================================================================================
                       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, 2002


                         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: [ ]

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


        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

<PAGE>

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 23, 2002 was approximately $2,260,000,000. The closing
price of the registrant's common stock on the NASDAQ National Market System on
April 23, 2002 was $12.11 per share.

       There were 186,833,952 shares of the registrant's common stock
outstanding on April 23, 2002.


                       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 2002 Annual Meeting
of Shareholders of the registrant or in an amendment to this report on Form
10K/A.



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




Medalist is a registered trademark, and Comverse, Comverse Technology and
Trilogue are trademarks, of the Company. LORONIX is a registered trademark, and
Intelligent Recording, OpenStorage Portal, RELIANT, STAR-GATE, ULTRA, Universal
Database and Verint Systems are trademarks, of Verint Systems Inc., a subsidiary
of the Company. Signalware and Ulticom are registered trademarks of Ulticom,
Inc., a subsidiary of the Company.





                                     - ii -
<PAGE>

                                     PART I

ITEM 1.  BUSINESS.

The Company

         Comverse Technology, Inc. ("CTI" 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 wireless and wireline telecommunications network
operators and service providers, call centers, and other public and commercial
organizations worldwide.

         Through its subsidiary Comverse, Inc. ("Comverse"), the Company
provides enhanced services products that enable telecommunications service
providers ("TSPs") to offer a variety of revenue-generating services accessible
to large numbers of simultaneous users. These services include a broad range of
integrated multimodal messaging, information distribution and personal
communications services, such as call answering with one-touch call return,
voicemail, IP-based unified messaging (voice, fax and email in a single mailbox,
media conversion such as email to voice and visual mailbox presentation),
prepaid wireless calling services, wireless data and Internet-based services
such as short messaging services ("SMS"), wireless information and entertainment
services, multimedia messaging services ("MMS"), and wireless instant messaging,
interactive voice response ("IVR"), and voice portal services, which are part of
a voice-controlled portfolio of services such as voice dialing, voice-controlled
Web browsing and voice-controlled messaging, and other applications. Comverse's
principal market for its 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 wireless and wireline telecommunications network
operators and other TSP organizations. Comverse markets its systems throughout
the world, with its own direct sales force and in cooperation with a number of
leading international vendors of telecommunications infrastructure equipment.
More than 390 wireless and wireline TSPs in more than 100 countries, including
the majority of the 20 largest telecom companies in the world, have selected
Comverse's products to provide enhanced telecommunications services to their
consumers. Major network operators and service providers using Comverse's
systems include, among others, AT&T Wireless (USA), BellSouth (USA), Deutsche
Telekom (Germany and other European countries), KDDI (Japan), MCI Worldcom
(USA), mmO2 (several European countries), NTT (Japan), Orange (several European
countries), Pacific Century CyberWorks (Hong Kong), SBC Communications (USA),
SFR (France), SingTel (Singapore), Sprint PCS (USA), Telecom Italia (Italy),
Telmex (Mexico), Telstra (Australia), Verizon (USA) and Vodafone (multiple
European countries).

         Through its subsidiary Verint Systems Inc. ("Verint"), formerly known
as Comverse Infosys, Inc., the Company provides analytic solutions for
communications interception, digital video security and surveillance, and
enterprise business intelligence. Verint's software generates actionable
intelligence through the collection, retention and analysis of voice, fax,
video, email, Internet and data transmissions from multiple types of
communications networks. The digital security and surveillance market consists
primarily of communications interception by law enforcement agencies and digital
video security utilized by government agencies and public and private
organizations. The enterprise business intelligence market consists primarily of
solutions targeting enterprises that rely on contact centers for voice, email
and Internet interactions with their customers. Additionally, an emerging


<PAGE>

segment of enterprise business intelligence utilizes digital video information
to allow enterprises and institutions to enhance their operations, processes and
performance. Verint sells its enterprise business intelligence solutions to
contact center service bureaus, financial institutions, casinos, retailers,
utilities, communications service providers, manufacturers and other
enterprises. Verint has established marketing relationships with a variety of
global value added resellers and a network of systems integrators including ADT,
Avaya, Nortel and Siemens. Verint also has technological alliances with leading
software and hardware companies including Genesys, Siebel and Visionics, which
enables Verint to offer complementary solutions to their products. Verint's
products are used by over 800 organizations in over 50 countries worldwide.
Customers for digital security and surveillance products include the U.S.
Capitol, the U.S. Department of Defense, the U.S. Department of Justice,
Washington Dulles International Airport, the Toronto Police Service, the Dutch
National Police Agency, and other domestic and foreign law enforcement and
intelligence agencies, as well as communications service and equipment
providers, such as Cingular, Ericsson and Nortel. Customers for enterprise
business intelligence products include Con Edison, FedEx, HSBC, JCPenney,
Sprint, Target and Tiffany & Co.

         Through its subsidiary Ulticom, Inc. ("Ulticom"), the Company provides
service enabling signaling software for wireline, wireless and Internet
communications. Ulticom's Signalware call control products interconnect the
complex circuit switching, database and messaging systems and manage vital
number, routing and billing information that form the backbone of today's public
telecommunications networks. Ulticom's products are used by equipment
manufacturers, application developers and communications service providers to
deploy revenue generating infrastructure, enhanced and mandated services such as
global roaming, voice and text messaging, prepaid calling and location-based
services. Signalware products also are embedded in a range of packet
softswitching products to interoperate or converge voice and data networks and
facilitate services such as voice over the Internet and Internet offload.
Ulticom had an initial public offering of its common stock in April, 2000, and
its common stock is listed on the NASDAQ National Market System under the symbol
"ULCM". CTI holds approximately 72% of Ulticom's outstanding common stock.

         The Company markets other telecommunications products and services,
including products that are integrated with its systems and products that work
in combination with other systems to provide advanced telecommunications
services, such as automatic call distribution and messaging systems for
telephone answering service bureaus, and intelligent IP gateways for wireless
roaming. The Company also engages in venture capital investment 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.



                                      -2-
<PAGE>

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


THE COMPANY'S PRODUCTS

Enhanced Services Solutions (ESS)

         Comverse provides enhanced services products that enable TSPs to offer
a variety of revenue-generating services accessible to large numbers of
simultaneous users. These services include a broad range of integrated
multimodal messaging, information distribution and personal communications
services, such as call answering with one-touch call return, voicemail, IP-based
unified messaging (voice, fax and email in a single mailbox, media conversion
such as email to voice and visual mailbox presentation), prepaid wireless
calling services, wireless data and Internet-based services such as SMS,
wireless information and entertainment services, MMS, and wireless instant
messaging, IVR and voice portal services, which are part of a voice-controlled
portfolio of services such as voice dialing, voice-controlled Web browsing and
voice-controlled messaging, and other applications. Comverse's principal market
for its 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 wireless and wireline telecommunications network operators and
other TSP organizations. With call answering and voice messaging, TSPs benefit
primarily from traffic revenue generated by the increase in billable completed
calls. In addition, these services foster customer loyalty that results in an
overall reduction in churn. Wireless TSPs are almost universally adding
voicemail and SMS to their service offerings, and often as part of their basic
service package, not only because of these benefits, but also because wireless
voicemail messaging services directly increase billable airtime by stimulating
outbound calls, and wireless SMS increases billable transactions by stimulating
person-to-person messaging and information retrieval.

         Comverse's carrier grade ESS systems and software have been designed
and packaged to meet the capacity, reliability, availability, scalability,
maintainability, network and OMAP (Operations, Maintenance, Administration, and
Provisioning) interfaces and physical requirements of large telecommunications
network operators. The systems are offered in a variety of sizes and
configurations 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. Comverse's products are available in both
centralized and widely distributed configurations.

         Comverse's systems also incorporate components that are compatible with
the Intelligent Network ("IN") and Advanced Intelligent Network ("AIN")
protocols for Service Control Points and Intelligent Peripherals, permitting
Comverse'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 IN/AIN-based services such as
voice activated dialing.


                                      -3-
<PAGE>

             Comverse's products incorporate both Comverse-developed and
third-party-developed software, and Comverse-designed and third-party hardware,
in an open, standards-based system architecture. The systems support a wide
variety of digital telephony and IP interfaces and signaling systems, enabling
them to adapt to a variety of different network environments and IN/AIN
applications, and provide a "universal port" -- a single port that supports
multiple applications and services at any time during a single call.

Digital Security and Surveillance and Enterprise Business Intelligence

         Verint is a leading provider of analytic solutions for communications
interception, digital video security and surveillance, and enterprise business
intelligence. Verint's software generates actionable intelligence through the
collection, retention and analysis of voice, fax, video, email, Internet and
data transmissions from multiple types of communications networks.

         The digital security and surveillance market consists primarily of
communications interception by law enforcement agencies and digital video
security utilized by government agencies and public and private organizations
for use in airports, public buildings, correctional facilities and corporate
sites.

         Verint's STAR-GATE product line enables communications carriers,
Internet service providers, and communications equipment manufacturers to
overcome the complexities posed by global digital communications and comply with
governmental requirements. STAR-GATE enables communications service providers to
intercept simultaneous communications over a variety of wireline, wireless and
IP networks for delivery to law enforcement and other government agencies.
STAR-GATE's flexibility supports multi-network, multi-vendor switch environments
for a common interface across communications networks and supports switches from
communications equipment manufacturers, such as Alcatel, Ericsson, Lucent,
Nokia, Nortel and Siemens. STAR-GATE also supports interfaces to packet data
networks, such as the Internet and general packet radio services.

         Verint's RELIANT product line provides intelligent recording and
analysis solutions for communications interception activities to law enforcement
organizations and government agencies. The RELIANT software equips law
enforcement agencies with an end-to-end solution for live monitoring of
intercepted target communications and evidence collection management, regardless
of the type of communication or network used. Applications can scale from a
small center for a local police force, to a country-wide center for national law
enforcement agencies. RELIANT products are designed to comply with legal
regulations and can be integrated with communications networks in the country
where the system is utilized. RELIANT collects intercepted communications from
multiple channels and stores them for immediate access, further analysis and
later use as evidence.

         Verint's LORONIX digital video security product line provides
intelligent recording and analysis of video for security and surveillance
applications to government agencies and public organizations. The LORONIX
software digitizes, compresses, stores and retrieves video imaging. In addition,


                                      -4-
<PAGE>

LORONIX products provide live video streaming and camera control over local and
wide area computer networks and the Internet. The LORONIX product line may be
configured to allow customers to perform complete monitoring for security and
management of local and remote sites from a central investigative unit. The use
of digital storage and compression technology makes the LORONIX product line a
more efficient alternative to analog tape storage. The technology interfaces
with access control, facial recognition, activity and intrusion detection and
other technologies for enhanced security and surveillance.

         The enterprise business intelligence market consists primarily of
solutions targeting enterprises that rely on contact centers for voice, email
and Internet interactions with their customers.

         Verint's ULTRA products record and analyze customer interactions to
provide enterprises with business intelligence about their customers and help
monitor and improve the performance of their contact centers. ULTRA products
capture customer interactions from multiple sources, including telephone, email,
Internet or voice-over-IP ("VoIP"). Utilizing ULTRA's OpenStorage Portal and
Universal Database, customers can leverage their existing storage infrastructure
to store and access recorded customer interactions using standard file formats.
ULTRA products integrate with leading customer relationship management ("CRM")
applications allowing the delivery of information directly to the user's desktop
within Siebel, PeopleSoft and other CRM solutions. ULTRA also interfaces with
popular desktop software tools, including Microsoft Outlook, Lotus Notes and web
browsers, to enable the user to easily access the data in a familiar computing
environment.

         Verint's LORONIX video business intelligence products enable enterprise
customers to monitor and improve their operations through the analysis of live
and recorded digital video. Like the LORONIX digital video security product, the
LORONIX video business intelligence product digitizes, compresses, stores and
retrieves video imaging. While leveraging the technology of the LORONIX digital
security product, the LORONIX enterprise product line also contains unique
software focused on maximizing operational effectiveness through video analysis.
By interfacing with customer databases and software systems, LORONIX facilitates
the user's review of video imaging based on specific criteria such as employee
ID, product barcodes and point of sale transaction history.




Service Enabling Signaling Software

         The Company's Ulticom subsidiary provides service enabling signaling
software for wireline, wireless and Internet communications. Ulticom's
Signalware call control products interconnect the complex circuit switching,
database and messaging systems and manage vital number, routing and billing
information that form the backbone of today's public telecommunications
networks. Signalware provides signaling system #7 ("SS7"), the globally accepted
signaling standard protocol, which has become the critical element needed to
connect and interoperate packet networks with the existing circuit network


                                      -5-
<PAGE>

infrastucture. Signalware provides the SS7 connectivity required to offer value
added services. Signalware call control products work within wireline, wireless
and Internet networks to interconnect and interoperate voice and data
communication systems. In addition, Signalware plays a key role in the
convergence of disparate networks by providing a means to bridge circuit and
packet technology. Signalware offers many of the features that are crucial to
the connectivity of communication networks and the rapid delivery of revenue
generating services.

