wakefield Park Limited Partnership. (Incorporated by
                    reference to the Quarterly Report of Boston Technology, Inc.
                    on Form 10-Q under the Securities Exchange Act of 1934 for
                    the quarter ended October 31, 1993.)



                                       33
<PAGE>
          10.20*    Second Amendment dated as of August 31, 1994 to Lease dated
                    November 5, 1990 between Boston Technology, Inc. and
                    Wakefield Park Limited Partnership. (Incorporated by
                    reference to the Annual Report of Boston Technology, Inc. on
                    Form 10-K under the Securities Exchange Act of 1934 for the
                    year ended January 31, 1995.)

          10.21*    License Agreement dated November 15, 1988 between Boston
                    Technology, Inc. and VMX, Inc. (Incorporated by reference to
                    the Registration Statement of Boston Technology, Inc. on
                    Form S-1 under the Securities Act of 1933, Registration No.
                    33-32134.)

          10.22*    License Agreement dated January 22, 1990 between Boston
                    Technology, Inc. and Dytel Corporation. (Incorporated by
                    reference to the Annual Report of Boston Technology, Inc. on
                    Form 10-K under the Securities Exchange Act of 1934 for the
                    year ended January 31, 1990.)

          10.23*    Settlement Agreement dated December 28, 1993 between the
                    Boston Technology, Inc. and Theis Research, Inc. and Peter
                    F. Theis. (Incorporated by reference to the Annual Report of
                    Boston Technology, Inc. on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended January 31, 1994.)

          10.24*    Boston Technology, Inc. 1995 Director Stock Option Plan.
                    (Incorporated by reference to the Quarterly Report of Boston
                    Technology, Inc. on Form 10-Q under the Securities Exchange
                    Act of 1934 for the quarter ended July 31, 1995.)

          10.25*    Boston Technology, Inc. 1992 Directors' Stock Option Plan,
                    as amended. (Incorporated by reference to the Annual Report
                    of Boston Technology, Inc. on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended January 31, 1994.)

          10.26*    Boston Technology, Inc. 1994 Stock Incentive Plan.
                    (Incorporated by reference to the Annual Report of Boston
                    Technology, Inc. on Form 10-K under the Securities Exchange
                    Act of 1934 for the year ended January 31, 1994.)

          10.27*    Boston Technology, Inc. 1989 Incentive Stock Option Plan, as
                    amended. (Incorporated by reference to the Definitive Proxy
                    Materials for Boston Technology, Inc.'s Annual Meeting of
                    Stockholders held July 14, 1992.)

          10.28*    Boston Technology, Inc. Employee Savings and Profit Sharing
                    Plan. (Incorporated by reference to Registration Statement
                    of Boston Technology, Inc. on Form S-1 under the Securities
                    Act of 1933, Registration No. 33-32134.)

          10.29*    Boston Technology, Inc. Employee Severance Benefit Plan.
                    (Incorporated by reference to the Current Report of Boston
                    Technology, Inc. on Form 8-K under the Securities Exchange
                    Act of 1934 dated May 9, 1991.)

          10.30*    Boston Technology, Inc. 1996 Stock Incentive Plan.
                    (Incorporated by reference to the Definitive Proxy Materials
                    for Boston Technology, Inc.'s Annual Meeting of Stockholders
                    held June 25, 1996.)


                                       34
<PAGE>
         10.31*     Lease dated June 7, 1996 between Boston Technology, Inc. and
                    WBAM Limited Partnership. (Incorporated by reference to the
                    Annual Report of Boston Technology, Inc. on Form 10-K under
                    the Securities Exchange Act of 1934 for the year ended
                    January 31, 1997.)

21       Subsidiaries of Registrant.

27       Financial Data Schedule



-----------------

* Incorporated by reference.






                                       35
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                                                         PAGE

Independent Auditors' Reports                                             F-2

Consolidated Balance Sheets as of January 31, 1998 and 1999               F-4

Consolidated Statements of Income for the
   Years Ended December 31, 1996, 1997 and January 31, 1999               F-5

Consolidated Statements of Stockholders' Equity for the
   Years Ended December 31, 1996, 1997 and January 31, 1999               F-6

Consolidated Statements of Cash Flows for the
   Years Ended December 31, 1996, 1997 and January 31, 1999               F-7

Notes to Consolidated Financial Statements                                F-8









                                      F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of Comverse Technology, Inc.
Woodbury, New York

We have audited the accompanying consolidated balance sheets of Comverse
Technology, Inc. and subsidiaries (the "Company") as of January 31, 1998 and
1999, and the related consolidated statements of income, stockholders' equity
and cash flows for years ended December 31, 1996 and 1997 and January 31, 1999.
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. The statements of income, stockholders' equity and cash flows for
the year ended December 31, 1996 give retroactive effect to the merger of the
Company and Boston Technology, Inc., which has been accounted for as a pooling
of interests as described in Note 8 to the consolidated financial statements. We
did not audit the financial statements of Boston Technology, Inc. for the year
ended January 31, 1997, which statements reflect total sales constituting 49% of
consolidated total sales for the year ended December 31, 1996. These financial
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Boston
Technology, Inc., is based solely on the report of such other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. 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 report of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our report and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Comverse Technology, Inc. and subsidiaries as of January
31, 1998 and 1999, and the results of their operations and their cash flows for
the years ended December 31, 1996, 1997 and January 31, 1999 in conformity with
generally accepted accounting principles.


Deloitte & Touche LLP

New York, New York
March 8, 1999 (April 15, 1999 as to Note 12)




                                      F-2
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of Boston Technology, Inc.:

We have audited the consolidated balance sheet of Boston Technology, Inc. as of
January 31, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year ended January 31, 1997 (none of
which were included herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Boston Technology,
Inc. as of January 31, 1997, and the consolidated results of its operations and
its cash flows for the fiscal year ended January 31, 1997 in conformity with
generally accepted accounting principles.


PricewaterhouseCoopers LLP
Boston, Massachusetts
April 24, 1997







                                      F-3
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------

ASSETS                                                                            1998                    1999
------                                                                            ----                    ----
<S>                                                                        <C>                       <C>
CURRENT ASSETS:
   Cash and cash equivalents                                               $     180,855             $      583,959
   Bank time deposits                                                             35,700                     10,000
   Short-term investments                                                         60,347                     63,658
   Accounts receivable, net of allowance for
     doubtful accounts of $24,454 and $25,218                                     79,693                    192,317
   Inventories                                                                    63,024                     46,689
   Prepaid expenses and other current assets                                      27,863                     34,354
   Deferred income tax benefits                                                    1,652                      1,660
                                                                           -------------             --------------
TOTAL CURRENT ASSETS                                                             449,134                    932,637
PROPERTY AND EQUIPMENT, net                                                       53,413                     61,445
INVESTMENTS                                                                        6,838                      7,902
OTHER ASSETS                                                                      18,267                     29,409
                                                                           -------------             --------------
TOTAL ASSETS                                                               $     527,652             $    1,031,393
                                                                           =============             ==============


-----------------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY                                              1998                    1999
------------------------------------                                              ----                    ----

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                   $     125,941             $      184,870
   Bank loans                                                                     16,600                        247
   Advance payments from customers                                                22,680                     39,051
   Other current liabilities                                                       3,120                      1,188
                                                                           -------------             --------------
TOTAL CURRENT LIABILITIES                                                        168,341                    225,356
CONVERTIBLE SUBORDINATED DEBENTURES                                              115,000                    415,000
LIABILITY FOR SEVERANCE PAY                                                        4,481                      4,338
OTHER LIABILITIES                                                                  8,440                      5,037
                                                                           -------------             --------------
TOTAL LIABILITIES                                                                296,262                    649,731
                                                                           -------------             --------------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
   Preferred stock, $0.01 par value--authorized, 2,500,000
     shares; issued, none                                                              -                          -
   Common stock, $0.10 par value -- authorized, 100,000,000 shares;
     issued and outstanding, 65,086,196 and 68,736,936 shares                      6,509                      6,874
   Additional paid-in capital                                                    217,192                    253,065
   Retained earnings                                                               6,559                    118,086
   Accumulated other comprehensive income                                          1,130                      3,637
                                                                           -------------             --------------
TOTAL STOCKHOLDERS' EQUITY                                                       231,390                    381,662
                                                                           -------------             --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $     527,652             $    1,031,393
                                                                           =============             ==============

</TABLE>
                 See notes to consolidated financial statements.


                                      F-4
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1997 AND JANUARY 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------

                                                                 DECEMBER 31,         DECEMBER 31,         JANUARY 31,
                                                                     1996                  1997               1999
                                                                     ----                  ----               ----
<S>                                                            <C>                  <C>                  <C>
Sales                                                           $    389,639         $    488,940         $    696,094
Cost of sales                                                        169,524              202,640              279,690
                                                                ------------         ------------         ------------
Gross margin                                                         220,115              286,300              416,404

Operating expenses:
   Research and development, net                                      66,228               96,626              132,820
   Selling, general and administrative                                93,604              138,305              151,985
   Royalties and license fees                                         10,443               12,325               16,552
                                                                ------------          -----------         ------------

   Income from operations                                             49,840               39,044              115,047

   Interest and other income, net                                      2,467                4,879                8,263
                                                                ------------          -----------         ------------

Income before income tax provision                                    52,307               43,923              123,310
Income tax provision                                                  10,170                9,398               11,783
                                                                ------------          -----------         ------------

Net income                                                      $     42,137          $    34,525         $    111,527
                                                                ============          ===========         ============

Earnings per share:
     Basic                                                      $       0.73          $      0.54         $       1.68
                                                                ============          ===========         ============
     Diluted                                                    $       0.67          $      0.50         $       1.55
                                                                ============          ===========         ============

</TABLE>


                 See notes to consolidated financial statements.


                                      F-5
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND JANUARY 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Accumulated Other
                                                                                                     Comprehensive Income    Total
                                       Common Stock    Additional                                  Unrealized Cumulative     Stock-
                                    Number of    Par     Paid-in    Treasury Stock      Retained      Gains   Translation   holders'
                                     Shares     Value    Capital   Shares     Amount    Earnings    (Losses)  Adjustment    Equity
                                     ------     -----    -------   ------     ------    --------    --------  ----------    ------
<S>                             <C>           <C>       <C>        <C>        <C>       <C>         <C>       <C>           <C>
BALANCE, JANUARY 1, 1996          56,755,091    $5,676    $129,285 (597,791)  $(8,599)   $ 48,925      $ 646      $  147    $176,080
Comprehensive income:
Net income                                                                                 42,137
Unrealized gain on available-for-
     sale securities                                                                                     901
Translation adjustment                                                                                               191
Total comprehensive income                                                                                                    43,229
Issuance of treasury stock upon
   exercise of stock options                                        528,894     7,534      (3,993)                             3,541
Issuance of treasury stock for
   employee stock purchase plan                                      68,897     1,065        (197)                               868
Exercise of stock options            567,498        57      2,798                                                              2,855
Conversion of debentures           4,645,152       464     58,181                                                             58,645
Acquisition of additional interest
   in majority-owned subsidiary        8,250         1        148                                                                149
Tax benefit of dispositions of
     stock options                                          3,183                                                              3,183
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996        61,975,991     6,198    193,595                          86,872      1,547         338     288,550
Comprehensive income:
Net income                                                                                 34,525
Unrealized (loss) on available-for-
      sale securities                                                                                   (430)
Translation adjustment                                                                                               106
Total comprehensive income                                                                                                    34,201
AT&T warrant exercises               828,216        83       (83)
Common stock issued for acquisition  243,750        24                                                                            16
Retained earnings of acquired
   company                                                    (8)                             661                                661
Common stock issued for employee
     stock purchase plan              76,382         8      1,298                                                              1,306
Issuance of treasury stock upon
   exercise of stock options                                                                 (292)                             (292)
Exercise of stock options          1,886,204       188     14,601                                                             14,789
Tax benefit of dispositions of
     stock options                                          6,930                                                              6,930
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997        65,010,543    $6,501   $216,333                        $121,766     $1,117        $444    $346,161
                                  ==========    ======   ========                        ========     ======        ====    ========

BALANCE, FEBRUARY 1, 1998         65,086,196    $6,509  $ 217,192                        $  6,559      $ 641      $  489    $231,390
Comprehensive income:
Net income                                                                                111,527
Unrealized gain on available-for-sale
     securities                                                                                        2,874
Translation adjustment                                                                                              (367)
Total comprehensive income                                                                                                   114,034
AT&T warrant exercise                649,500        65       (65)
Common stock issued for employee
     stock purchase plan             105,333        10      2,288                                                              2,298
Exercise of stock options          2,895,907       290     33,650                                                             33,940
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 1999         68,736,936    $6,874    $253,065                       $118,086      $3,515     $  122    $381,662
                                  ==========    ======    ========                       ========      ======     ======    ========
</TABLE>
                 See notes to consolidated financial statements.

                                      F-6
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND JANUARY 31, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                            DECEMBER 31,     DECEMBER 31,      JANUARY 31,
                                                                                1996           1997             1999
                                                                                ----           ----             ----
<S>                                                                       <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                              $    42,137     $    34,525     $   111,527
   Adjustments to reconcile net income to net cash provided
       by operating activities:
     Depreciation and amortization                                              15,493          22,000          20,872
     Changes in assets and liabilities:
       Accounts receivable                                                     (46,044)        (23,977)       (112,624)
       Inventories                                                             (17,816)        (14,818)         16,335
       Prepaid expenses and other current assets                                (1,503)        (17,802)         (6,491)
       Accounts payable and accrued expenses                                    35,459           8,314          58,929
       Advance payments from customers                                           5,130           8,595          16,371
       Liability for severance pay                                                 409             807            (143)
       Other                                                                      (305)          3,657            (440)
                                                                           -----------     -----------     -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                       32,960          21,301         104,336
                                                                           -----------     -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Maturities and sales (purchases) of bank time deposits
     and investments, net                                                      (27,792)        (53,524)         24,199
   Purchase of property and equipment                                          (32,227)        (36,532)       (24,673)
   Capitalization of software development costs                                 (4,466)         (6,008)        (8,569)
   Other                                                                        (1,331)              -               -
                                                                           ------------    -----------     -----------
NET CASH (USED IN) INVESTING ACTIVITIES                                        (65,816)        (96,064)        (9,043)
                                                                           ------------    ------------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from issuance of debentures                                    111,899               -         292,672
   Proceeds from issuance of common stock in connection
     with exercise of stock options, warrants, and
     employee stock purchase plan                                                7,412          23,041          36,238
   Net proceeds from bank loans and other debt                                  10,510          28,989         (21,099)
                                                                           -----------      ----------     ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                      129,821          52,030         307,811
                                                                           -----------      ----------     -----------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                                             96,965         (22,733)        403,104
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                   113,791         210,756         180,855
                                                                           -----------      ----------      ----------
CASH AND CASH EQUIVALENTS, END OF YEAR                                     $   210,756      $  188,023      $  583,959
                                                                           ===========      ==========      ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for interest                                  $     3,276      $    9,184      $   14,094
                                                                           ===========      ==========      ==========
   Cash paid during the year for income taxes                              $     5,116      $   10,811      $    2,452
                                                                           ===========      ==========      ==========
</TABLE>

                 See notes to consolidated financial statements.


                                      F-7
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND JANUARY 31, 1999
--------------------------------------------------------------------------------

1.      ORGANIZATION AND BUSINESS

        Comverse Technology, Inc. ("Comverse" and, together with its
        subsidiaries, "CTI" or the "Company") was organized as a New York
        corporation in October 1984. The Company is engaged in the design,
        development, manufacture, marketing and support of special purpose
        computer and telecommunications systems and software for multimedia
        communications and information processing applications.


2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
        include the accounts of Comverse and its wholly-owned and majority-owned
        subsidiaries. All material intercompany balances and transactions have
        been eliminated.

        CASH, CASH EQUIVALENTS AND BANK TIME DEPOSITS - The Company considers
        all highly liquid investments purchased with original maturities of
        three months or less to be cash equivalents. Bank deposits with
        maturities in excess of three months are classified as bank time
        deposits.

        SHORT-TERM INVESTMENTS - The Company classifies all of its short-term
        investments (including U.S. treasury bills) as available-for-sale,
        accounted for at fair value, with resulting unrealized gains or losses
        reported as a separate component of stockholders' equity, on a
        net-of-tax basis.

        CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
        expose the Company to concentration of credit risk, consist primarily of
        cash investments and accounts receivable. The Company places its cash
        investments with high-credit quality financial institutions and
        currently invests primarily in bank time deposits, money market funds
        placed with major banks and financial institutions, corporate commercial
        paper, corporate medium-term notes, and U.S. government obligations that
        have maturities of one year or less. Accounts receivable are generally
        diversified due to the number of commercial and government entities
        comprising the Company's customer base and their dispersion across many
        geographical regions. The Company believes no significant concentration
        of credit risk exists with respect to these cash investments and
        accounts receivable.

        INVENTORIES - Inventories are stated at the lower of cost or market.
        Cost is determined by the first-in, first-out method.

        PROPERTY AND EQUIPMENT - Property and equipment are carried at cost less
        accumulated depreciation and amortization. The Company depreciates its
        property and equipment on a straight-line basis over periods ranging
        from three to seven years. The cost of maintenance and repairs is
        charged to operations as incurred. Significant renewals and betterments
        are capitalized.

        INCOME TAXES - The Company accounts for its income using the asset and
        liability method. Under this method, deferred tax assets and liabilities
        are determined based on differences between financial reporting and tax


                                      F-8
<PAGE>
        bases of assets and liabilities, and are measured using the enacted tax
        rates and laws that are expected to be in effect when the differences
        are expected to reverse.

        REVENUE AND EXPENSE RECOGNITION - Revenues from product sales are
        generally recognized upon shipment. Products shipped for customer trials
        are carried in finished goods inventory until customer acceptance is
        obtained, at which time revenue is recognized.