         Signalware supports a range of applications in wireline, wireless and
Internet networks. In circuit networks, Signalware has been deployed as part of
wireline services such as voice messaging, 800 number service and caller ID.
Signalware enables wireless services that include infrastructure applications
such as global roaming, as well as enhanced services like voice and text
messaging and prepaid calling. Signalware enables deployment of high capacity
wireless data services made possible by the evolution from second generation
("2G") to third generarion ("3G") infrastructures, including an intermediate
generation called "2.5G". Signalware also is used to deploy mandated, location
based wireless services, such as emergency-911. Signalware also is used to
enable solutions that ease congestion on existing networks by routing Internet
dial-up traffic to packet infrastructure, and deliver VoIP services such as
click-to-dial and advanced call forwarding.

         Signalware works with multiple SS7 networks, supports a wide variety of
SS7 protocol elements and enables analog or digital wireline and wireless
transmissions. It provides the functionality needed for call set-up/termination
and call routing/billing. Signalware products also include features that enable
the transition from SS7 signaling to emerging packet signaling standards, such
as Sigtran. New features include a Signalware Sigtran Gateway for circuit-packet
network interoperability, and protocols to carry SS7 signals over IP networks.
Signalware packages run on a range of hardware platforms and operating systems,
including Sun Solaris, IBM AIX and Red Hat Linux. These packages can be used in
single or multiple computing configurations for fault resiliency and
reliability. Signalware also provides a means to separate the signaling function
from the application development environment, which provides greater flexibility
in service configurations. Signalware customers include equipment manufacturers,
such as Alcatel, Ericsson and Siemens, application developers such as Logica and
Sonus and service providers such as Level (3), MCI Worldcom and Telefonica.



Other Telecommunications Products and Services

         The Company's other telecommunications products and services are
developed and marketed through subsidiaries in the United States and
internationally. These include automatic call distribution and messaging systems
for telephone answering service bureaus and other organizations, and intelligent
IP gateways for wireless roaming and VoIP applications.


                                      -6-
<PAGE>

MARKETS, SALES AND MARKETING

         Comverse's ESS systems and software are marketed by Comverse 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. Comverse is the market share leader in providing large
capacity voice messaging systems for wireless and wireline telecommunications
network operators around the world.

         More than 390 wireless and wireline telecommunications network
operators in more than 100 countries, including the majority of the 20 largest
telephone companies in the world, have selected Comverse's platforms to provide
enhanced telecommunications services to their consumers. Major network operators
using Comverse's ESS systems include, among others, AT&T Wireless (USA),
BellSouth (USA), Deutsche Telekom (Germany and other European countries), KDDI
(Japan), MCI Worldcom (USA), mmO2 (several European countries), NTT (Japan),
Orange (several European countries), Pacific Century CyberWorks (Hong Kong), SBC
Communications (USA), SFR (France), SingTel (Singapore), Sprint PCS (USA),
Telecom Italia (Italy), Telmex (Mexico), Telstra (Australia), Verizon (USA) and
Vodafone (multiple European countries).

         Comverse provides its customers, through its Medalist plan, 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.

         Verint's products are marketed primarily through a combination of its
direct sales force and agents, distributors, value added resellers and systems
integrators. Verint develops strategic marketing alliances with leading
companies in the industry to expand the coverage and support of its direct sales
force. Verint currently has such relationships with ADT, Avaya, Nortel and
Siemens. In addition, Verint established technological alliances with leading
software and hardware companies including Genesys, Siebel and Visionics, which
enables Verint to offer complementary solutions to their products.

         Verint's products are used by over 800 organizations and are deployed
in over 50 countries, across many industries and markets. Many users of the
products are large corporations or government agencies that operate from
multiple locations and facilities across large geographic areas and sometimes
across several countries. These organizations typically implement Verint's
solutions in stages, with implementation in one or more sites and then gradually
expanding to a full enterprise, networked-based solution.

         Customers for digital security and surveillance products include the
U.S. Capitol, the U.S. Department of Defense, the U.S. Department of Justice,
Washington Dulles International Airport, the Toronto Police Service, the Dutch
National Police Agency, and other domestic and foreign law enforcement and
intelligence agencies, as well as communications service and equipment
providers, such as Cingular, Ericsson and Nortel. Customers for enterprise
business intelligence products include Con Edison, FedEx, HSBC, JCPenney,
Sprint, Target and Tiffany & Co.



                                      -7-
<PAGE>

         Ulticom's products are used by over 55 customers and are deployed by
more than 260 service providers in more than 100 countries. Ulticom markets its
products and services primarily through a direct sales organization and through
key relationships with customers. Customers include network equipment
manufacturers, such as Alcatel, Ericsson and Siemens, application developers
such as Logica and Sonus and service providers such as Level (3), MCI Worldcom
and Telefonica.

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, video, and data communications, IP and messaging
protocols, multimodal user interfaces, development of various network and OMAP
interfaces, and application development. The Company's products use advanced
technologies in the areas of digital signal processing, VoIP, facsimile
protocols, networking interfaces, databases, data networking, multi-processor
computer architecture and real-time software design. The Company uses its
proprietary 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 high capacity multiple session multimodal user
experience, multimedia communication and processing applications. 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 data 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 has developed or integrated third-party interfaces for its
products to most circuit-switched and IP networks used around the world,
including digital interfaces, such as IP, SIP, SS7, T1, E1 and ISDN and VoIP,
designed to encompass both basic network connectivity and the IN/AIN
capabilities of Intelligent Peripherals and SNs. The Company has also developed
Internet Protocols, including cHTML, HTML, HTTP, IMAP4, LDAP, POP3, VPIM, VXML
and WAP. The Company has implemented facsimile communication and intercept
protocols for Group 3 facsimile. Certain of its products incorporate LAN and WAN
technologies used for the transfer of digitized voice, fax, video, 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. 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.



                                      -8-
<PAGE>

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 2,200 scientists, engineers and technicians in its research
and development efforts, located predominantly in the United States and Israel
with additional offices in France, Germany and Malaysia, with broad experience
in the areas of digital signal processing, computer architecture, telephony, IP,
data networking, multi-processing, databases, real-time software design and
application software design, among others.

         A portion of the Company's research and development operations benefit
from financial incentives provided by government instrumentalities to promote
research and development activities performed in Israel. The cost of such
efforts is and will continue to be affected by the continued availability of
funding under such programs. During the past 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 ("OCS"), 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. The Company pays
royalties on its sales of certain products developed in part with funding
supplied under such programs. During the year ended January 31, 2002, Comverse
entered into an arrangement with the OCS whereby Comverse agreed to pay a lump
sum royalty amount for all past amounts received from the OCS. In addition,
Comverse will receive lower amounts from the OCS than it has historically
received, but will not have to pay royalty amounts on future grants. 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 "Licenses and
Royalties" and "Operations in Israel" in Item 1 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7.

PATENTS AND INTELLECTUAL PROPERTY RIGHTS

         The Company holds a number of United States and 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.


                                      -9-
<PAGE>

         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.

         In January 2000, the Company and Lucent Technologies GRL Corp.
("Lucent") entered into a non-exclusive cross-licensing arrangement covering
current and certain future patents issued to the Company and its affiliates and
a portfolio of current and certain future patents in the area of
telecommunications technology issued to Lucent and its affiliates.

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. 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.




BACKLOG

         At January 31, 2002, the backlog of the Company amounted to
approximately $220.7 million. Substantially all of the 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 telecommunications network
operators and 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.


                                      -10-
<PAGE>

         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 many cases, and is sometimes 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 ESS systems is highly competitive, and includes
numerous products offering a broad range of features and capacities. The primary
competitors are suppliers of turnkey ESS systems and software, and indirect
competitors that supply certain components to systems integrators. Many of
Comverse's competitors specialize in a subset of Comverse's portfolio of
services. Direct and/or indirect competitors include, among others, Boston
Communications, Cap Gemini, CMG, Ericsson, Glenayre, IBM, InterVoice-Brite,
Logica, Lucent, Motorola, Nokia, Openwave, SS8 Networks, Tecnomen, Telcordia,
and Unisys. Competitors of Comverse that manufacture other telecommunications
equipment may derive a competitive advantage in selling ESS systems to customers
that are purchasing or have previously purchased other compatible equipment from
such manufacturers.

         Indirect competition is provided by messaging and other enhanced
communications products employed at end-user sites as an alternative to the use
of services available through telecommunications network operators. This
"enterprise based equipment" includes a broad range of products, such as
stand-alone voicemail systems, answering machines, telephone handsets with
voice-activated dialing and other enhanced services capabilities, products
offering "call processing" services that are supplied with voicemail features or
integrated with other voicemail systems, as well as personal computer modems and
add-on cards and software designed to furnish enhanced communications
capabilities.

         Comverse believes that competition in the sale of ESS 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 telecom
networks, IP networks and Operation and Support Systems (OSS). Comverse believes
that the range of capabilities provided by, and the ease of use of, its systems
compare favorably with other products currently marketed. Comverse anticipates
that a number of its direct and indirect competitors will introduce new or
improved ESS systems during the next several years.

         Verint faces strong competition in the markets for its products, both
in the United States and internationally. Verint expects competition to persist
and intensify in the digital security and surveillance market, primarily due to
increased demand for homeland defense and security solutions following the
September 11, 2001 terrorist attacks. Verint's primary competitors are suppliers


                                      -11-
<PAGE>

of security and recording systems and software, and indirect competitors that
supply certain components to systems integrators. In the enterprise business
intelligence market, Verint faces competition from organizations emerging from
the traditional call logging or call recording market as well as software
companies that develop and sell products that perform specific functions for
this market. Additionally, many of Verint's competitors specialize in a subset
of Verint's portfolio of products and services. Primary competitors include,
among others, ECtel, e-talk, Eyretel, JSI Telecom, NICE Systems, Sensormatic,
SS8 Networks and Witness Systems. Verint believes it competes principally on the
basis of product performance and functionality, knowledge and experience in the
industry, product quality and reliability, customer service and support, and
price.

         Verint believes that its success depends primarily on its ability to
provide technologically advanced and cost effective solutions and to continue to
provide its customers with prompt and responsive customer support. Competitors
that manufacture other security-related systems or other recording systems may
derive a competitive advantage in selling to customers that are purchasing or
have previously purchased other compatible equipment from such manufacturers.
Further, Verint expects that competition will increase as other established and
emerging companies enter its markets and as new products, services and
technologies are introduced.

         Competitors of Ulticom include a number of companies ranging from SS7
software solution providers, such as SS8 Networks and Trillium Digital Systems,
an Intel company, to vendors of communication and network infrastructure
equipment, such as Compaq and Hewlett Packard. Ulticom believes it competes
principally on the basis of product performance and functionality, product
quality and reliability, customer service and support, and price.

         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 primarily uses third-parties to perform modules and subsystem assembly,
component testing and sheet metal fabrication. Although the Company generally
uses standard parts and components in its products, certain components and
subassemblies are presently available only from a limited number of sources. To
date, the Company has been able to obtain adequate supplies of all components
and subassemblies in a timely manner from existing sources or, when necessary,
from alternative sources or redesign the system to incorporate new modules, when
applicable. 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.



                                      -12-
<PAGE>

         The Company maintains organization-wide quality assurance procedures,
coordinating the quality control activities of the Company's research and
development, manufacturing and service departments.

CAPITAL MARKET ACTIVITIES

         The Company seeks to identify and implement suitable investments, and
engages in portfolio investment and capital market activities, including venture
capital investments directly and indirectly through private equity funds.
Through a joint venture formed by the Company in partnership with Quantum
Industrial Holdings Ltd., an investment company managed by Soros Fund Management
LLC, the Company invests in venture capital in high technology firms, and
engages in other investment activities. The Company has significantly reduced
its new venture capital investments in recent periods.

OPERATIONS IN ISRAEL

         A substantial portion of the Company's research and development,
manufacturing and other operations are located in Israel and, accordingly, may
be affected by economic, political and military conditions in that country.
Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors, and the
continued state of hostility, varying in degree and intensity, has led to
security and economic problems for Israel. Since October 2000, there has been a
significant increase in violence, primarily in the West Bank and Gaza Strip, and
more recently Israel has experienced terrorist incidents within its borders. As
a result, negotiations between Israel and representatives of the Palestinian
Authority have been sporadic and have failed to result in peace. The Company
could be adversely affected by hostilities involving Israel, the interruption or
curtailment of trade between Israel and its trading partners, or a significant
downturn in the economic or financial condition of Israel. In addition, some of
the Company's employees in Israel are subject to being called upon to perform
military service in Israel, and their absence may have an adverse effect upon
the Company's operations.