        Revenues from certain contracts are recognized under the
        percentage-of-completion method on the basis of physical completion to
        date or using actual costs incurred to total expected costs under the
        contract. Amounts received from customers in excess of revenues earned
        under the percentage-of-completion method are recorded as advance
        payments from customers. Related contract costs include all direct
        material and labor costs and those indirect costs related to contract
        performance, and are included in cost of sales in the consolidated
        statements of income.

        Expenses incurred in connection with research and development
        activities, other than certain software development costs that are
        capitalized, and selling, general and administrative expenses are
        charged to operations as incurred.

        SOFTWARE DEVELOPMENT COSTS - Software development costs are capitalized
        upon the establishment of technological feasibility and are amortized
        over the estimated useful life of the software, which to date has been
        four years or less. Amortization begins in the period in which the
        related product is available for general release to customers.
        Amortization expenses amounted to $3,079,000, $3,546,000 and $3,230,000
        for the years ended December 31, 1996, 1997 and January 31, 1999,
        respectively.

        FUNCTIONAL CURRENCY AND FOREIGN CURRENCY TRANSACTION GAINS AND LOSSES -
        The United States dollar (the "dollar") is the functional currency of
        the major portion of the Company's foreign operations. Most of the
        Company's sales, and materials purchased for manufacturing, are
        denominated in or linked to the dollar. Certain operating costs,
        principally salaries, of foreign operations are denominated in local
        currencies. In those instances where a foreign subsidiary has a
        functional currency other than the dollar, the Company records any
        necessary foreign currency translation adjustment, reflected in
        stockholders' equity, at the end of each reporting period.

        Net gains (losses) from foreign currency transactions, included in the
        consolidated statements of income, approximated $(1,012,000),
        $(2,192,000) and $2,847,000 for the years ended December 31, 1996, 1997
        and January 31, 1999, respectively.

        The Company occasionally enters into foreign exchange forward contracts
        and options on foreign currencies. The purpose of the Company's foreign
        currency hedging activities is to protect the Company from the risk that
        the eventual dollar cash flows resulting from the sale of products to
        international customers will be adversely affected by changes in
        exchange rates. Any gain or loss on a foreign exchange contract which
        hedges a firm commitment is deferred until the underlying transaction is
        realized, at which time it is included in the consolidated statement of
        income. The Company also purchases foreign exchange options which
        permit, but do not require, the Company to exchange foreign currencies
        at a future date with another party at a contracted exchange rate. To
        finance premiums paid on such options, from time to time the Company may
        also write offsetting options at exercises prices which limit, but do
        not eliminate, the effect of purchased options as a hedge. As of January
        31, 1999, the Company had purchased foreign exchange options of
        approximately $7,000,000 and written foreign exchange options of
        approximately $7,000,000 in Japanese yen.


                                      F-9
<PAGE>
        OTHER ASSETS - Licenses of patent rights and acquired "know-how" are
        recorded at cost and amortized using the straight-line method over the
        estimated useful lives of the related technology, not exceeding five
        years. Goodwill and other intangible assets associated with acquired
        subsidiaries are amortized over periods ranging from five to twelve
        years. Debt issue costs are amortized over the term of the related debt,
        on a straight-line basis.

        LONG-LIVED ASSETS - The Company reviews for the impairment of long-lived
        assets and certain identifiable intangibles whenever events or changes
        in circumstances indicate that the carrying amount of an asset may not
        be recoverable. An impairment loss would be recognized when estimated
        future cash flows expected to result from the use of the asset and its
        eventual disposition are less than its carrying amount. No such
        impairment losses have been identified by the Company.

        PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
        conformity with generally accepted accounting principles requires
        management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets
        and liabilities at the date of the financial statements and the reported
        amounts of revenues and expenses during the reporting period.
        Actual results could differ from those estimates.

        RECLASSIFICATIONS - Certain prior year amounts have been reclassified to
        conform to the manner of presentation in the current year.


3.      RESEARCH AND DEVELOPMENT

        A significant portion of the Company's research and development
        operations are located in Israel where the Company derives substantial
        benefits from participation in programs sponsored by the Government of
        Israel for the support of research and development activities conducted
        in that country. The Company's research and development activities
        include projects partially funded by the Office of the Chief Scientist
        of the Ministry of Industry and Trade of the State of Israel (the "OCS")
        under which the funding organization reimburses a portion of the
        Company's research and development expenditures under approved project
        budgets. The Company is currently involved in several ongoing research
        and development projects supported by the OCS. The Company is required
        to pay royalties to the OCS based on the sale of products incorporating
        technology developed in these projects. In addition, under the terms of
        the applicable funding agreements, products resulting from projects
        funded by the OCS may not be manufactured outside of Israel without
        government approval. The amounts reimbursed by the OCS for the years
        ended December 31, 1996, 1997 and January 31, 1999 were $9,172,000,
        $16,276,000 and $16,732,000, respectively.




                                      F-10
<PAGE>
4.      SHORT-TERM INVESTMENTS

        The Company classifies all of its short-term investments as
        available-for-sale securities. The following is a summary of
        available-for-sale securities as of January 31, 1999:

<TABLE>
<CAPTION>
                                                                 GROSS               GROSS            ESTIMATED
                                                              UNREALIZED          UNREALIZED            FAIR
                                            COST                 GAINS              LOSSES              VALUE     
                                        -------------------------------------------------------------------------
                                                                       (IN THOUSANDS)
<S>                                     <C>                  <C>                  <C>               <C>
        Corporate debt securities        $   40,819            $     924           $     6           $   41,737
                                         ----------            ---------           -------           ----------

        Common stock                         13,993                3,448             1,082               16,359
        Mutual funds investing in
           U.S. government and
           agencies obligations               1,929                   70                 -                1,999
        Preferred stock                       3,173                  481                91                3,563
                                        -----------            ---------           -------           ----------
        Total equity securities              19,095                3,999             1,173               21,921
                                        -----------            ---------           -------           ----------

                                        $    59,914            $   4,923           $ 1,179           $   63,658
                                        ===========            =========           =======           ==========



        The following is a summary of available-for-sale securities as of
January 31, 1998:

                                                                GROSS               GROSS           ESTIMATED
                                                              UNREALIZED          UNREALIZED           FAIR
                                            COST                 GAINS              LOSSES             VALUE     
                                        -------------------------------------------------------------------------
                                                                          (IN THOUSANDS)

        U.S. treasury notes              $     248              $      4           $     -           $      252
        Corporate debt securities           35,722                   129                 -               35,851
        U.S. Government
           agency bonds                        750                     -                 -                  750
                                         ---------              --------           -------           ----------
        Total debt securities               36,720                   133                 -               36,853
                                         ---------              --------           -------           ----------

        Common stock                        14,359                 1,880             1,347               14,892
        Mutual funds investing in
           U.S. government and
           agencies obligations              1,929                    49                 -                1,978
        Preferred stock                      5,981                   804               161                6,624
                                        ----------              --------           -------           ----------
        Total equity securities             22,269                 2,733             1,508               23,494
                                        ----------              --------           -------           ----------

                                        $   58,989              $  2,866           $ 1,508           $   60,347
                                        ==========              ========           =======           ==========

</TABLE>

        During the year ended January 31, 1999, the gross realized gains on
        sales of securities totaled approximately $1,358,000 and the gross
        realized losses totaled approximately $5,472,000.


                                      F-11
<PAGE>
        The amortized cost and estimated fair value of debt securities at
        January 31, 1999, by contractual maturity, are as follows:

<TABLE>
<CAPTION>
                                                                                   ESTIMATED
                                                                COST               FAIR VALUE
                                                                ----               ----------
                                                                      (IN THOUSANDS)
<S>                                                         <C>                     <C>
        Due in one year or less                              $   20,898              $   20,931
        Due after one year through three years                   18,051                  18,139
        Due after three years                                     1,870                   2,667
                                                             ----------              ----------

                                                             $   40,819              $   41,737
                                                             ==========              ==========


5.      INVENTORIES

        Inventories consist of:
<CAPTION>
                                                                                     JANUARY 31,
                                                                           1998                       1999
                                                                           ----                       ----
                                                                                   (IN THOUSANDS)
<S>                                                                    <C>                         <C>
                      Raw materials                                    $    29,735                 $    23,944
                      Work in process                                       20,413                      11,171
                      Finished goods                                        12,876                      11,574
                                                                       -----------                 -----------

                                                                       $    63,024                 $    46,689
                                                                       ===========                 ===========


6.       PROPERTY AND EQUIPMENT

        Property and equipment consists of:
<CAPTION>
                                                                                     JANUARY 31,
                                                                           1998                       1999
                                                                           ----                       ----
                                                                                   (IN THOUSANDS)
<S>                                                                   <C>                         <C>
                      Fixtures and equipment                           $    99,667                 $   124,331
                      Transportation vehicles                                2,872                       1,985
                      Leasehold improvements                                 2,148                       3,044
                                                                       -----------                 -----------
                                                                           104,687                     129,360
                      Less accumulated depreciation
                             and amortization                              (51,274)                    (67,915)
                                                                       ------------                ------------

                                                                       $    53,413                 $    61,445
                                                                       ===========                 ===========



                                      F-12
<PAGE>
7.       OTHER ASSETS

        Other assets consist of:
<CAPTION>
                                                                                     JANUARY 31,
                                                                           1998                       1999
                                                                           ----                       ----
                                                                                   (IN THOUSANDS)
<S>                                                                   <C>                         <C>
           Software development costs,  net of
              accumulated amortization
              of $10,896 and $14,126                                   $     9,801                 $    15,140
           Debt issue costs, net of accumulated
              amortization of $415 and $1,078                                2,696                       9,140
              Other assets                                                   5,770                       5,129
                                                                       -----------                 -----------

                                                                       $    18,267                 $    29,409
                                                                       ===========                 ===========
</TABLE>

8.      BUSINESS COMBINATIONS

        On January 14, 1998, Boston Technology, Inc., a Delaware corporation,
        ("BTI") merged with and into Comverse in a transaction that was
        accounted for as a pooling of interests. BTI designed, developed,
        manufactured, marketed and supported standard and customized enhanced
        services platforms and software applications for the telephone network
        operator market. Pursuant to the merger, the issued and outstanding
        shares of BTI at the effective date of the merger were converted into an
        aggregate of approximately 27,211,778 shares of Comverse's common stock
        and outstanding options and warrants to purchase BTI stock were
        converted into options and warrants to purchase an aggregate of
        5,187,398 Comverse shares.

        The table below sets forth the unaudited separate and combined results
        of CTI and BTI for the fiscal years ended December 31, 1996 and 1997:


<TABLE>
<CAPTION>
                                                          CTI            BTI            ADJUSTMENTS         COMBINED
                                                          ---            ---            -----------         --------
                                                                 (In thousands, except per share amounts)
<S>                                                 <C>               <C>                <C>             <C>

        1996
        Sales                                        $   197,181       $   192,458                        $   389,639
        Net income                                   $    27,988       $    14,149                        $    42,137
        Earnings per share - diluted                 $      1.16                                          $      1.01

        1997
        Sales                                        $   280,281       $   210,525      $    (1,866)      $   488,940
        Net income (loss)                            $    43,500       $    (7,503)     $    (1,472)      $    34,525
        Earnings per share - diluted                 $      1.61                                          $      0.75


</TABLE>



                                      F-13
<PAGE>
        BTI had a January fiscal year end. Accordingly, the consolidated
        statement of income data combines the historical statement of income
        data of the Company for the years ended December 31, 1996 and 1997 with
        the historical statement of income data of BTI for the fiscal years
        ended January 31, 1997 and the eleven months ended December 31, 1997,
        respectively.

        In 1998, the Company changed its fiscal year from the calendar year to
        the fiscal year ending January 31, corresponding to BTI's fiscal year.
        As a result of the change in fiscal year, the Company's results of
        operations for the one month ended January 31, 1998 have previously been
        reported separately as a transition period and included on a transition
        report on Form 10-K. The Company had sales of $14,401,000, costs and
        expenses of $129,608,000, and a net loss of $115,207,000 for the one
        month ended January 31, 1998. Included in these results are $85,763,000
        for merger and other related costs.

        In February 1997, the Company acquired all of the outstanding stock of
        Enhanced Communications Corporation ("ECC"), a company providing
        outsourcing of voice messaging, for 243,750 shares of the Company's
        common stock. The combination has been accounted for as a pooling of
        interests. The Company did not restate prior financial statements for
        this acquisition due to immateriality and recorded the book value of the
        net assets of ECC of $661,000 in the statement of stockholders' equity.

        In February 1999, the Company acquired all of the outstanding stock of
        Amarex Technology, Inc., a company that develops software-based
        applications for the telephone network operator and call center markets,
        for 346,007 shares of the Company's common stock and the assumption of
        options and warrants to purchase 119,643 shares of the Company's common
        stock. The combination is being accounted for as a pooling of interests.
        The pro-forma effects of the acquisition would not have a material
        effect on the Company's financial statements.


9.      ACCOUNTS PAYABLE AND ACCRUED EXPENSES

        Accounts payable and accrued expenses consist of:

                                                      JANUARY 31,
                                            1998                       1999
                                            ----                       ----
                                                    (IN THOUSANDS)

           Accounts payable             $    37,488                $    63,606
           Accrued salaries                  15,492                     22,645
           Accrued vacation                   6,718                      9,004
           Accrued royalties                  6,271                     18,165
           Other accrued expenses            59,972                     71,450
                                        -----------                -----------
                                        $   125,941                $   184,870
                                        ===========                ===========


10.    CONVERTIBLE SUBORDINATED DEBENTURES

       In October 1996, the Company issued $115,000,000 of convertible
       subordinated debentures bearing interest at 5-3/4% per annum, payable
       semi-annually. The debentures mature on October 1, 2006. The debentures


                                      F-14
<PAGE>
       are convertible into shares of the Company's common stock at a conversion
       price of $30.50 per share, subject to adjustment in certain events. The
       debentures are subordinated in right of payment to all existing and
       future senior indebtedness of the Company. The debentures are redeemable
       at the option of the Company, in whole or in part, at prices decreasing
       from 102% of the face amount on October 12, 1999 to par on October 1,
       2001. The debenture holders may require the Company to repurchase the
       debentures at par in the event that the common stock ceases to be
       publicly traded and, in certain instances, upon a change in control of
       the Company.

       In June 1998, the Company issued $300,000,000 of convertible subordinated
       debentures bearing interest at 4-1/2% per annum, payable semi-annually.
       The debentures mature on July 1, 2005. The debentures are convertible
       into shares of the Company's common stock at a conversion price of $43.00
       per share, subject to adjustment in certain events. The debentures are
       subordinated in right of payment to all existing and future senior
       indebtedness of the Company. The debentures are redeemable at the option
       of the Company, in whole or in part, at prices decreasing from 101.8% of
       the face amount on July 10, 2001 to par on July 10, 2003. The debenture
       holders may require the Company to repurchase the debentures at par in
       the event that the common stock ceases to be publicly traded and, in
       certain instances, upon a change in control of the Company.


11.     LIABILITY FOR SEVERANCE PAY

        Liability for severance pay consists of the Company's unfunded liability
        for severance pay to employees of certain foreign subsidiaries and
        accrued severance to the Company's chief executive officer.

        The Company's statutory obligation for severance pay to employees of its
        Israeli subsidiaries is determined on the basis of each individual's
        current salary and length of employment. Funding is currently provided
        primarily by premiums paid by the Company to insurance providers.

        The Company is obligated under an agreement with its chief executive
        officer to provide a severance payment upon the termination of his
        employment with the Company. Approximately $1,405,000 and $1,648,000 has
        been accrued as of January 31, 1998 and 1999, respectively, relating to
        this liability.


12.      COMMON STOCK

        STOCK SPLIT - On April 15, 1999, the Company effected a three-for-two
        stock split by paying a 50% stock dividend to stockholders of record on
        March 31, 1999. All share and per share information has been
        retroactively restated in the consolidated financial statements to
        reflect this split.


13.     STOCK OPTIONS

       EMPLOYEE STOCK OPTIONS - At January 31, 1999, 10,388,732 shares of common
       stock were reserved for issuance upon the exercise of options then
       outstanding and 413,730 shares were available for future grant under
       Comverse's Stock Option Plans, under which options may be granted to key
       employees, directors, and other persons rendering services to the
       Company. Options which are designated as "incentive stock options" under
       the option plans may be granted with an exercise price not less than the


                                      F-15
<PAGE>
       fair market value of the underlying shares at the date of grant and are
       subject to certain quantity and other limitations specified in Section
       422 of the Internal Revenue Code. Options which are not intended to
       qualify as incentive stock options may be granted at any price, but not
       less than the par value of the underlying shares, and without restriction
       as to amount. The options and the underlying shares are subject to
       adjustment in accordance with the terms of the plans in the event of
       stock dividends, recapitalizations and similar transactions. The right to
       exercise the options generally vests in annual increments over periods of
       up to four years from the date of grant or the date of commencement of
       the grantee's employment with the Company.

       The changes in the number of options were as follows:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED                      
                                                          --------------------------------------------------------
                                                                     DECEMBER 31,                    JANUARY 31,
                                                              1996                 1997                1999
                                                              ----                 ----                ----
<S>                                                      <C>                   <C>                 <C>
       Outstanding at beginning of year                      6,930,338             8,359,442          12,395,693
       Granted during the year                               2,838,204             1,657,125           1,345,291
       Exercised during the year                            (1,096,392)           (1,886,204)         (2,895,907)
       Canceled, terminated and expired                       (312,708)             (213,507)           (456,345)
                                                          -------------         -------------       -------------

       Outstanding at end of year                            8,359,442             7,916,856          10,388,732
                                                          ============          ============        ============

</TABLE>

       At January 31, 1999, options to purchase an aggregate of 3,288,803 shares
       were vested and currently exercisable under the option plans and options
       to purchase an additional 7,099,929 shares vest at various dates
       extending through the year 2003.