         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 that has eliminated all tariff and certain
non-tariff barriers on most trade between the two countries. Israel has also
entered into an agreement with the European Free Trade Association ("EFTA"),
which currently includes Iceland, Liechtenstein, Norway and Switzerland, that


                                      -13-
<PAGE>

established a free-trade zone between Israel and EFTA nations exempting
manufactured goods and some agricultural goods and processed foods from customs
duties, while reducing duties on other goods. The end of the Cold War has also
enabled Israel to establish commercial and trade relations with a number of
nations, including Russia, China, India, Turkey and the nations of Eastern
Europe, with whom Israel had not previously had such relations.

         The Company's business is 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 trade
between Israel and its current trading partners were interrupted or curtailed.
The sale of products manufactured in Israel has been adversely affected in
certain markets by restrictive laws, policies or practices directed toward
Israel or companies having operations in Israel. The continuation or
exacerbation of conflicts involving Israel and other nations may impede the
Company's ability to sell its products in certain markets.

         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.

         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. 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.

EMPLOYEES

         At January 31, 2002, the Company employed approximately 5,650
individuals, of whom approximately 77% 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


                                      -14-
<PAGE>

generally requires the payment by employers of severance pay upon the death of
an employee, his or her retirement or upon termination of his or her 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. 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, 2002, the Company leased an aggregate of
approximately 2,455,000 square feet of office space and manufacturing and
related facilities for its operations worldwide, including approximately
1,486,000 square feet in Tel Aviv, Israel, approximately 367,000 square feet in
Wakefield, Massachusetts, approximately 77,000 square feet in Andover,
Massachusetts, approximately 60,000 square feet in Woodbury, New York,
approximately 85,000 square feet in Mt. Laurel, New Jersey, and an aggregate of
approximately 380,000 square feet at various other locations in the United
States, Europe, the Far East, Australia, Latin America and Africa. The aggregate
base monthly rent for the facilities under lease as of January 31, 2002 was
approximately $3,119,000, and all of such leases are subject to various
pass-throughs and escalation adjustments.

         In addition, the Company owns office space and manufacturing and
related facilities of approximately 40,000 square feet in Durango, Colorado and
approximately 25,000 square feet in Bexbach, Germany.

         In September, 1999, the Company acquired approximately 423,000 square
feet of unimproved land in Ra'anana, Israel, with a view to the potential future
consolidation and construction of facilities for its Israeli operations.

         The Company believes that its facilities currently under lease are more
than adequate for its current operations, and may endeavor selectively to reduce
its existing facilities commitments as circumstances may warrant.


                                      -15-
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

         On or about October 19, 2001, Kevin Beier v. Comverse Technology, Inc.,
et al., CV 016972, the first of four virtually identical purported securities
class action complaints was filed against CTI and certain of its executive
officers in the United States District Court for the Eastern District of New
York. The four actions were consolidated into the Beier action on January 15,
2002 and an amended consolidated complaint was filed on March 4, 2002. The
consolidated complaint generally alleges violations of federal securities laws
on behalf of individuals who allege that they purchased CTI's common stock
during a purported class period between April 30, 2001 and July 10, 2001. The
consolidated complaint seeks an unspecified amount in damages on behalf of
persons who purchased CTI stock during the purported class period. The Company
believes all claims in the complaints to be without merit and will vigorously
defend against these claims.

         From time to time, the Company is subject to claims in legal
proceedings arising in the normal course of its business. The Company does not
believe that it is currently party to any pending legal action that could
reasonably be expected to have a material adverse effect on its business or
operating results.


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

         At a Special Meeting of Shareholders held on February 25, 2002, the
shareholders of CTI authorized CTI to make an offer to holders of certain CTI
stock options granted under its stock incentive compensation plans entitling
such holders to surrender such options for cancellation in exchange for the
grant of replacement options to purchase 0.85 shares of Common Stock for each
share that was issuable under such cancelled options, with the replacement
options to be granted no earlier than six months and one day following the
cancellation date of the cancelled options at a price equal to the fair market
value of the Common Stock on the new grant date. This proposal was approved with
a vote of 74,549,571 shares in favor, 58,162,258 shares against and 1,206,026
abstentions.





                                      -16-
<PAGE>

                                     PART II

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

         The Common Stock of CTI 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 two fiscal years.
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, and the
two-for-one stock split, effected in the form of a stock dividend, distributed
on April 3, 2000.

             Year           Fiscal Quarter            Low          High

             2000        2/1/00   -      4/30/00       68.06        119.69
                         5/1/00   -      7/31/00       65.25        102.75
                         8/1/00   -     10/31/00       76.06        114.81
                        11/1/00   -      1/31/01       86.19        121.63

             2001        2/1/01   -      4/30/01       45.82        113.13
                         5/1/01   -      7/31/01       24.78         74.11
                         8/1/01   -     10/31/01       15.90         29.87
                        11/1/01   -      1/31/02       19.14         26.93

         There were 1,829 holders of record of Common Stock at April 23, 2002.
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 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."





                                      -17-
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.

         The following tables present selected consolidated financial data for
the Company for the year ended December 31, 1997, the one month period ended
January 31, 1998, and the years ended January 31, 1999, 2000, 2001 and 2002.
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 has been retroactively adjusted for the January 1998 merger
with Boston Technology, Inc. ("Boston") and the July 2000 acquisition of Loronix
Information Systems, Inc. ("Loronix") to account for those transactions as
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, and a two-for-one stock
split effected as a 100% stock dividend to shareholders of record on March 27,
2000, distributed on April 3, 2000.
<TABLE>
<CAPTION>
                                              Year        Transition
                                              Ended      Period Ended                      Year Ended
                                           December 31,   January 31,                      January 31,
                                           ------------   ----------- -------------------------------------------------
                                            1997(1)(3)       1998     1999 (3)     2000 (3)            2001        2002
                                                           (In thousands, except per share data)
<S>                                      <C>          <C>          <C>           <C>             <C>         <C>
   Statement of Operations Data:
     Sales                               $  498,343   $   14,401   $  708,805    $ 909,667       $ 1,225,058 $ 1,270,218
     Cost of sales                          221,650       21,666(2)   304,665      371,589           482,658     525,480
     Research and development, net           98,152       13,481      134,201      169,816           232,198     293,296
     Selling, general and administrative    142,055       51,892(2)   157,106      193,996           259,607     323,036
    Merger and acquisition expenses               -       41,877            -        2,016            15,971           -
    Workforce reduction and
         restructuring charges                    -            -            -            -                 -      63,562
     Interest and other income
             (expense), net                   4,957          175        8,315       16,595            33,339     (5,789)
     Income (loss) before
           income tax provision              41,443     (114,340)     121,148      188,845           267,963      59,055
     Income tax provision                     9,430          867       11,783       15,698            18,827       4,436
                                         ----------   ----------   ----------    ---------      ------------ -----------
     Net income (loss)                   $   32,013   $ (115,207)  $  109,365    $ 173,147      $    249,136 $    54,619
                                         ==========   ===========  ==========    =========      ============ ===========

     Earnings (loss) per share - diluted $     0.23   $   (0.89)   $     0.75    $    1.08      $       1.39 $      0.29
                                         ==========   ==========   ==========    =========      ============ ===========

Weighted average number of
   common and common equivalent
     shares outstanding - diluted           139,702      130,060      145,439      178,986           189,964     186,434

                                         December 31,                                        January 31,
                                         ------------   -------------------------------------------------------------------
                                            1997 (4)(5)      1998     1999(4)       2000(4)       2001            2002

                                                                          (In thousands)
   Balance Sheet Data:
     Working capital                     $  402,901   $  280,793   $  712,165     $  858,304   $ 1,860,379  $  2,030,250
     Total assets                           636,342      527,652    1,042,959      1,372,847     2,625,264     2,704,163
     Long-term debt, including
       current portion                      142,790      124,257      416,327        308,082       906,723       648,611
     Stockholders' equity                   357,514      231,390      390,855        724,839     1,236,165     1,616,408
</TABLE>

(1)      Includes results for Boston for the 11 months ended December 31, 1997.
(2)      Includes approximately $7.8 million in cost of sales and $36.1 million
         in selling, general and administrative expenses relating to charges as
         a result of the merger with Boston.
(3)      Includes the results of Loronix for its fiscal year ended December 31.
(4)      Includes amounts for Loronix as of its fiscal year ended December 31.
(5)      Includes amounts for Boston as of December 31, 1997.


                                      -18-
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.


SIGNIFICANT ACCOUNTING POLICIES

         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.

         Revenue is generally recognized at the time of shipment for sales of
systems which do not require significant customization to be performed by the
Company and collection of the resulting receivable is deemed probable by the
Company. The Company's systems are generally a bundled hardware and software
solution that are shipped together. The Company generally has no obligations to
customers after the date products are shipped, except for product warranties.
The Company generally warranties its products for one year after sale. A
provision for estimated warranty costs is recorded at the time of sale.

         Customers may also purchase separate maintenance contracts, which
generally consist of bug-fixing and telephone access to Company technical
personnel, but in certain circumstances may also include the right to receive
unspecified product updates, upgrades and enhancements. Revenue from these
services is recognized ratably over the contract period.

         Revenues from certain development 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.
Revisions in estimates of costs and profits are reflected in the accounting
period in which the facts that require the revision become known. At the time a
loss on a contract is known, the entire amount of the estimated loss is accrued.
Amounts received from customers in excess of revenues earned under the
percentage-of-completion method are recorded as advance payments from customers.
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. At the end of each accounting
period, the Company records a reserve for bad debts included in accounts
receivable based upon its current and historical collection history.

         Cost of sales include material costs, subcontractor costs, salary and
related benefits for the operations and service departments, depreciation and
amortization of equipment used in the operations and service departments,
amortization of capitalized software costs, royalties and license fee costs,
travel costs and an overhead allocation. Research and development costs include
salary and related benefits as well as travel, depreciation and amortization of
research and development equipment, an overhead allocation, as well as other
costs associated with research and development activities. Selling, general and
administrative costs include salary and related benefits, travel, depreciation
and amortization, marketing and promotional materials, recruiting expenses,
professional fees, facility costs, as well as other costs associated with sales,
marketing, finance and administrative departments.



                                      -19-
<PAGE>

         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. 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 undiscounted cash
flows expected to result from the use of the asset and proceeds from its
eventual disposition are less than its carrying amount. Impairment is measured
at fair value.

         In July 2000, CTI acquired all of the outstanding stock of Loronix in a
transaction accounted for as a pooling of interests. The Company's financial
statements for the year ended January 31, 2000 include the operations of Loronix
for the year ended December 31, 1999.


RESULTS OF OPERATIONS


Year Ended January 31, 2002 Compared to Year Ended January 31, 2001

         Sales. Sales for the fiscal year ended January 31, 2002 ("fiscal 2001")
increased by approximately $45.2 million, or 4%, compared to fiscal year ended
January 31, 2001 ("fiscal 2000"). This increase is primarily attributable to an
increase in sales of ESS products of approximately $48.7 million. Such increase
was principally due to increased sales to American customers. In addition, sales
of security and business intelligence recording products and service enabling
signaling software products increased (decreased) by approximately ($8.0)
million and $9.3 million, respectively.

         Cost of Sales. Cost of sales for fiscal 2001 increased by approximately
$42.8 million, or 9%, as compared to fiscal 2000. The increase in cost of sales
is primarily attributable to increased materials and production costs of
approximately $21.8 million due to the increase in sales and increased
personnel-related costs of approximately $23.2 million due to hiring of
additional personnel and increased compensation and benefits for existing
personnel. Gross margins decreased from approximately 60.6% in fiscal 2000 to
approximately 58.6% in fiscal 2001.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 2001 increased by approximately $63.4
million, or 24%, compared to fiscal 2000, and as a percentage of sales increased
from approximately 21.2% in fiscal 2000 to approximately 25.4% in fiscal 2001.
The increase was primarily due to hiring of additional personnel and increased
compensation and benefits for existing personnel to support the increased level
of sales during the first half of fiscal 2001.

         Research and Development. Net research and development expenses for
fiscal 2001 increased by approximately $61.1 million, or 26%, compared to fiscal
2000 due to overall growth of research and development operations and the
initiation of significant new research and development projects. The increase
was primarily due to the hiring of additional personnel and increased
compensation and benefits for existing personnel of approximately $32.9 million,


                                      -20-
<PAGE>

lower reimbursements for research and development projects submitted for funding
to the OCS of approximately $11.5 million, an increase in depreciation and
amortization costs of approximately $6.3 million and an increase in the overhead
allocation of approximately $3.6 million.