       Weighted average option exercise price information was as follows:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED                      
                                                          --------------------------------------------------------
                                                                     DECEMBER 31,                    JANUARY 31,
                                                              1996                 1997                1999
                                                              ----                 ----                ----
<S>                                                       <C>                   <C>                  <C>
       Outstanding at beginning of year                     $  7.50               $ 11.08               $ 17.27
       Granted during the year                                18.07                 28.69                 21.44
       Exercised during the year                               5.95                  8.25                 11.73
       Canceled, terminated and expired                       11.70                 17.98                 20.83
       Exercisable at year end                                 6.51                  7.79                 13.58

</TABLE>

       Significant option groups outstanding at January 31, 1999 and related
       weighted average price and life information were as follows:

<TABLE>
<CAPTION>
                                          Weighted Average        Weighted                          Weighted
       Range of              Number            Remaining           Average            Number         Average
       Exercise Price      Outstanding      Contractual Life     Exercise Price     Exercisable    Exercise Price
       --------------      -----------      ----------------     --------------     -----------    --------------
<S>                      <C>                <C>                <C>                <C>              <C>
       $ 1.25 - $15.83      2,890,941          5.96             $   9.84            2,106,596        $  8.51
       $16.99 - $20.00      1,113,189          9.68                19.99                2,437          16.99
       $20.83 - $20.83      4,132,746          8.99                20.83              858,662          20.83
       $22.17 - $34.55      2,251,856          8.23                27.94              321,108          27.41
                          ------------         ----             --------           ----------        -------

                           10,388,732          8.06             $  19.23            3,288,803        $ 13.58
                          ============         ====             ========           ==========        =======
</TABLE>


                                      F-16
<PAGE>
       The Company applies Accounting Principles Board Opinion No. 25,
       "Accounting for Stock Issued to Employees," and related interpretations
       in accounting for its option plans. Accordingly, as all options have been
       granted at exercise prices equal to fair market value on the date of
       grant, no compensation expense has been recognized by the Company in
       connection with its stock-based compensation plans. Had compensation cost
       for the Company's stock option plans been determined based upon the fair
       value at the grant date for awards under these plans consistent with the
       methodology prescribed under Statement of Financial Accounting Standards
       ("SFAS") No. 123, "Accounting for Stock-Based Compensation", the
       Company's net income and earnings per share would have been reduced by
       approximately $4,962,000, $13,505,000 and $28,769,000 or $.07, $.20 and
       $0.40 per diluted share for the years ended December 31, 1996, 1997 and
       January 31, 1999, respectively. The weighted average fair value of the
       options granted for the years ended December 31, 1996, 1997 and January
       31, 1999 is estimated at $9.47, $15.47 and $11.16 on the date of grant
       (using the Black-Scholes option pricing model) with the following
       weighted average assumptions for the years ended December 31, 1996, 1997
       and January 31, 1999, respectively: volatility of 56%, 54% and 55%,
       risk-free interest rate of 6.3%, 6.5% and 4.7% and an expected life of
       4.6, 4.7 and 5.0 years.

       OPTIONS ON SUBSIDIARY SHARES - In accordance with the requirements of his
       employment agreement, the chief executive officer of Comverse holds
       options to acquire up to 7.5% of the shares of certain subsidiaries,
       other than Comverse Network Systems, Inc. In addition, Comverse has
       granted to certain other employees of the Company options to acquire
       shares of certain subsidiaries, other than Comverse Network Systems,
       Inc., as a means of providing incentives directly tied to the performance
       of those subsidiaries. The portion of the shares of the subsidiaries upon
       which such options have been granted varies among the subsidiaries
       affected, not exceeding in any instance 10.8% of the shares outstanding
       assuming exercise in full. The options have terms of ten years and become
       exercisable and vest over various periods ranging up to seven years from
       the date of initial grant. The exercise price of each option is equal to
       the higher of the book value of the underlying shares at the date of
       grant or the fair market value of such shares at that date determined on
       the basis of an arms'-length transaction with a third party or, if no
       such transactions have occurred, on a reasonable basis as determined by a
       committee of the Board of Directors.


14.    WARRANTS

       In November 1995, the Company entered into an agreement to supply its
       products to a customer. Pursuant to this agreement, the Company issued
       warrants to purchase shares of its common stock at an exercise price of
       $14.36 per share. The warrants vest in five equal annual increments,
       commencing with the first anniversary of the date of grant, and remain
       exercisable for 30 months after first becoming exercisable. As of January
       31, 1999, warrants to purchase 1,914,432 shares are outstanding, none of
       which are exercisable.


15.    EMPLOYEE STOCK PURCHASE PLAN

       Under the 1997 Employee Stock Purchase Plan ("ESPP"), all employees who
       had completed three months of employment are entitled, through payroll
       deductions of amounts up to 10% of their base salary, to purchase shares


                                      F-17
<PAGE>
       of the Company's common stock at 85% of the lesser of the market price at
       the offering commencement date or the offering termination date. The
       number of shares available under the ESPP is 375,000, of which 105,333
       had been issued as of January 31, 1999.




16.    EARNINGS PER SHARE ("EPS")

        Basic earnings per share is determined by using the weighted average
        number of shares of common stock outstanding during each period. Diluted
        earnings per share further assumes the issuance of common shares for all
        dilutive potential common shares outstanding. The calculation for
        earnings per share for the years ended December 31, 1996, 1997 and
        January 31, 1999 was as follows:

<TABLE>
<CAPTION>
                                     DECEMBER 31, 1996              DECEMBER 31, 1997             JANUARY 31, 1999      
                                -----------------------------  --------------------------   ----------------------------
                                                  Per-Share                     Per-Share                     Per-Share
                                 Income   Shares   Amount      Income    Shares  Amount      Income    Shares  Amount
                                 ------   ------   ------      ------    ------  ------      ------    ------  ------
                                                          (In thousands, except per share data)
<S>                            <C>        <C>      <C>       <C>        <C>      <C>       <C>        <C>     <C>
        BASIC EPS
        Net Income              $ 42,137   57,335   $ 0.73    $ 34,525    63,620  $ 0.54    $111,527   66,300  $1.68
                                                    ======                        ======                       =====

        EFFECT OF DILUTIVE
             SECURITIES 
        Options                             5,180                          5,334                        5,525
        Convertible debentures     2,586    4,051                                                                    
                                --------  -------   ------    --------   -------  ------    --------  -------- -----

        DILUTED EPS             $ 44,723   66,566   $ 0.67    $ 34,525    68,954  $ 0.50    $111,527   71,825  $1.55
                                ========  =======   ======    ========   =======  ======    ========  ======== =====
</TABLE>

        Debentures convertible into 3,770,492 shares, 3,770,492 shares and
        10,747,236 shares were outstanding as of December 31, 1996, 1997 and
        January 31, 1999, respectively, but were not included in the computation
        of diluted EPS because the effect of including them would be
        antidilutive.


17.     INTEREST AND OTHER INCOME, NET

        Interest and other income, net, consists of the following:

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED
                                                                            DECEMBER 31,            JANUARY 31,
                                                                       1996            1997            1999
                                                                       ----            ----            ----
                                                                                  (IN THOUSANDS)
<S>                                                                 <C>            <C>           <C>
                  Interest and dividend income                       $   9,199      $   15,692    $    25,410
                  Interest expense                                      (5,667)         (9,727)       (15,154)
                  Other, net                                            (1,065)         (1,086)        (1,993)
                                                                     ---------      ----------    -----------
                                                                     $   2,467      $    4,879    $     8,263
                                                                     =========      ==========    ===========
</TABLE>

                                      F-18
<PAGE>
18.     INCOME TAXES

        The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED
                                                                            DECEMBER 31,            JANUARY 31,
                                                                       1996            1997            1999
                                                                       ----            ----            ----
                                                                                  (IN THOUSANDS)
<S>                                                               <C>              <C>             <C>
           Current:
             Federal                                               $    9,885       $    3,471      $        -
             State                                                      1,235              703             127
             Foreign                                                    1,950            2,216          11,664
                                                                   ----------       ----------      ----------

                                                                       13,070            6,390          11,791
                                                                   ----------       ----------      ----------

           Deferred (benefit):
             Federal                                                   (2,716)           2,810            (430)
             State                                                       (206)             215              13
             Foreign                                                       22              (17)            409
                                                                   ----------       -----------     ----------

                                                                       (2,900)           3,008              (8)
                                                                   -----------      ----------      ----------

                                                                   $   10,170       $    9,398      $   11,783
                                                                   ==========       ==========      ==========


        The reconciliation of the U.S. Federal statutory tax rate to the
        Company's effective tax rate is as follows:

                                                                                         YEAR ENDED
                                                                            DECEMBER 31,            JANUARY 31,
                                                                       1996            1997             1999
                                                                       ----            ----             ----
                                                                                  (IN THOUSANDS)

                  U.S. Federal statutory rate                            35%               35%            35%
                  Consolidated worldwide income
                       in excess of U.S. income                         (18)              (31)           (37)
                  Foreign income taxes                                    4                 5              9
                  Other                                                  (2)               12              3  
                                                                     --------         --------       --------
                  Company's effective tax rate                           19%               21%            10%
                                                                     ========         ========       ========

</TABLE>

         Deferred income taxes reflect the net tax effects of (a) temporary
         differences between the carrying amounts of assets and liabilities for
         financial reporting purposes and the amounts used for income tax
         purposes and (b) operating loss carryforwards. The tax effects of
         significant items comprising the Company's deferred tax asset and
         liability at January 31, 1998 and 1999 is as follows:


                                      F-19
<PAGE>
<TABLE>
<CAPTION>
                                                                                            JANUARY 31,
                                                                                     1998                1999
                                                                                     ----                ----
                                                                                          (IN THOUSANDS)
<S>                                                                               <C>                 <C>
           Deferred tax liability:
             Expenses deductible for tax purposes and
               not for financial reporting purposes                                $    1,433          $      94
             Unrealized gain on available-for-sale securities                             679              1,301
                                                                                   ----------          ---------
                                                                                   $    2,112          $   1,395
                                                                                   ==========          =========
           Deferred tax asset:
             Reserves not currently deductible                                     $   20,262          $  22,417
             Tax loss carryforwards                                                    17,480             25,160
             Inventory capitalization                                                     388                276
             Other                                                                        852                  -
                                                                                   ----------          ---------
                                                                                       38,982             47,853
           Less: valuation allowance                                                  (37,330)           (46,193)
                                                                                   ----------          ---------

                 Total deferred tax asset                                          $    1,652          $   1,660
                                                                                   ==========          =========
</TABLE>

        At January 31, 1999, the Company had net operating loss carryforwards
        for Federal income tax purposes of approximately $68 million, which
        begin to expire in 2018.

        Income tax has not been provided on unrepatriated earnings of foreign
        subsidiaries as currently it is the intention of the Company to reinvest
        such foreign earnings in their operations.


19.     BUSINESS SEGMENT INFORMATION

        The Company is engaged in one business segment: the design, development,
        manufacture, marketing and support of special purpose computer and
        telecommunications systems and software for multimedia communications
        and information processing applications.

        Sales by country, based on end-user location, as a percentage of total
        sales, for the years ended December 31, 1996 and 1997 and January 31,
        1999 were as follows:

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,                  JANUARY 31,
                                                                      ------------                  -----------
                                                               1996                 1997               1999
                                                               ----                 ----               ----
<S>                                                         <C>                  <C>               <C>
                           United States                        49%                  33%                  26%
                           Germany                               4%                   4%                  11%
                           Japan                                14%                  13%                   8%
                           Other foreign                        33%                  50%                  55%
                                                              -----                -----             --------
                           Total                               100%                 100%                 100%
                                                              =====                =====             ========
</TABLE>

           During the year ended December 31, 1996, sales to a customer
           constituted 11% of total sales. No customer accounted for 10% of
           sales for the year ended December 31, 1997 or January 31, 1999.


                                      F-20
<PAGE>
           Condensed operating information for the years ended December 31,1996
           and 1997 and January 31, 1999 were as follows:

<TABLE>
<CAPTION>
                                                                         (IN THOUSANDS)
                                              UNITED
                                              STATES         ISRAEL         OTHER        ELIMINATIONS       TOTAL
<S>                                     <C>              <C>              <C>            <C>            <C>
           YEAR ENDED
           DECEMBER 31, 1996

           Sales                          $   299,181     $    137,184    $   12,216      $  (58,942)   $   389,639
           Costs and expenses                (280,599)        (106,713)      (11,763)         59,276       (339,799)
                                          -----------     ------------    ----------      ----------    -----------
           Operating income (loss)        $    18,582     $     30,471    $      453      $      334    $    49,840
                                          ===========     ============    ==========      ==========    ===========

           YEAR ENDED
           DECEMBER 31, 1997

           Sales                          $   343,158     $    203,636    $   18,511      $  (76,365)   $   488,940
           Costs and expenses                (342,396)        (163,847)      (17,694)         74,041       (449,896)
                                          -----------     ------------    ----------      -----------   -----------
           Operating income (loss)        $       762     $     39,789    $      817      $   (2,324)   $    39,044
                                          ===========     ============    ==========      ===========   ===========

           YEAR ENDED
           JANUARY 31, 1999

           Sales                          $   342,368     $    407,809    $   32,838      $  (86,921)   $   696,094
           Costs and expenses                (365,711)        (274,218)      (30,263)         89,145       (581,047)
                                          ------------    ------------    ----------      ----------    -----------
           Operating income (loss)        $   (23,343)    $    133,591    $    2,575      $    2,224    $   115,047
                                          ============    ============    ==========      ==========    ===========
</TABLE>

           Long-lived assets by country of domicile consist of:

                                                         JANUARY 31,
                                                  1998                1999
                                                  ----                ----
                                                       (IN THOUSANDS)

                 United States                  $   47,681          $  47,996
                 Israel                             28,576             41,826
                 Other                               1,444              2,210
                                                ----------          ---------

                                                $   77,701          $  92,032
                                                ==========          =========


20.     COMMITMENTS AND CONTINGENCIES

        LEASES - The Company leases office, manufacturing, and warehouse space
        under non-cancelable operating leases. Rent expense for all leased
        premises approximated $7,839,000, $11,705,000 and $15,081,000 in the
        years ended December 31, 1996, 1997 and January 31, 1999, respectively.


                                      F-21
<PAGE>
        As of January 31, 1999, the minimum annual rent obligations of the
Company were approximately as follows:

               TWELVE MONTHS ENDED
                   JANUARY 31,                                 AMOUNT
                                                           (IN THOUSANDS)

                      2000                                 $    18,086
                      2001                                      18,595
                      2002                                      17,207
                      2003                                      12,714
                 2004 and thereafter                            40,947
                                                           -----------
                                                           $   107,549
                                                           ===========

        EMPLOYMENT AGREEMENTS - The Company is obligated under employment
        contracts with its chief executive officer to provide salary, bonuses,
        and fringe benefits through June 30, 2000. Minimum salary payments under
        the contracts currently amount to $350,000 per year and aggregate
        $496,000 through June 30, 2000. The executive is entitled to annual
        bonuses equal to at least 3% of the Company's consolidated after-tax net
        income during each year. Upon termination or expiration of the term of
        employment, the executive is entitled to receive a severance payment
        equal to $102,487 for each year of his previous and current employment
        with the Company, which is increased by the rate of 10% per annum
        compounded for each year of employment, plus continued
        employment-related benefits for the period of 36 months thereafter. If
        the termination of employment results from a unilateral termination or
        fundamental breach of the agreement by the Company, or the resignation
        of the executive within six months following a change in control of the
        Company not approved by the executive in his capacity as a director of
        Comverse, the executive is entitled to an additional payment equal to
        299% of the average annual cash compensation, including salary and any
        bonus payments, received by the executive from the Company during the
        three immediately preceding fiscal years, plus an amount equal to the
        income tax resulting from such payment. The agreements also provide for
        the executive to receive options entitling him to purchase 7-1/2% of the
        equity of Comverse's subsidiaries, other than Comverse Network Systems,
        Inc., at prices equal to the higher of book value of the underlying
        shares at the date of option grant or the fair market value of such
        shares at that date determined on the basis of an arms'-length
        transaction with a third party or, if no such transactions have
        occurred, on a reasonable basis as determined by the Board of Directors.

        Most other employment agreements of the Company are terminable with or
        without cause with prior notice of 60 days or less. In certain
        instances, the termination of employment agreements without cause
        entitles the employees to certain benefits, including acceleration of
        the vesting of stock options and severance payments of as much as one
        year's compensation.

        LICENSES AND ROYALTIES - The Company licenses certain technology,
        "know-how," software and related rights for use in the manufacture and
        marketing of its products, and pays royalties to third parties under
        such licenses and under other agreements entered into in connection with
        research and product development activities. The Company currently pays
        royalties on the sale of most of its product lines in varying amounts
        based upon the revenues attributed to the various components of such
        products. Royalties typically range up to 6% of net sales of the related
        products and, in the case of royalties due to government funding sources


                                      F-22
<PAGE>
        in respect of research and development projects, are required to be paid
        until the funding organization has received total royalties ranging from
        100% to 150% of the amounts received by the Company under the approved
        project budgets.

       DIVIDEND RESTRICTIONS - The ability of Comverse's Israeli subsidiaries to
        pay dividends is governed by Israeli law, which provides that cash
        dividends may be paid by an Israeli corporation only out of retained
        earnings as determined for statutory purposes in Israeli currency. In
        the event of a devaluation of the Israeli currency against the dollar,
        the amount in dollars available for payment of cash dividends out of
        prior years' earnings will decrease accordingly. Cash dividends paid by
        an Israeli corporation to United States residents are subject to
        withholding of Israeli income tax at source at a rate of up to 25%,
        depending on the particular facilities which have generated the earnings
        that are the source of the dividends.

       INVESTMENTS - In 1997, wholly-owned subsidiaries of Comverse and Quantum
       Industrial Holdings Ltd. organized two new companies to make investments
       primarily relating to Israel, including investments in high technology
       ventures. Each participant committed a total of $25,000,000 to the
       capital of the new companies, for use as suitable investment
       opportunities are identified. Quantum Industrial Holdings Ltd. is the
       principal direct investment vehicle of the Quantum Group, a group of
       investment funds managed by Soros Fund Management LLC.