         Acquisition Expenses and Workforce Reduction and Restructuring Charges.
During the 2001 fiscal year, the Company took steps to better align its cost
structure with the current business environment, to improve the efficiency of
its operations and to better position the Company to realize emerging
opportunities. These steps included a reduction in workforce announced in April
2001 and a restructuring plan announced in December 2001. In connection with the
implementation of these actions the Company incurred charges of approximately
$63.6 million to cover the costs of severance, elimination of excess facilities
and related leasehold improvements, write-off of certain inventory, property and
equipment and capitalized software and other restructuring related charges, such
as professional fees. The Company expects to pay approximately $11.9 million for
severance and related charges during the year ended January 31, 2003 and
approximately $24.3 million for lease related obligations at various dates
through January 2011.

         In July 2000, the Company acquired all of the outstanding stock of
Loronix, a company that develops software-based digital video recording and
management systems, and all of the outstanding stock of Syborg
Informationsysteme GmbH, a company that develops software-based digital voice
and internet recording and workforce management systems. In August 2000, the
Company acquired all of the outstanding stock of Gaya Software Industries Ltd.,
a company specializing in software-based intelligent IP gateways and VoIP
technology, and all of the outstanding stock of Exalink Ltd., a company
specializing in protocol gateways and applications software for the delivery of
Internet-based services to all types of wireless devices. These business
combinations were accounted for as pooling of interests.

         In connection with the above acquisitions, the Company charged to
operations approximately $16.0 million in fiscal 2000 for merger related
charges. Such charges relate to the following:

         Asset write-downs and impairments
         ---------------------------------

         In connection with the acquisitions in fiscal 2000, certain assets
became impaired due to the existence of duplicative technology, property and
equipment and inventory of the merged companies. Accordingly, these assets were
written down to their net realizable value at the time of the mergers and a
charge of approximately $7.4 million was charged to operations.

         Professional fees and other direct merger expenses
         --------------------------------------------------

         In connection with the acquisitions in fiscal 2000, the Company
recorded a charge of approximately $8.6 million for professional fees to
lawyers, investment bankers and accountants, as well as other direct merger
costs in connection with the mergers, such as printing costs and filing fees.

         Interest and Other Income (Expense), Net. Interest and other income
(expense), net, for fiscal 2001 decreased by approximately $39.1 million as
compared to fiscal 2000. The principal reasons for the decrease are increased


                                      -21-
<PAGE>

net realized losses and write-downs of the Company's investments and decreased
equity in the earnings of affiliates of approximately $22.1 million, increased
interest expense of approximately $0.3 million and a change in foreign currency
gains/losses of approximately $20.1 million. These decreases were partially
offset by increased interest and dividend income of approximately $7.6 million.
The increase in interest and dividend income is primarily a result of the
inclusion of the proceeds for a full year in fiscal 2001 of the Company's $600
million 1.50% convertible debentures issued in November and December 2000,
partially offset by the decrease in interest rates during fiscal 2001.

         Income Tax Provision. Provision for income taxes decreased from fiscal
2000 to fiscal 2001 by approximately $14.4 million, or 76%, due to decreased
pre-tax income. The Company's overall effective tax rate increased from
approximately 7.0% during fiscal 2000 to approximately 7.5% in fiscal 2001. 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 decreased by approximately $194.5 million, or
78%, in fiscal 2001 compared to fiscal 2000, while as a percentage of sales
decreased from approximately 20.3% in fiscal 2000 to approximately 4.3% in
fiscal 2001. The decrease resulted primarily from the factors described above.


Year Ended January 31, 2001 Compared to Year Ended January 31, 2000

         Sales. Sales for fiscal 2000 increased by approximately $315.4 million,
or 35%, compared to the year ended January 31, 2000 ("fiscal 1999"). This
increase is primarily attributable to an increase in sales of ESS products of
approximately $277.2 million. Such increase was principally due to increased
sales to European and American customers. In addition, sales of security and
business intelligence recording products and service enabling signaling software
products increased by approximately $23.8 million and $18.7 million,
respectively.

         Cost of Sales. Cost of sales for fiscal 2000 increased by approximately
$111.1 million, or 30%, as compared to fiscal 1999. The increase in cost of
sales is primarily attributable to (i) increased materials and production costs
of approximately $62.3 million due to the increase in sales, (ii) increased
personnel-related costs of approximately $30.3 million due to hiring of
additional personnel and increased compensation and benefits for existing
personnel, (iii) increased travel-related costs of approximately $7.1 million
and (iv) an increase in depreciation and amortization costs of approximately
$4.3 million. Gross margins increased from approximately 59.2% in fiscal 1999 to
approximately 60.6% in fiscal 2000.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 2000 increased by approximately $65.6
million, or 34%, compared to fiscal 1999, and as a percentage of sales was
approximately 21% in both fiscal 1999 and fiscal 2000. The increase was
primarily due to hiring of additional personnel and increased compensation and
benefits for existing personnel to support the increased level of sales during
fiscal 2000.


                                      -22-
<PAGE>

         Research and Development. Net research and development expenses for
fiscal 2000 increased by approximately $62.4 million, or 37%, compared to fiscal
1999 due to overall growth of research and development operations and the
initiation of significant new research and development projects. The increase
was primarily due to hiring of additional personnel and increased compensation
and benefits for existing personnel to support the higher volume of research and
development activities.

         Acquisition Expenses. 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. In August 1999, the Company acquired all of the outstanding stock of
InTouch Systems, Inc., a company that develops and markets a suite of
intelligent voice-controlled software applications. In July 2000, the Company
acquired all of the outstanding stock of Loronix, a company that develops
software-based digital video recording and management systems, and all of the
outstanding stock of Syborg Informationsysteme GmbH, a company that develops
software-based digital voice and internet recording and workforce management
systems. In August 2000, the Company acquired all of the outstanding stock of
Gaya Software Industries Ltd., a company specializing in software-based
intelligent IP gateways and voice-over-IP technology, and all of the outstanding
stock of Exalink Ltd., a company specializing in protocol gateways and
applications software for the delivery of Internet-based services to all types
of wireless devices. These business combinations were accounted for as pooling
of interests.

         In connection with the above acquisitions, the Company has charged to
operations approximately $2.0 million and $16.0 million in fiscal 1999 and
fiscal 2000, respectively, for merger related charges. Such charges relate to
the following:

         Asset write-downs and impairments
         ---------------------------------

         In connection with the acquisitions in fiscal 2000, certain assets
became impaired due to the existence of duplicative technology, property and
equipment and inventory of the merged companies. Accordingly, these assets were
written down to their net realizable value at the time of the mergers and a
charge of approximately $7.4 million was charged to operations.



         Professional fees and other direct merger expenses
         --------------------------------------------------

         In connection with the acquisitions in fiscal 1999 and fiscal 2000, the
Company recorded a charge of approximately $2.0 million and $8.6 million,
respectively, for professional fees to lawyers, investment bankers and
accountants, as well as other direct merger costs in connection with the
mergers, such as printing costs and filing fees.

         Interest and Other Income, Net. Interest and other income, net, for
fiscal 2000 increased by approximately $16.7 million as compared to fiscal 1999.
The principal reasons for the increase are increased interest and dividend
income of approximately $26.7 million, a change in foreign currency gains/losses
of approximately $8.8 million and a decrease in interest expense of
approximately $1.4 million. These increases were partially offset by an increase
in net realized losses and write-downs on the Company's investments and the
equity in the earnings of affiliates of approximately $20.7 million. In November


                                      -23-
<PAGE>

and December 2000 the Company issued $600 million convertible senior debentures
with the interest income earned on the proceeds of such debentures adding to the
increase in interest and dividend income in fiscal 2000. The decrease in
interest expense is primarily a result of the inclusion in fiscal 1999 of the
Company's 5-3/4% convertible subordinated debentures redeemed in October 1999.

         Income Tax Provision. Provision for income taxes increased from fiscal
1999 to fiscal 2000 by approximately $3.1 million, or 20%, due to increased
pre-tax income. The Company's overall effective tax rate decreased from
approximately 8% during fiscal 1999 to approximately 7% in fiscal 2000. 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 increased by approximately $76.0 million, or
44%, in fiscal 2000 compared to fiscal 1999, while as a percentage of sales
increased from approximately 19% in fiscal 1999 to approximately 20% in fiscal
2000. The increase resulted primarily from the factors described above.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's working capital at January 31, 2002 and 2001 was
approximately $2,030.3 million and $1,860.4 million, respectively.

         Operations for fiscal 2001, fiscal 2000 and fiscal 1999, after adding
back non-cash items, provided cash of approximately $130.0 million, $309.7
million and $208.1 million, respectively. During such years, other changes in
working capital provided (used) cash of approximately $12.2 million, ($65.2)
million and ($30.8) million, respectively, resulting in cash being provided by
operating activities of approximately $142.2 million, $244.5 million and $177.4
million, respectively.

         Investment activities for fiscal 2001, fiscal 2000 and fiscal 1999 used
cash of approximately $122.4 million, $207.3 million and $475.7 million,
respectively. These amounts include (i) additions to property, plant and
equipment in fiscal 2001, fiscal 2000 and fiscal 1999 of approximately $54.6
million, $97.3 million and $85.6 million, respectively; (ii) maturities and
sales (purchases) of bank time deposits and investments, net, of approximately
($44.8) million, ($94.5) million and ($377.6) million, respectively; and (iii)
capitalization of software development costs of approximately $23.0 million,
$15.5 million and $12.5 million, respectively. The property additions in each of
fiscal 2001, 2000 and 1999 include the increase of the Company's fixtures and
equipment and in fiscal 1999 the purchase of land by the Company of
approximately $25.8 million for potential future construction purposes. In
addition, in each of fiscal 2001, 2000 and 1999 the Company increased the amount
of its bank time deposits and investments to better utilize the net proceeds of
the 2000 and 1998 issuances of convertible debentures.

         Financing activities for fiscal 2001, fiscal 2000 and fiscal 1999
provided cash of approximately $67.0 million, $894.1 million and $53.6 million,
respectively. These amounts include (i) the net proceeds from the issuance of
convertible debentures in fiscal 2000 of approximately $588.4 million; (ii)


                                      -24-
<PAGE>

proceeds from the issuance of common stock in connection with the exercise of
stock options, warrants and employee stock purchase plan of approximately $28.8
million, $111.4 million and $50.6 million, respectively; (iii) net proceeds
(repayments) of bank loans and other debt of approximately $38.2 million, ($0.9)
million and $3.1 million, respectively; and (iv) net proceeds from the issuance
of common stock of a subsidiary in connection with public offerings in fiscal
2000 of approximately $195.2 million.

         In November 2000, the Company issued $500 million aggregate principal
amount of its 1.50% convertible senior debentures due December 2005. In December
2000, the Company issued an additional $100 million aggregate principal amount
of its 1.50% convertible senior debentures due December 2005 as a result of the
initial purchaser exercising in full their over-allotment option.

         As of January 31, 2002, the Company had outstanding convertible
debentures of $600 million. In January 2002, Verint took a long-term bank loan
in the amount of $42 million. This loan, which matures in February 2003, bears
interest at LIBOR plus 0.55% and may be prepaid without penalty. The loan is
guaranteed by CTI.

         The Company has obtained bank guaranties primarily for performance of
certain obligations under contracts with customers. These guaranties, which
aggregated approximately $23.4 million at January 31, 2002, are to be released
by the Company's performance of specified contract milestones, which are
scheduled to be completed primarily during 2002.

        The Company leases office, manufacturing, and warehouse space under
non-cancelable operating leases. As of January 31, 2002, the minimum annual rent
obligations of the Company were approximately as follows:


                   Twelve Months Ended
                       January 31,                      Amount
                   -------------------                  ------
                                                    (In thousands)

                          2003                      $    34,007
                          2004                           30,234
                          2005                           20,253
                          2006                           18,981
                     2007 and thereafter                 33,666
                                                    -----------

                                                    $   137,141
                                                    ===========





                                      -25-
<PAGE>

         On February 1, 2002, Verint acquired the digital video recording
business of Lanex, LLC. The Lanex business provides digital video recording
solutions for security and surveillance applications primarily to North American
banks. The purchase price consisted of $9.5 million in cash and a $2.2 million
convertible note. The note is non-interest bearing and matures on February 1,
2004. The holder of the note may elect to convert the note, in whole or in part,
into shares of Verint's common stock at a conversion price of $16.06 per share
at any time on or after the completion of an initial public offering by Verint.
The note is guaranteed by CTI. Pro forma results of operations have not been
presented because the effects of this acquisition are not material.

         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 derives the majority of its revenue from the
telecommunications industry, which is facing an unprecedented recession. This
has resulted in a significant reduction of capital expenditures made by TSPs.
The Company's operating results and financial condition have been, and will
continue to be, adversely affected by the severe decline in technology purchases
and capital expenditures by TSPs worldwide and by unfavorable global economic
conditions. Consequently, the Company's operating results have deteriorated
significantly in recent periods and may continue to deteriorate in future
periods if such conditions remain in effect. For these reasons and the risk
factors outlined below, it has been and continues to be very difficult for the
Company to accurately forecast future revenues and operating results.

         The Company's business is particularly dependent on the strength of the
telecommunications industry. The telecommunications industry, in general, and
the Company, in particular, have been negatively affected by, among other
factors, the high costs and large debt positions incurred by some TSPs to expand
capacity and enable the provision of future services (and the corresponding
risks associated with the development, marketing and adoption of these services
as discussed below), including the cost of acquisitions of licenses to provide
future broadband services and reductions in TSPs' actual and projected revenues
and deterioration in their actual and projected operating results. Accordingly,
TSPs have significantly reduced their actual and planned expenditures to expand
or replace equipment and delayed and reduced the deployment of services. A


                                      -26-
<PAGE>

number of TSPs, including certain customers of the Company, have indicated the
existence of conditions of excess capacity in certain markets.

         In addition, TSPs have delayed the planned introduction of new
services, such as broadband mobile telephone services, that would be supported
by certain of the Company's products. Certain of the Company's customers also
have implemented changes in procurement practices and procedures, including
limitations on purchases in anticipation of estimated future capacity
requirements, and in the management and use of their networks, that have had an
adverse affect on the Company's sales and order backlog, which also has made it
very difficult for the Company to project future sales. The continuation and/or
exacerbation of these trends will have an adverse effect on the Company's future
results. In addition to loss of revenue, weakness in the telecommunications
industry has affected and will continue to affect the Company's business by
increasing the risks of credit or business failures of suppliers, customers or
distributors, by customer requirements for vendor financing, by delays and
defaults in customer or distributor payments, and by price reductions instituted
by competitors to retain or acquire market share.

         The Company's current plan of operations is predicated in part on a
recovery in capital expenditures by its customers. In the absence of such
improvement, the Company would experience further deterioration in its operating
results, and may determine to modify its plan for future operations accordingly,
which may include, among other things, additional reductions in its workforce.

         The Company intends to continue to make significant investments in its
business, and to examine opportunities for growth through acquisitions and
strategic investments. These activities may involve significant expenditures and
obligations that cannot readily be curtailed or reduced if anticipated demand
for the associated products does not materialize or is delayed. The impact of
these decisions on future financial results cannot be predicated with assurance,
and the Company's commitment to growth may increase its vulnerability to
downturns in its markets, technology changes and shifts in competitive
conditions. The Company also may not be able to identify future suitable merger
or acquisition candidates, and even if the Company does identify suitable
candidates, it may not be able to make these transactions on commercially
acceptable terms, or at all. If the Company does make acquisitions, it may not
be able to successfully incorporate the personnel, operations and customers of
these companies into the Company's business. In addition, the Company may fail
to achieve the anticipated synergies from the combined businesses, including
marketing, product integration, distribution, product development and other
synergies. The integration process may further strain the Company's existing
financial and managerial controls and reporting systems and procedures. This may
result in the diversion of management and financial resources from the Company's
core business objectives. In addition, an acquisition or merger may require the
Company to utilize cash reserves, incur debt or issue equity securities, which
may result in a dilution of existing stockholders, and the Company may be
negatively impacted by the assumption of liabilities of the merged or acquired
company. Due to rapidly changing market conditions, the Company may find the
value of its acquired technologies and related intangible assets, such as
goodwill as recorded in the Company's financial statements, to be impaired,
resulting in charges to operations. The Company may also fail to retain the
acquired or merged companies' key employees and customers.



                                      -27-
<PAGE>

         The Company has made, and in the future, may continue to make strategic
investments in other companies. These investments have been made in, and future
investments will likely be made in, immature businesses with unproven track
records and technologies. Such investments have a high degree of risk, with the
possibility that the Company may lose the total amount of its investments. The
Company may not be able to identify suitable investment candidates, and, even if
it does, the Company may not be able to make those investments on acceptable
terms, or at all. In addition, even if the Company makes investments, it may not
gain strategic benefits from those investments.

         The telecommunications industry is subject to rapid technological
change. The introduction of new technologies in the telecommunications market
and new alternatives for the delivery of services are having, and can be
expected to continue to have, a profound effect on competitive conditions in the
market and the success of market participants, including the Company. The
Company's continued success will depend on its ability to correctly anticipate
technological trends in its industries, to react quickly and effectively to such
trends and to enhance its existing products and to introduce new products on a
timely and cost-effective basis. As a result, the life cycle of the Company's
products is difficult to estimate. In addition, changing industry and market
conditions may dictate strategic decisions to restructure some business units
and discontinue others. Discontinuing a business unit or product line may result
in the Company recording accrued liabilities for special charges, such as costs
associated with a reduction in work force. These strategic decisions could
result in changes to determinations regarding a product's useful life and the
recoverability of the carrying basis of certain assets.

         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. The Company relies on a limited number of suppliers and manufacturers
for specific components and may not be able to find alternate manufacturers that
meet its requirements and existing or alternative sources may not be available
on favorable terms and conditions. Thus, if there is a shortage of supply for
these components, the Company may experience an interruption in its product
supply. In addition, loss of third party software licensing would materially and
adversely affect the Company's business, financial condition and results of
operations.

         The telecommunications industry continues to undergo significant change
as a result of deregulation and privatization worldwide, reducing restrictions
on competition in the industry. Unforeseen changes in the regulatory environment
also may have an impact on the Company's revenues and/or costs in any given part
of the world. The worldwide ESS 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 ESS system markets. Moreover, as the
Company enters into new markets as a result of its own research and development
efforts or acquisitions, it is likely to encounter new competitors.

         The market for the Company's digital security and surveillance and
enterprise business intelligence products has also been affected by weakness in
general economic conditions, delays or reductions in customers' purchases of
capital equipment and uncertainties relating to government expenditure programs.


                                      -28-
<PAGE>

Budgetary constraints, uncertainties resulting from the introduction of new
technologies and shifts in the pattern of government expenditures resulting from
increased uncertainties in the market for monitoring systems, 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. 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. 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 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 also may be more volatile than the Company has
experienced in prior periods. 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's gross margins also may be adversely
affected by increases in material or labor costs, obsolescence charges, price
competition and changes in channels of distribution or in the mix of products
sold.

         Political, economic and military conditions in Israel directly affect
the Company's operations. Since the establishment of the State of Israel in
1948, a number of armed conflicts have taken place between Israel and its Arab
neighbors, and the continued state of hostility, varying in degree and
intensity, has led to security and economic problems for Israel. Since October
2000, there has been a significant increase in violence, primarily in the West
Bank and Gaza Strip, and more recently Israel has experienced terrorist
incidents within its borders. As a result, negotiations between Israel and
representatives of the Palestinian Authority have been sporadic and have failed
to result in peace. The Company could be adversely affected by hostilities
involving Israel, the interruption or curtailment of trade between Israel and
its trading partners, or a significant downturn in the economic or financial
condition of Israel. In addition, the sale of products manufactured in Israel
may be adversely affected in certain countries by restrictive laws, policies or
practices directed toward Israel or companies having operations in Israel. The
continuation or exacerbation of violent conflicts involving Israel and other
nations may impede the Company's ability to sell its products in certain
countries. In addition, some of the Company's employees in Israel are subject to
being called upon to perform military service in Israel, and their absence may
have an adverse effect upon the Company's operations. Generally, unless exempt,


                                      -29-
<PAGE>

male adult citizens and permanent residents of Israel under the age of 54 are
obligated to perform up to 36 days of military reserve duty annually.
Additionally, all such residents are subject to being called to active duty at
any time under emergency circumstances. These conditions could disrupt the
Company's operations in Israel and its business, financial condition and results
of operations could be adversely affected.

         The Company's costs of operations have at times been affected by
changes in the cost of its operations in Israel, resulting from changes in the
value of the Israeli shekel relative to the United States dollar, and from
difficulties in attracting and retaining qualified scientific, engineering and
technical personnel in Israel, where the availability of such personnel has at
times been severely limited. Changes in these cost factors have from time to
time been significant and difficult to predict, and could in the future have a
material adverse effect on the Company's results of operations.

         The Company's historical operating results reflect substantial benefits
it has received from programs sponsored by the Israeli government for the
support of research and development, as well as tax moratoriums and favorable
tax rates associated with investments in approved projects ("Approved
Enterprises") in Israel. Some of these programs and tax benefits have ceased and
others may not be continued in the future and the availability of such benefits
to the Company may be affected by a number of factors, including budgetary
constraints resulting from adverse economic conditions, government policies and
the Company's ability to satisfy eligibility criteria.

         The Israeli government has reduced the benefits available under some of
these programs in recent years, and Israeli government authorities have
indicated that the government may further reduce or eliminate some of these
benefits in the future. The Company has regularly participated in a conditional
grant program administered by the OCS under which it has received significant
benefits through reimbursement of up to 50% of qualified research and
development expenditures. Verint currently pays royalties, of between 3% and 5%
(or 6% under certain circumstances) of associated product revenues (including
service and other related revenues) to the Government of Israel for repayment of
benefits received under this program. Such royalty payments by Verint are
currently required to be made until the government has been reimbursed the
amounts received by the Company plus, for amounts received under projects
approved by the OCS after January 1, 1999, interest on such amount at a rate
equal to the 12-month LIBOR rate in effect on January 1 of the year in which
approval is obtained. During fiscal 2001, Comverse entered into an arrangement
with the OCS whereby Comverse agreed to pay a lump sum royalty amount for all
past amounts received from the OCS. In addition, Comverse will receive lower
amounts from the OCS than it has historically received, but will not have to pay
royalty amounts on future grants. The amount of reimbursement received by the
Company under this program has been reduced significantly, and the Company does
not expect to receive significant reimbursement under this program in the
future. 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 these programs, or to transfer outside
of Israel related technology rights. 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 continued reduction in the benefits received by the
Company under the program, or the termination of its eligibility to receive
these benefits at all in the future, could adversely affect the Company's
operating results.



                                      -30-
<PAGE>

         The Company's overall effective tax rate benefits from the tax
moratorium provided by the Government of Israel for Approved Enterprises
undertaken in that country. The Company's effective tax rate may increase due
to, among other factors, the increased proportion of its taxable income
associated with activities in higher tax jurisdictions, and by the relative ages
of the Company's eligible investments in Israel. The tax moratorium on income
from the Company's Approved Enterprise investments made prior to 1997 is four
years, whereas subsequent Approved Enterprise projects are eligible for a
moratorium of only two years. Reduced tax rates apply in each case for certain
periods thereafter. To be eligible for these tax benefits, the Company must
continue to meet conditions, including making specified investments in fixed
assets and financing a percentage of investments with share capital. If the
Company fails to meet such conditions in the future, the tax benefits would be
canceled and the Company could be required to refund the tax benefits already
received. Israeli authorities have indicated that additional limitations on the
tax benefits associated with Approved Enterprise projects may be imposed for
certain categories of taxpayers, which would include 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
of the Company's operations in Israel would increase and there could be a
material adverse effect on the Company's operations and financial results.

         The Company's success is dependent on recruiting and retaining key
management and highly skilled technical, managerial, sales, and marketing
personnel. The competition for highly skilled personnel remains very competitive
despite the current economic conditions. The Company's ability to attract and
retain employees also may be affected by recent cost control actions, including
reductions in the Company's workforce and the associated reorganization of
operations.

         The occurrence or perception of security breaches within the Company
could harm the Company's business, financial condition and operating results.
While the Company implements sophisticated security measures, third parties may
attempt to breach the Company's security through computer viruses, electronic
break-ins and other disruptions. If successful, confidential information,
including passwords, financial information, or other personal information may be
improperly obtained and the Company may be subject to lawsuits and other
liability. Even if the Company is not held liable, a security breach could harm
the Company's reputation, and even the perception of security risks, whether or
not valid, could inhibit market acceptance of the Company's products.