        GUARANTIES - The Company has obtained bank guaranties primarily for
        performance of certain obligations under contracts with customers. These
        guaranties, which aggregated approximately $20,919,000 at January 31,
        1999, are to be released by the Company's performance of specified
        contract milestones, which are scheduled to be completed primarily
        during 1999.

        LITIGATION - On November 5, 1998, Comverse's subsidiary, Comverse
        Network Systems, Inc. ("CNS"), filed a complaint against Priority Call
        Management, Inc. ("PCM") alleging that PCM is infringing and has
        infringed certain patents owned by CNS. CNS is seeking a declaratory
        judgment, injunctive relief, compensatory and treble damages and
        attorneys fees. PCM answered the complaint, asserting numerous
        affirmative defenses, and is seeking a declaratory judgment that it has
        not infringed the CNS patents and that the patents are invalid. On March
        16, 1999, PCM filed an amended answer and counterclaim asserting
        violations of the Sherman Antitrust Act, tortious interference and
        patent misuse. In its counterclaim PCM seeks declaratory judgments,
        compensatory and treble damages in unspecified amounts and attorneys
        fees. Currently, the parties are engaged in discovery.

        The Company is subject to certain other legal actions arising in the
        normal course of business. After taking into consideration legal
        counsel's evaluation of such actions, management is of the opinion that
        their final resolution will not have any significant adverse effect upon
        the Company's financial position or results of operations.


21.     FAIR VALUE OF FINANCIAL INSTRUMENTS

        The estimated fair value amounts have been determined by the Company,
        using available market information and appropriate valuation
        methodologies. However, considerable judgment is necessarily required in
        interpreting market data to develop the estimates of fair value.
        Accordingly, the estimates presented herein are not necessarily
        indicative of the amounts that the Company could realize in a current
        market exchange. The use of different market assumptions and/or
        estimation methodologies may have a material effect on the estimated
        fair value amounts.


                                      F-23
<PAGE>
<TABLE>
<CAPTION>
                                                                                  JANUARY 31,
                                                     ----------------------------------------------------------------
                                                                 1998                                1999
                                                                 ----                                ----
                                                       CARRYING        ESTIMATED            CARRYING       ESTIMATED
                                                        AMOUNT        FAIR VALUE             AMOUNT       FAIR VALUE
                                                        ------        ----------             ------       ----------
                                                                              (IN THOUSANDS)
<S>                                                 <C>              <C>                  <C>            <C>
       Liabilities:
         Convertible subordinated debentures         $   115,000      $   116,438         $   415,000    $   646,475

       Off-balance sheet financial instruments:
       Foreign exchange forward contracts and
         options used for hedging purposes           $         -      $      (126)        $         -    $     (909)

</TABLE>

        CASH AND CASH EQUIVALENTS, BANK TIME DEPOSITS, SHORT-TERM INVESTMENTS,
        ACCOUNTS RECEIVABLE, INVESTMENTS, AND ACCOUNTS PAYABLE - The carrying
        amounts of these items are a reasonable estimate of their fair value.

        CONVERTIBLE SUBORDINATED DEBENTURES AND FOREIGN EXCHANGE FORWARD
        CONTRACTS - The fair value of these securities is estimated based on
        quoted market prices or recent sales for those or similar securities.

        The fair value estimates presented herein are based on pertinent
        information available to management as of January 31, 1999. Although
        management is not aware of any factors that would significantly affect
        the estimated fair value amounts, such amounts have not been
        comprehensively revalued for purposes of these financial statements
        since that date, and current estimates of fair value may differ
        significantly from the amounts presented herein.


22.      EFFECT OF NEW ACCOUNTING PRONOUNCEMENT

        During 1998, the Financial Accounting Standards Board issued Statement
        of Financial Accounting Standards No. 133, "Accounting for Derivative
        Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires that
        all derivative financial instruments be recognized as either assets or
        liabilities in the balance sheet. Measurement is at fair value, and if
        the derivative is not designed as a hedging instrument, changes in fair
        value (i.e., gains and losses) are to be recognized in earnings in the
        period of change. If certain conditions are met, a derivative may be
        designed as a hedge, in which case the accounting for changes in fair
        value will depend on the specific exposure being hedged. The method that
        will be used for assessing the effectiveness of a hedging derivative, as
        well as the measurement approach for determining the ineffective aspects
        of the hedge, must be established at the inception of the hedge. The
        methods must be consistent with the Company's approach to managing risk.
        SFAS 133 will be effective for fiscal years beginning after June 15,
        1999. The Company is currently evaluating the impact that the adoption
        of SFAS 133 will have on its financial statements.




                                      F-24
<PAGE>
23.     QUARTERLY INFORMATION (UNAUDITED)

        The following table shows selected results of operations for each of the
        quarters during the years ended December 31, 1997 and January 31, 1999:

<TABLE>
<CAPTION>
                                                                            FISCAL QUARTER ENDED
                              MARCH 31,     JUNE 30,      SEPT. 30,     DEC. 31,     APRIL 30,    JULY 31,      OCT.31,     JAN. 31,
                                1997          1997          1997          1997         1998         1998         1998         1999
                                ----          ----          ----          ----         ----         ----         ----         ----
                                                             (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                         <C>           <C>           <C>           <C>          <C>          <C>           <C>         <C>
Sales                        $ 126,848     $ 133,012     $  140,327    $  88,753    $ 160,481    $ 167,404     $ 178,107   $ 190,102

Gross profit                 $  74,221     $  80,101     $   85,081    $  46,897    $  94,616    $  99,688     $ 107,158   $ 114,942
Net income (loss)            $  15,494     $  17,050     $   18,246    $ (16,265)   $  23,970    $  26,067     $  29,121   $  32,369




Diluted earnings per share   $    0.23     $    0.25     $     0.26    $   (0.23)   $    0.34    $    0.37     $    0.41   $    0.44
                             =========     =========     ==========    =========    ========    ==========     =========   =========

</TABLE>


The difference between income per share and the sum of the income per share for
the quarters comprising the year is due to differences in the calculation of the
weighted average number of shares outstanding over the respective periods and
rounding adjustments.









                                      F-25
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                        COMVERSE TECHNOLOGY, INC.
                                               (Registrant)

                                        By: /s/ Kobi Alexander
                                            --------------------------------
Date:   April 22, 1999                      Kobi Alexander, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.


/s/ Kobi Alexander                                              April 22, 1999
--------------------------------------------
Kobi Alexander, President,
Chairman of the Board and
Chief Executive Officer; Director


/s/ Igal Nissim                                                 April 22, 1999
--------------------------------------------
Igal Nissim, Chief Financial Officer


/s/ Zvi Alexander                                               April 22, 1999
--------------------------------------------
Zvi Alexander, Director


/s/ Itsik Danziger                                              April 22, 1999
--------------------------------------------
Itsik Danziger, Director


/s/ John H. Friedman                                            April 22, 1999
--------------------------------------------
John H. Friedman, Director


/s/ Francis E. Girard                                           April 22, 1999
--------------------------------------------
Francis E. Girard, Director


/s/ Sam Oolie                                                   April 22, 1999
--------------------------------------------
Sam Oolie, Director


/s/ William F. Sorin                                            April 22, 1999
--------------------------------------------
William F. Sorin, Director


/s/ Carmel Vernia                                               April 22, 1999
--------------------------------------------
Carmel Vernia, Director


/s/ Shaula A. Yemini                                            April 22, 1999
--------------------------------------------
Dr. Shaula A. Yemini, Director



                                      F-26
<PAGE>
                                 EXHIBIT INDEX

NO.      DESCRIPTION
---      -----------

2.1*     Agreement and Plan of Merger dated as of August 20, 1997, between
         Registrant and Boston Technology, Inc. (Incorporated by reference to
         the Definitive Proxy Materials for the Registrant's Annual Meeting of
         Stockholders held January 13, 1998.)

3        Articles of Incorporation and By-Laws:

         3.1*       Certificate of Incorporation. (Incorporated by reference to
                    the Registrant's Annual Report on Form 10-K under the
                    Securities Exchange Act of 1934 for the year ended December
                    31, 1987.)

         3.2*       Certificate of Amendment of Certificate of Incorporation
                    effective February 26, 1993. (Incorporated by reference to
                    the Registrant's Annual Report on Form 10-K under the
                    Securities Exchange Act of 1934 for the year ended December
                    31, 1992.)

         3.3*       Certificate of Amendment of Certificate of Incorporation
                    effective January 12, 1995. (Incorporated by reference to
                    the Registrant's Annual Report on Form 10-K under the
                    Securities Exchange Act of 1934 for the year ended December
                    31, 1994.)

         3.4*       By-Laws, as amended. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1987.)

4        Instruments defining the rights of security holders including 
         indentures:

         4.1*       Excerpts from Certificate of Incorporation. (Incorporated by
                    reference to the Registrant's Registration Statement on Form
                    S-1 under the Securities Exchange Act of 1933, Registration
                    No. 33-9147.)

         4.2*       Excerpt from Certificate of Amendment of Certificate of
                    Incorporation effective February 26, 1993. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1992.)

         4.3*       Excerpt from Certificate of Amendment of Certificate of
                    Incorporation effective January 12, 1995. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1994.)