         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. The Company is required
to obtain export licenses and other authorizations from applicable governmental
authorities for certain countries within which it conducts business. The failure
to receive any required license or authorization would hinder the Company's
ability to sell its products and could adversely affect the Company's business,
financial condition and results of operations. In addition, legal uncertainties
regarding liability, compliance with local laws and regulations, labor laws,


                                      -31-
<PAGE>

employee benefits, currency restrictions, difficulty in accounts receivable
collection, longer collection periods and other requirements may have a negative
impact on the Company's operating results.

         Volatility in international currency exchange rates may have a
significant impact on the Company's operating results. The risk of currency
instability is increased by prevailing conditions of economic weakness in a
number of world markets, and the potential for recession. The Company has, and
anticipates that it will continue to receive, significant contracts denominated
in foreign currencies, particularly the euro. 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. The Company
may experience risk associated with the failure to hedge the exchange rate risks
associated with contracts denominated in foreign currencies and its operating
results have been and may continue to be negatively affected to a material
extent by the impact of currency fluctuations. Operating results may also be
affected by the cost of such hedging activities that the Company does undertake.

         While the Company generally requires employees, independent contractors
and consultants to execute non-competition and confidentiality agreements, the
Company's intellectual property or proprietary rights could be infringed or
misappropriated, which could result in expensive and protracted litigation. The
Company relies on a combination of patent, copyright, trade secret and trademark
law to protect its technology. Despite the Company's efforts to protect its
intellectual property and proprietary rights, unauthorized parties may attempt
to copy or otherwise obtain and use its products or technology. Effectively
policing the unauthorized use of the Company's products is time-consuming and
costly, and there can be no assurance that the steps taken by the Company will
prevent misappropriation of its technology, particularly in foreign countries
where in many instances the local laws or legal systems do not offer the same
level of protection as in the United States.

         If others claim that the Company's products infringe their intellectual
property rights, the Company may be forced to seek expensive licenses,
reengineer its products, engage in expensive and time-consuming litigation or
stop marketing its products. The Company attempts to avoid infringing known
proprietary rights of third parties in its product development efforts. The
Company does not regularly conduct comprehensive patent searches to determine
whether the technology used in its products infringes patents held by third
parties, however. There are many issued patents as well as patent applications
in the fields in which the Company is engaged. Because patent applications in
the United States are not publicly disclosed until the patent is issued,
applications may have been filed which relate to the Company's software and
products. If the Company were to discover that its products violated or
potentially violated third-party proprietary rights, it might not be able to
obtain licenses to continue offering those products without substantial
reengineering. Any reengineering effort may not be successful, nor can the
Company be certain that any licenses would be available on commercially
reasonable terms.

         Substantial litigation regarding intellectual property rights exists in
the telecommunications industry, and the Company expects that its products may
be increasingly subject to third-party infringement claims as the number of
competitors in its industry segments grows and the functionality of software
products in different industry segments overlaps. In addition, the Company has
agreed to indemnify customers in certain situations should it be determined that


                                      -32-
<PAGE>

its products infringe on the proprietary rights of third parties. Any
third-party infringement claims could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
and service delays or require the Company to enter into royalty or licensing
agreements. Any royalty or licensing arrangements, if required, may not be
available on terms acceptable to the Company, if at all. A successful claim of
infringement against the Company and its failure or inability to license the
infringed or similar technology could have a material adverse effect on its
business, financial condition and results of operations.

         The Company holds a large proportion of its net assets in cash
equivalents and short-term investments, including a variety of public and
private debt and equity instruments, and has made significant venture capital
investments, both directly and through private investment funds. Such
investments subject the Company to the risks inherent in the capital markets
generally, and to the performance of other businesses over which it has no
direct control. Given the relatively high proportion of the Company's liquid
assets relative to its overall size, the results of its operations are
materially affected by the results of the Company's capital management and
investment activities and the risks associated with those activities. Declines
in the public equity markets have caused, and may be expected to continue to
cause, the Company to experience realized and unrealized investment losses. In
addition, while the Company's interest and other income has benefited from the
positive spread between the fixed interest it pays on its outstanding
indebtedness and interest earned on the investment of its cash balances,
reduction in prevailing interest rates due to economic conditions or government
policies has had and may continue to have an adverse impact on the Company's
results of operations.

         The severe decline in the public trading prices of equity securities,
particularly in the technology and telecommunications sectors, and corresponding
decline in values of privately-held companies and venture capital funds in which
the Company has invested, have, and may continue to have, an adverse impact on
the Company's financial results and costs of operations. The Company has in the
past benefited from the long-term rise in the public trading price of its shares
in various ways, including its ability to use equity incentive arrangements as a
means of attracting and retaining the highly qualified employees necessary for
the growth of its business and its ability to raise capital on relatively
attractive conditions. The decline in the price of the Company's shares, and the
overall decline in equity prices generally, and in the shares of technology
companies in particular, can be expected to make it more difficult for the
Company to rely on equity incentive arrangements as a means to recruit and
retain talented employees, and negatively has impacted the ability of the
Company to raise capital on terms as advantageous to the Company as in the past.

         The trading price of the Company's shares has been affected by the
factors disclosed herein as well as prevailing economic and financial trends and
conditions in the public securities markets. Share prices of companies in
technology-related industries, such as the Company, tend to exhibit a high
degree of volatility. The announcement of financial results that fall short of
the results anticipated by the public markets could have an immediate and
significant negative 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 may contribute to the volatility of
the trading value of its shares regardless of the Company's long-term prospects.


                                      -33-
<PAGE>

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 business segments in particular, which
may not have any direct relationship with the Company's business or prospects.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

         In 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities" which was subsequently amended by
SFAS Nos. 137 and 138 (collectively "SFAS 133"). SFAS 133 establishes accounting
and reporting standards for derivative instruments, including certain
derivatives embedded in other contracts, and hedging activities and requires
that an entity recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. Under SFAS 133, certain contracts that
were not formerly considered derivatives may now meet the definition of a
derivative. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company adopted SFAS 133 effective February
1, 2001. The adoption of SFAS 133 did not have a material effect on the
Company's consolidated financial statements.

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations."
SFAS No. 141 applies prospectively to all business combinations initiated after
June 30, 2001 and to all business combinations accounted using the purchase
method for which the date of acquisition is July 1, 2001, or later. The
Statement requires all business combinations to be accounted for using one
method, the purchase method. Under previously existing accounting rules,
business combinations were accounted for using one of two methods, the
pooling-of-interests method or the purchase method. The adoption of SFAS No. 141
is not expected to have a material effect on the Company's consolidated
financial statements.

         In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 addresses financial accounting and reporting
for acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill
and some intangible assets will no longer be amortized, but rather reviewed for
impairment on a periodic basis. The provisions of this Statement are required to
be applied starting with fiscal years beginning after December 15, 2001. This
Statement is required to be applied at the beginning of the Company's fiscal
year and is to be applied to all goodwill and other intangible assets recognized
in its financial statements at that date. Impairment losses for goodwill and
certain intangible assets that arise due to the initial application of this
Statement are to be reported as resulting from a change in accounting principle.
Goodwill and intangible assets acquired after June 30, 2001 will be subject
immediately to the provisions of this Statement. The adoption of SFAS No. 142 is
not expected to have a material effect on the Company's consolidated financial
statements.

         In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 establishes accounting standards for
recognition and measurement of a liability for an asset retirement obligation
and the associated asset retirement cost. SFAS No. 143 applies to legal
obligations associated with the retirement of a tangible long-lived asset that


                                      -34-
<PAGE>

result from the acquisition, construction, development and/or normal operation
of a long-lived asset. This Statement is effective for fiscal years beginning
after June 15, 2002; however, early adoption is encouraged. The adoption of SFAS
No. 143 is not expected to have a material effect on the Company's consolidated
financial statements.

         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 supercedes certain provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of" and Accounting Principles
Board Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001
and interim periods within those fiscal years; however, early adoption is
encouraged. The Company is currently evaluating the impact, if any, that SFAS
No. 144 will have on its consolidated 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.


                                      -35-
<PAGE>

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 may, from time to time, use 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 its
products in foreign currency will be adversely affected by changes in exchange
rates. In most 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, 2001, the Company
had no material outstanding foreign currency exchange contracts.

         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 date of purchase
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.


                                      -36-
<PAGE>

                                    PART III

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


















                                      -37-
<PAGE>

                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
                                                                                                 Page(s)
                                                                                                 -------
<S>                                                                                              <C>
                  (a)      Documents filed as part of this report.
                           --------------------------------------


                           (1)      Financial Statements.
                                    --------------------

                                    Index to Consolidated Financial Statements                     F-1

                                    Independent Auditors' Report                                   F-2

                                    Consolidated Balance Sheets as of
                                            January 31, 2001 and 2002                              F-3

                                    Consolidated Statements of Income
                                            for the  Years Ended
                                            January 31, 2000, 2001 and 2002                        F-4

                 Consolidated Statements of Stockholders' Equity
                                            for the  Years Ended
                                            January 31, 2000, 2001 and 2002                        F-5

                                    Consolidated Statements of Cash Flows
                                            for the Years Ended
                                            January 31, 2000, 2001 and 2002                        F-6

                                    Notes to Consolidated Financial Statements                     F-7
</TABLE>

                           (2)      Financial Statement Schedules.
                                    -----------------------------

                                    None

                           (3)      Exhibits.
                                    --------

                                    The Index of Exhibits commences on the
                                    following page. Exhibits numbered 10.1
                                    through 10.3 and 10.5 through 10.9 comprise
                                    material compensatory plans and arrangements
                                    of the registrant.


                                      -38-
<PAGE>

                                    Exhibits

No.      Description
---      -----------

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*       Certificate of Amendment of Certificate of Incorporation
                    dated October 18, 1999. (Incorporated by reference to the
                    Registrant's Annual Report on Form 10-K under the Securities
                    Exchange Act of 1934 for the year ended January 31, 2000.)

         3.5*       Certificate of Amendment of Certificate of Incorporation
                    dated September 19, 2000.

         3.6*       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.)



                                      -39-
<PAGE>

         4.6*       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.)

         4.7*       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.)

         4.8*       Indenture dated as of November 22, 2000 from Comverse
                    Technology, Inc. to The Chase Manhattan Bank, Trustee.
                    (Incorporated by reference to the Registrant's Registration
                    Statement on Form S-3 under the Securities Act of 1933,
                    Registration No. 333-55526.)

         4.9*       Specimen 1 1/2% Convertible Senior Debenture Due 2005.
                    (Incorporated by reference to the Registrant's Registration
                    Statement on Form S-3 under the Securities Act of 1933,
                    Registration No. 333-55526.)

10       Material contracts:

         10.1*      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.)

         10.2*      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.)

         10.3*      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.)

         10.4*      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.)

         10.5*      1997 Employee Stock Purchase Plan, as amended. (Incorporated
                    by reference to the Definitive Proxy Materials for the
                    Registrant's Annual Meeting of Stockholders held October 8,
                    1999.)

         10.6*      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.)

         10.7*      1999 Stock Incentive Compensation Plan. (Incorporated by
                    reference to the Definitive Proxy Materials for the
                    Registrant's Annual Meeting of Stockholders held October 8,
                    1999.)

         10.8*      2000 Stock Incentive Compensation Plan. (Incorporated by
                    reference to the Definitive Proxy Materials for the
                    Registrant's Annual Meeting of Stockholders held September
                    15, 2000.)



                                      -40-
<PAGE>

         10.9*      2001 Stock Incentive Compensation Plan. (Incorporated by
                    reference to the Definitive Proxy Materials for the
                    Registrant's Annual Meeting of Stockholders held June 15,
                    2001.)

         10.10*     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.)

         10.11*     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.)

         10.12*     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.)

         10.13*     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.)

         10.14*     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.)

         10.15*     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.)

         10.16*     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.

23       Consent of Deloitte & Touche LLP

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

*        Incorporated by reference.


                                      -41-
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES

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


                                                                      Page

Independent Auditors' Report                                          F-2

Consolidated Balance Sheets as of January 31, 2001 and 2002           F-3

Consolidated Statements of Income for the
   Years Ended January 31, 2000, 2001 and 2002                        F-4

Consolidated Statements of Stockholders' Equity for the
   Years Ended January 31, 2000, 2001 and 2002                        F-5

Consolidated Statements of Cash Flows for the
   Years Ended January 31, 2000, 2001 and 2002                        F-6

Notes to Consolidated Financial Statements                            F-7


<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, 2001 and
2002, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended January 31, 2002.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Comverse Technology, Inc. and
subsidiaries as of January 31, 2001 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 2002 in conformity with accounting principles generally accepted in
the United States of America.


/S/ Deloitte & Touche LLP

New York, New York
March 8, 2002


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2001 AND 2002
(In thousands, except share data)
----------------------------------------------------------------------------------------------------------------------

ASSETS                                                                            2001                    2002
------                                                                            ----                    ----
<S>                                                                        <C>                       <C>
CURRENT ASSETS:
   Cash and cash equivalents                                               $   1,275,105             $    1,361,862
   Bank time deposits                                                              3,000                     21,431
   Short-term investments                                                        457,735                    509,191
   Accounts receivable, net                                                      359,317                    371,928
   Inventories                                                                   115,799                     56,024
   Prepaid expenses and other current assets                                      64,729                     76,667
                                                                           -------------             --------------
TOTAL CURRENT ASSETS                                                           2,275,685                  2,397,103
PROPERTY AND EQUIPMENT, net                                                      183,444                    181,761
INVESTMENTS                                                                       96,870                     68,518
OTHER ASSETS                                                                      69,265                     56,781
                                                                           -------------             --------------
TOTAL ASSETS                                                               $   2,625,264             $    2,704,163
                                                                           =============             ==============

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

LIABILITIES AND STOCKHOLDERS' EQUITY                                              2001                    2002
------------------------------------                                              ----                    ----

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                   $     288,921             $      322,402
   Bank loans                                                                      4,066                      4,696
   Advance payments from customers                                               122,175                     39,576
   Other current liabilities                                                         144                        179
                                                                           -------------             --------------
TOTAL CURRENT LIABILITIES                                                        415,306                    366,853
CONVERTIBLE DEBENTURES                                                           900,000                    600,000
LIABILITY FOR SEVERANCE PAY                                                        7,924                      9,772
OTHER LIABILITIES                                                                 12,404                     49,827
                                                                           -------------             --------------
TOTAL LIABILITIES                                                              1,335,634                  1,026,452
                                                                           -------------             --------------

MINORITY INTEREST                                                                 53,465                     61,303
                                                                           -------------             --------------

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, 600,000,000 shares;
     issued and outstanding, 168,643,623 and 186,248,350 shares                   16,864                     18,625
   Additional paid-in capital                                                    692,014                  1,018,232
   Retained earnings                                                             520,144                    574,763
   Accumulated other comprehensive income                                          7,143                      4,788
                                                                           -------------             --------------
TOTAL STOCKHOLDERS' EQUITY                                                     1,236,165                  1,616,408
                                                                           -------------             --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $   2,625,264             $    2,704,163
                                                                           =============             ==============
</TABLE>


                 See notes to consolidated financial statements.


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 31, 2000, 2001 AND 2002
(In thousands, except per share data)
----------------------------------------------------------------------------------------------------------------------



                                                                  January 31,          January 31,         January 31,
                                                                     2000                 2001                2002
                                                                     ----                 ----                ----
<S>                                                             <C>                  <C>                  <C>
Sales                                                           $    909,667         $  1,225,058         $  1,270,218
Cost of sales                                                        371,589              482,658              525,480
                                                                ------------         ------------         ------------
Gross margin                                                         538,078              742,400              744,738

Operating expenses:
   Research and development, net                                     169,816              232,198              293,296
   Selling, general and administrative                               193,996              259,607              323,036
   Acquisition expenses                                                2,016               15,971                    -
   Workforce reduction and restructuring charges                           -                    -               63,562
                                                                ------------          -----------         ------------

   Income from operations                                            172,250              234,624               64,844

   Interest and other income (expense), net                           16,595               33,339               (5,789)
                                                                ------------          -----------         -------------

Income before income tax provision                                   188,845              267,963               59,055
Income tax provision                                                  15,698               18,827                4,436
                                                                ------------          -----------         ------------

Net income                                                      $    173,147          $   249,136         $     54,619
                                                                ============          ===========         ============

Earnings per share:
     Basic                                                      $       1.19          $      1.54         $       0.30
                                                                ============          ===========         ============
     Diluted                                                    $       1.08          $      1.39         $       0.29
                                                                ============          ===========         ============

</TABLE>




                 See notes to consolidated financial statements.


                                      F-4
<PAGE>

<TABLE>
<CAPTION>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITy
YEARS ENDED JANUARY 31, 2000, 2001 AND 2002
(In thousands, except share data)
--------------------------------------------------------------------------------------------------------------------------------

                                                                                                Accumulated Other
                                                                                              Comprehensive Income
                                                Common Stock                                  --------------------
                                                ------------     Additional                  Unrealized  Cumulative      Total
                                            Number of    Par      Paid-in       Retained        Gains   Translation   Stockholders'
                                             Shares     Value     Capital       Earnings      (Losses)  Adjustment       Equity
                                             ------     -----     -------       --------      --------  ----------       ------
<S>                                       <C>         <C>         <C>           <C>            <C>           <C>        <C>
BALANCE, JANUARY 31, 1999                 139,262,904 $13,926     $261,218      $112,074       $3,515        $122       $390,855

Comprehensive income:
Net income                                                                       173,147
Unrealized gain (loss) on available-for-sale
     securities                                                                                  (397)
Translation adjustment                                                                                       (817)
Total comprehensive income                                                                                               171,933
Warrant exercises                           1,746,635     175         (175)                                                    -
Common stock issued for acquisitions        1,371,216     137          930                                                 1,067
Retained earnings of acquired companies                                           (2,457)                                 (2,457)
Common stock issued for employee
   stock purchase plan                        377,016      38        5,514                                                 5,552
Exercise of stock options                   5,477,611     547       44,464                                                45,011
Conversion of debentures                    7,540,916     754      112,079                                               112,833
Tax benefit of dispositions of stock options                            45                                                    45
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 31, 2000                 155,776,298  15,577      424,075       282,764        3,118        (695)       724,839

Comprehensive income:
Net income                                                                       249,136
Unrealized gain (loss) on available-for-sale
     securities                                                                                 4,408
Translation adjustment                                                                                        312
Total comprehensive income                                                                                               253,856
Change in year-end of pooled company                                                (705)                                   (705)
Common stock issued for acquisitions        5,746,220     575       10,498                                                11,073
Retained earnings of acquired companies                                          (11,051)                                (11,051)
Common stock issued for employee
     stock purchase plan                      131,452      13        9,842                                                 9,855
Exercise of stock options                   6,989,653     699      100,840                                               101,539
Issuance of subsidiary shares                                      145,958                                               145,958
Tax benefit of dispositions of stock options                           801                                                   801
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 31, 2001                 168,643,623  16,864      692,014       520,144        7,526        (383)     1,236,165

Comprehensive income:
Net income                                                                        54,619
Unrealized gain (loss) on available-for-sale
     securities                                                                                (3,227)
Translation adjustment                                                                                        872
Total comprehensive income                                                                                                52,264
Warrant exercises                           1,792,932     179         (179)                                                    -
Common stock issued for employee
     stock purchase plan                      394,866      39       12,401                                                12,440
Exercise of stock options                   1,463,467     148       16,196                                                16,344
Conversion of debentures                   13,953,462   1,395      294,801                                               296,196
Tax benefit of dispositions of stock options                         2,999                                                 2,999
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 31, 2002                 186,248,350  $18,625  $1,018,232     $574,763        $4,299        $489     $1,616,408
                                          ===========  =======  ==========     ========        ======        ====     ==========
</TABLE>

                 See notes to consolidated financial statements.


                                      F-5
<PAGE>
<TABLE>
<CAPTION>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 2000, 2001 AND 2002
(In thousands)
--------------------------------------------------------------------------------------------------------------------------------

                                                                             January 31,    January 31,      January 31,
                                                                                2000           2001             2002
                                                                                ----           ----             ----
<S>                                                                        <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                              $   173,147     $   249,136     $    54,619
   Adjustments to reconcile net income to net cash provided
       by operating activities:
     Depreciation and amortization                                              34,969          53,196          63,824
     Operating asset write-downs and impairments                                     -           7,399          11,530
     Changes in assets and liabilities:
       Accounts receivable                                                     (68,024)        (92,039)        (12,611)
       Inventories                                                             (53,085)        (16,915)         55,775
       Prepaid expenses and other current assets                                (3,055)        (22,464)         (2,172)
       Accounts payable and accrued expenses                                    49,117          52,165          33,481
       Advance payments from customers                                          48,114          26,325         (82,599)
       Liability for severance pay                                               1,847           1,729           1,848
       Other                                                                    (5,680)        (14,041)         18,490
                                                                           ------------    ------------    -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                      177,350         244,491         142,185
                                                                           -----------     -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Maturities and sales (purchases) of bank time deposits
     and investments, net                                                     (377,613)        (94,452)       (44,762)
   Purchase of property and equipment                                          (85,638)        (97,337)       (54,634)
   Capitalization of software development costs                                (12,482)        (15,489)       (23,027)
                                                                           ------------    ------------    -----------
NET CASH USED IN INVESTING ACTIVITIES                                         (475,733)       (207,278)      (122,423)
                                                                           ------------    ------------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from issuance of debentures                                          -         588,429               -
   Proceeds from issuance of common stock in connection
     with exercise of stock options, warrants, and
     employee stock purchase plan                                               50,563         111,394          28,784
   Proceeds from issuance of common stock of subsidiary                              -         195,231               -
   Net proceeds (repayments) of bank loans and other debt                        3,064            (943)         38,211
                                                                           -----------      -----------    -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                       53,627         894,111          66,995
                                                                           -----------      ----------     -----------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                                           (244,756)        931,324          86,757
CASH ACQUIRED IN POOLING OF INTERESTS TRANSACTIONS                               1,707           1,246               -
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                   585,584         342,535       1,275,105
                                                                           -----------      ----------     -----------
CASH AND CASH EQUIVALENTS, END OF YEAR                                     $   342,535      $1,275,105     $ 1,361,862
                                                                           ===========      ==========     ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for interest                                  $    20,329      $   14,665      $   16,240
                                                                           ===========      ==========      ==========
   Cash paid during the year for income taxes                              $       708      $    4,393      $    8,379
                                                                           ===========      ==========      ==========
</TABLE>

                 See notes to consolidated financial statements.


                                      F-6
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 2001 AND 2002
--------------------------------------------------------------------------------

1.      ORGANIZATION AND BUSINESS

        Comverse Technology, Inc. ("CTI" and, together with its subsidiaries,
        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, mortgage and asset backed securities
        and U.S. government and agency obligations. 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. As of January 31, 2001 and 2002, the
        Company's allowance for doubtful accounts was approximately $23,755,000
        and $41,955,000, respectively. 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. Leasehold improvements are amortized over the
        shorter of their estimated useful lives or the related lease term. The
        cost of maintenance and repairs is charged to operations as incurred.
        Significant renewals and betterments are capitalized.

        Income Taxes - The Company accounts for income taxes using the asset and
        liability method. Under this method, deferred tax assets and liabilities
        are determined based on differences between financial reporting and tax
        bases of assets and liabilities, and are measured using the enacted tax
        rates and laws that are expected to be in effect when the differences
        are expected to reverse.



                                      F-7
<PAGE>

        Revenue and Expense Recognition - Revenue is generally recognized at the
        time of shipment for sales of systems which do not require significant
        customization to be performed by the Company and collection of the
        resulting receivable is deemed probable by the Company. The Company's
        systems are generally a bundled hardware and software solution that are
        shipped together. The Company generally has no obligations to customers
        after the date products are shipped, except for product warranties. The
        Company generally warranties its products for one year after sale. A
        provision for estimated warranty costs is recorded at the time of sale.

        Customers may also purchase separate maintenance contracts, which
        generally consist of bug-fixing and telephone access to Company
        technical personnel, but in certain circumstances may also include the
        right to receive unspecified product updates, upgrades and enhancements.
        Revenue from these services is recognized ratably over the contract
        period.

        Revenues from certain development 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. Revisions in estimates of costs and profits are reflected in
        the accounting period in which the facts that require the revision
        become known. At the time a loss on a contract is known, the entire
        amount of the estimated loss is accrued. 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 $6,304,000, $7,203,000 and $9,129,000
        for the years ended January 31, 2000, 2001 and 2002, 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.

        As of January 31, 2001 and 2002, the Company had no material outstanding
        foreign exchange contracts. Net gains (losses) from foreign currency
        transactions, included in the consolidated statements of income,
        approximated $(9,422,000), $(646,000) and $(20,788,000) for the years
        ended January 31, 2000, 2001 and 2002, respectively.

        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. Debt issue costs are amortized using the effective interest
        method over the term of the related debt.

        Other Liabilities - In January 2002, a subsidiary of CTI, Verint Systems
        Inc. ("Verint") took a long-term bank loan in the amount of $42,000,000.


                                      F-8
<PAGE>

        This loan, which matures in February 2003, bears interest at LIBOR plus
        0.55% and may be prepaid without penalty. The loan is guaranteed by CTI.