         4.4*       Excerpts from By-Laws, as amended. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1992.)

         4.5*       Specimen stock certificate. (Incorporated by reference to
                    the Registrant's Annual Report on Form 10-K under the
                    Securities Exchange Act of 1934 for the year ended December
                    31, 1992.)

<PAGE>
         4.6*       Indenture dated as of October 4, 1996 from Comverse
                    Technology, Inc. to The Chase Manhattan Bank, N.A., Trustee.
                    (Incorporated by reference to the Registrant's Current
                    Report on Form 8-K under the Securities Exchange Act of 1934
                    filed October 10, 1996.)

         4.7*       Specimen 5 3/4% Convertible Subordinated Debenture due 2006.
                    (Incorporated by reference to the Registrant's Current
                    Report on Form 8-K under the Securities Exchange Act of 1934
                    filed October 10, 1996.)

         4.8*       Indenture dated as of June 30, 1998 from Comverse
                    Technology, Inc. to The Chase Manhattan Bank, Trustee.
                    (Incorporated by reference to the Registrant's Current
                    Report on Form 8-K under the Securities Exchange Act of 1934
                    filed July 2, 1998.)

         4.9*       Specimen 4 1/2% Convertible Subordinated Debenture due 2005.
                    (Incorporated by reference to the Registrant's Current
                    Report on Form 8-K under the Securities Exchange Act of 1934
                    filed July 2, 1998.)

10       Material contracts:

         10.1*      Proxy Agreement dated as of September 5, 1991 by and among
                    Comverse Government Systems Corporation, James R. Allen,
                    Robert W. Bazley, Robert T. Marsh and Comverse Technology,
                    Inc. (Incorporated by reference to the Registrant's Annual
                    Report on Form 10-K under the Securities Exchange Act of
                    1934 for the year ended December 31, 1991.)

         10.2*      Visitation Approval Procedure Agreement dated as of
                    September 5, 1991 by and among Comverse Government Systems
                    Corporation, James R. Allen, Robert W. Bazley, Robert T.
                    Marsh and Comverse Technology, Inc. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1991.)

         10.3*      Form of Stock Option Agreement pertaining to shares of
                    certain subsidiaries of Comverse Technology, Inc.
                    (Incorporated by reference to the Registrant's Annual Report
                    on Form 10-K under the Securities Exchange Act of 1934 for
                    the year ended December 31, 1993.)

         10.4*      Employment Agreement effective as of July 1, 1994 by and
                    between Comverse Technology, Inc. and Kobi Alexander.
                    (Incorporated by reference to the Registrant's Annual Report
                    on Form 10-K under the Securities Exchange Act of 1934 for
                    the year ended December 31, 1994.)

         10.5*      1994 Stock Option Plan. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1994.)

         10.6*      1995 Stock Option Plan. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1995.)

         10.7*      1996 Stock Option Plan. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1996.)


<PAGE>
         10.8*      Form of Incentive Stock Option Agreement. (Incorporated by
                    reference to the Registrant's Registration Statement on Form
                    S-1 under the Securities Act of 1933, Registration No.
                    33-9147.)

         10.9*      Deed of Guarantee from Comverse Technology, Inc. to Bank
                    Hapoalim B.M. dated July 30, 1986. (Incorporated by
                    reference to the Registrant's Registration Statement on Form
                    S-1 under the Securities Act of 1933, Registration No.
                    33-9147.)

         10.10*     Continuing Guarantee from Comverse Technology, Inc. to Bank
                    Leumi le-Israel B.M. (Incorporated by reference to the
                    Registrant's Registration Statement on Form S-1 under the
                    Securities Act of 1933, Registration No. 33-9147.)

         10.11*     Patent License Agreement by and between Efrat Future
                    Technology Ltd. and VMX, Inc. (Incorporated by reference to
                    the Registrant's Registration Statement on Form S-1 under
                    the Securities Act of 1933, Registration No. 33-9147.)

         10.12*     Form of Indemnity Agreement between Comverse Technology,
                    Inc. and its Officers and Directors. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1987.)

         10.13*     1987 Stock Option Plan, as amended. (Incorporated by
                    reference to the Registrant's Annual Report on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    December 31, 1987.)

         10.14*     Form of Stock Option Agreement for options other than
                    Incentive Stock Options. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended December 31, 1987.)

         10.15*     1997 Employee Stock Purchase Plan. (Incorporated by
                    reference to the Definitive Proxy Materials for the
                    Registrant's Annual Meeting of Stockholders held January 13,
                    1998.)

         10.16*     1997 Stock Incentive Compensation Plan. (Incorporated by
                    reference to the Definitive Proxy Materials for the
                    Registrant's Annual Meeting of Stockholders held January 13,
                    1998.)

         10.17*     Memorandum of Agreement dated November 22, 1995 between
                    Boston Technology, Inc. and AT&T. (Incorporated by reference
                    to the Annual Report of Boston Technology, Inc. on Form 10-K
                    under the Securities Exchange Act of 1934 for the year ended
                    January 31, 1996, confidential treatment requested as to
                    certain portions.)

         10.18*     Lease dated November 5, 1990 between Boston Technology, Inc.
                    and Wakefield Park Limited Partnership. (Incorporated by
                    reference to the Annual Report of Boston Technology, Inc. on
                    Form 10-K under the Securities Exchange Act of 1934 for the
                    year ended January 31, 1991.)

         10.19*     First Amendment dated as of March 31, 1993 to Lease dated
                    November 5, 1990 between Boston Technology, Inc. and
                    Wakefield Park Limited Partnership. (Incorporated by
                    reference to the Quarterly Report of Boston Technology, Inc.
                    on Form 10-Q under the Securities Exchange Act of 1934 for
                    the quarter ended October 31, 1993.)


<PAGE>
          10.20*    Second Amendment dated as of August 31, 1994 to Lease dated
                    November 5, 1990 between Boston Technology, Inc. and
                    Wakefield Park Limited Partnership. (Incorporated by
                    reference to the Annual Report of Boston Technology, Inc. on
                    Form 10-K under the Securities Exchange Act of 1934 for the
                    year ended January 31, 1995.)

          10.21*    License Agreement dated November 15, 1988 between Boston
                    Technology, Inc. and VMX, Inc. (Incorporated by reference to
                    the Registration Statement of Boston Technology, Inc. on
                    Form S-1 under the Securities Act of 1933, Registration No.
                    33-32134.)

          10.22*    License Agreement dated January 22, 1990 between Boston
                    Technology, Inc. and Dytel Corporation. (Incorporated by
                    reference to the Annual Report of Boston Technology, Inc. on
                    Form 10-K under the Securities Exchange Act of 1934 for the
                    year ended January 31, 1990.)

          10.23*    Settlement Agreement dated December 28, 1993 between the
                    Boston Technology, Inc. and Theis Research, Inc. and Peter
                    F. Theis. (Incorporated by reference to the Annual Report of
                    Boston Technology, Inc. on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended January 31, 1994.)

          10.24*    Boston Technology, Inc. 1995 Director Stock Option Plan.
                    (Incorporated by reference to the Quarterly Report of Boston
                    Technology, Inc. on Form 10-Q under the Securities Exchange
                    Act of 1934 for the quarter ended July 31, 1995.)

          10.25*    Boston Technology, Inc. 1992 Directors' Stock Option Plan,
                    as amended. (Incorporated by reference to the Annual Report
                    of Boston Technology, Inc. on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended January 31, 1994.)

          10.26*    Boston Technology, Inc. 1994 Stock Incentive Plan.
                    (Incorporated by reference to the Annual Report of Boston
                    Technology, Inc. on Form 10-K under the Securities Exchange
                    Act of 1934 for the year ended January 31, 1994.)

          10.27*    Boston Technology, Inc. 1989 Incentive Stock Option Plan, as
                    amended. (Incorporated by reference to the Definitive Proxy
                    Materials for Boston Technology, Inc.'s Annual Meeting of
                    Stockholders held July 14, 1992.)

          10.28*    Boston Technology, Inc. Employee Savings and Profit Sharing
                    Plan. (Incorporated by reference to Registration Statement
                    of Boston Technology, Inc. on Form S-1 under the Securities
                    Act of 1933, Registration No. 33-32134.)

          10.29*    Boston Technology, Inc. Employee Severance Benefit Plan.
                    (Incorporated by reference to the Current Report of Boston
                    Technology, Inc. on Form 8-K under the Securities Exchange
                    Act of 1934 dated May 9, 1991.)

          10.30*    Boston Technology, Inc. 1996 Stock Incentive Plan.
                    (Incorporated by reference to the Definitive Proxy Materials
                    for Boston Technology, Inc.'s Annual Meeting of Stockholders
                    held June 25, 1996.)

<PAGE>
         10.31*     Lease dated June 7, 1996 between Boston Technology, Inc. and
                    WBAM Limited Partnership. (Incorporated by reference to the
                    Annual Report of Boston Technology, Inc. on Form 10-K under
                    the Securities Exchange Act of 1934 for the year ended
                    January 31, 1997.)

21       Subsidiaries of Registrant.

27       Financial Data Schedule







-----------------

* Incorporated by reference.