        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 undiscounted cash flows expected to result from the use of the
        asset and proceeds from its eventual disposition are less than its
        carrying amount. Impairment is measured at fair value.

       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 benefits from
        participation in programs sponsored by the Government of Israel for the
        support of research and development activities conducted in that
        country. Certain of 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 accrues royalties to the OCS for the sale of
        products incorporating technology developed in these projects. During
        the year ended January 31, 2002, one of the Company's subsidiaries
        entered into an agreement with the OCS whereby the subsidiary agreed to
        pay a lump sum royalty amount for all past amounts received from the
        OCS. In addition, the subsidiary will receive lower amounts from the OCS
        than it has historically received, but will not have to pay royalties on
        such future grants. 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 January 31, 2000,
        2001 and 2002 were $16,797,000, $21,508,000 and $9,980,000,
        respectively.


                                      F-9
<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, 2002:
<TABLE>
<CAPTION>
                                                               Gross             Gross          Estimated
                                                            Unrealized         Unrealized         Fair
                                             Cost              Gains             Losses           Value
                                           --------------------------------------------------------------
                                                                    (In thousands)
        <S>                                <C>               <C>               <C>               <C>
        Corporate debt securities          $120,492          $  1,481          $    208          $121,765
        U.S. Government bonds                86,128               346                 -            86,474
        U.S. Government
         agency bonds                       270,520             1,147                 -           271,667
                                           --------          --------          --------          --------
        Total debt securities               477,140             2,974               208           479,906
                                           --------          --------          --------          --------

        Common stock                         20,466             3,037             2,180            21,323
        Mutual funds investing in
           U.S. government and
           agencies obligations               5,763                97                 -             5,860
        Preferred stock                       1,523               579                 -             2,102
                                           --------          --------          --------          --------
        Total equity securities              27,752             3,713             2,180            29,285
                                           --------          --------          --------          --------

                                           $504,892          $  6,687          $  2,388          $509,191
                                           ========          ========          ========          ========

        The following is a summary of available-for-sale securities as of
        January 31, 2001:
                                                               Gross             Gross          Estimated
                                                            Unrealized         Unrealized         Fair
                                             Cost              Gains             Losses           Value
                                           --------------------------------------------------------------
                                                                    (In thousands)

         Corporate debt securities          $339,182          $    462          $  4,360          $335,284
         U.S. Government bonds                18,003               674                 -            18,677
         U.S. Government
          agency bonds                        60,050                 7                 9            60,048
                                            --------          --------          --------          --------
         Total debt securities               417,235             1,143             4,369           414,009
                                            --------          --------          --------          --------

         Common stock                         28,072            10,561                 -            38,633
         Mutual funds investing in
            U.S. government and
            agencies obligations               1,863                85                 -             1,948
         Preferred stock                       2,863               282                 -             3,145
                                            --------          --------          --------          --------
         Total equity securities              32,798            10,928                 -            43,726
                                            --------          --------          --------          --------

                                            $450,033          $ 12,071          $  4,369          $457,735
                                            ========          ========          ========          ========
</TABLE>
        During the year ended January 31, 2002, the gross realized gains on
        sales of securities totaled approximately $25,252,000, and the gross
        realized losses totaled approximately $18,855,000. During the year ended
        January 31, 2001, the gross realized gains on sales of securities
        totaled approximately $9,905,000, and the gross realized losses totaled
        approximately $8,394,000. During the year ended January 31, 2000, the


                                      F-10
<PAGE>

        gross realized gains on sales of securities totaled approximately
        $11,652,000, and the gross realized losses totaled approximately
        $4,613,000. The basis on which cost was determined in computing realized
        gain or loss is by the first-in, first-out method.

        The amortized cost and estimated fair value of debt securities at
        January 31, 2002, by contractual maturity, are as follows:
<TABLE>
<CAPTION>
                                                                                   Estimated
                                                                Cost               Fair Value
                                                                ----               ----------
                                                                      (In thousands)
<S>                                                         <C>                     <C>
        Due in one year or less                             $   157,339             $   158,093
        Due after one year through three years                  198,423                 199,433
        Due after three years                                   121,378                 122,380
                                                             ----------              ----------

                                                            $   477,140             $   479,906
                                                            ===========             ===========


5.      INVENTORIES

        Inventories consist of:
                                                                                     January 31,
                                                                                     -----------
                                                                           2001                       2002
                                                                           ----                       ----
                                                                                   (In thousands)

                      Raw materials                                    $    49,014                 $    30,989
                      Work in process                                       27,423                      12,049
                      Finished goods                                        39,362                      12,986
                                                                       -----------                 -----------

                                                                       $   115,799                 $    56,024
                                                                       ===========                 ===========

6.       PROPERTY AND EQUIPMENT

        Property and equipment consists of:
                                                                                     January 31,
                                                                                     -----------
                                                                           2001                       2002
                                                                           ----                       ----
                                                                                   (In thousands)


                      Fixtures and equipment                           $   242,922                 $   275,826
                      Land                                                  27,569                      29,061
                      Software                                              24,293                      30,201
                      Transportation vehicles                                1,263                       1,387
                      Leasehold improvements                                11,832                      11,817
                                                                       -----------                 -----------
                                                                           307,879                     348,292
                      Less accumulated depreciation
                             and amortization                             (124,435)                   (166,531)
                                                                       ------------                ------------

                                                                       $   183,444                 $   181,761
                                                                       ===========                 ===========
</TABLE>


                                      F-11
<PAGE>

<TABLE>
<CAPTION>
7.      OTHER ASSETS

        Other assets consist of:
                                                                                     January 31,
                                                                                     -----------
                                                                           2001                       2002
                                                                           ----                       ----
                                                                                   (In thousands)
<S>                                                                    <C>                         <C>
           Software development costs, net of
              accumulated amortization
              of $25,959 and $28,338                                   $    28,325                 $    39,313
           Debt issue costs, net of accumulated
              amortization of $3,157 and $2,737                             15,784                       8,775

           Other assets                                                     25,156                       8,693
                                                                       -----------                 -----------


                                                                       $    69,265                 $    56,781
                                                                       ===========                 ===========
</TABLE>


8.     BUSINESS COMBINATIONS

       In July 2000, the Company acquired all of the outstanding stock of
       Loronix Information Systems, Inc. ("Loronix"), a company that develops
       software-based digital video recording and management systems for
       1,994,806 shares of the Company's common stock and the assumption of
       options to purchase 370,101 shares of the Company's common stock. The
       combination was accounted for as a pooling of interests. For the six
       months ended June 30, 2000, Loronix had sales of approximately $18.1
       million and a net loss, including merger related expenses, of
       approximately $2.3 million.

       The table below sets forth the separate and combined results of the
       Company and Loronix for the fiscal year ended January 31, 2000:
<TABLE>
<CAPTION>
                                                             CTI              Loronix            Combined
                                                             ---              -------            --------
                                                               (In thousands, except per share data amounts)
<S>                                                       <C>                 <C>                <C>
          January 31, 2000
          Sales                                           $    872,190        $   37,477         $    909,667
          Net income                                      $    170,261        $    2,886         $    173,147
          Earnings per share - diluted                    $       1.07                           $       1.08
</TABLE>

       The consolidated statement of income data combines the historical
       statement of income data of the Company for the fiscal year ended January
       31, 2000 with the historical statement of income data of Loronix for the
       fiscal year ended December 31, 1999. Loronix's net loss for the period
       from July 1, 2000 through July 31, 2000 of approximately $705,000 has
       been excluded from the Company's consolidated statement of income for the
       year ended January 31, 2001 as a result of conforming fiscal years and
       has been included as an adjustment to retained earnings.

       In July 2000, the Company acquired all of the outstanding stock of Syborg
       Informationsysteme GmbH, ("Syborg") a company that develops
       software-based digital voice and internet recording systems, for 201,251
       shares of the Company's common stock. The combination was 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 Syborg of approximately $(475,000) in the
       statement of stockholders' equity.

                                      F-12
<PAGE>

       In August 2000, the Company acquired all of the outstanding stock of
       Exalink Ltd., ("Exalink") a company specializing in router-based protocol
       gateways and applications software for the delivery of Internet-based
       services to all types of wireless devices, for 5,261,211 shares of the
       Company's common stock and the assumption of options and warrants to
       purchase 810,377 shares of the Company's common stock. The combination
       was 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 Exalink of approximately
       $(973,000) in the statement of stockholders' equity.

       In August 2000, the Company acquired all of the outstanding stock of Gaya
       Software Industries Ltd., ("Gaya") a company specializing in
       software-based intelligent internet protocol ("IP") gateways and
       voice-over-IP technology, for 283,758 shares of the Company's common
       stock and the assumption of options and warrants to purchase 10,505
       shares of the Company's common stock. The combination was 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 Gaya of approximately $1,470,000 in the
       statement of stockholders' equity.

       In August 1999, the Company acquired all of the outstanding stock of
       InTouch Systems, Inc., ("InTouch") a company that develops and markets a
       suite of intelligent voice-controlled software applications, for 679,202
       shares of the Company's common stock and the assumption of options to
       purchase 79,122 shares of the Company's common stock. The combination was
       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 InTouch of $(1,122,000) in
       the statement of stockholders' equity.

       In February 1999, the Company acquired all of the outstanding stock of
       Amarex Technology, Inc., ("Amarex"), a company that develops
       software-based applications for the telephone network operator and call
       center markets, for 692,014 shares of the Company's common stock and the
       assumption of options and warrants to purchase 239,286 shares of the
       Company's common stock. The combination was 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 Amarex of $(268,000) in the statement of stockholders'
       equity.

       In connection with the above acquisitions, the Company has charged
       $2,016,000 and $15,971,000, respectively, to operations in the years
       ended January 31, 2000 and 2001 for merger related charges. Such charges
       relate to the following:
<TABLE>
<CAPTION>
                Asset write-downs and impairments
                                                                          Year Ended
                                                                        January 31, 2001
                                                                        ----------------
                                                                          (In thousands)
<S>                                                                        <C>
                           Inventory                                       $    3,685
                           Property and equipment                               1,528
                           Capitalized software costs                           2,186
                                                                           ----------
                           Total asset write-downs and impairments         $    7,399
                                                                           ==========
</TABLE>

       In connection with the acquisitions in the year ended January 31, 2001,
       certain assets became impaired due to the existence of duplicative
       technology, property and equipment and inventory of the merged companies.
       Accordingly, these assets were written down to their net realizable value
       at the time of the merger.

                                      F-13
<PAGE>

                Professional fees and other direct merger expenses
                --------------------------------------------------

       In connection with the acquisitions in the years ended in January 31,
       2000 and 2001, the Company recorded a charge of $2,016,000 and
       $8,572,000, respectively, for professional fees to lawyers, investment
       bankers and accountants, as well as other direct merger costs in
       connection with the mergers, such as printing costs and filing fees.


9.       WORKFORCE REDUCTION AND RESTRUCTURING

       During the year ended January 31, 2002, the Company took steps to better
       align its cost structure with the current business environment, to
       improve the efficiency of its operations and to better position the
       Company to realize emerging opportunities. These steps included a
       reduction in workforce announced in April 2001 and a restructuring plan
       announced in December 2001.

       In connection with these actions, the Company has charged $63,562,000 to
       operations in the year ended January 31, 2002. Such charges relate to the
       following:
<TABLE>
<CAPTION>
                                                                                              Accrual
                                  Restructuring                                             Balance at
                                    And Other             Cash               Non-cash       January 31,
                                     Charges            Payments              Charges          2002
                                     -------            --------              -------          ----
                                                                (In thousands)
<S>                                  <C>                  <C>                <C>             <C>
       Severance and related         $27,685              $15,823            $      -        $11,862
       Facilities                     24,347                    -                   -         24,347
       Inventory                       4,000                    -               4,000              -
       Property and equipment          4,620                    -               4,620              -
       Capitalized software            2,910                    -               2,910              -
                                     -------              -------             -------        -------
       Total                         $63,562              $15,823             $11,530        $36,209
                                     =======              =======             =======        =======
</TABLE>
       Severance and related costs consist primarily of severance payments to
       terminated employees, fringe related costs associated with severance
       payments, other termination costs and legal and consulting costs. The
       accrual balance of $11,862,000 is expected to be paid by October 31,
       2002.

       Facilities costs consist primarily of contractually obligated lease
       liabilities and operating expenses related to facilities to be vacated
       primarily in the United States and Israel as a result of the
       restructuring plan. The accrual balance of $24,347,000 is expected to be
       paid at various dates through January 2011.

       In connection with the restructuring plan, the Company changed its
       organizational structure and product offerings. As a result, certain
       inventory, property and equipment and capitalized software became
       impaired and were written-off.


                                      F-14
<PAGE>

10.     ACCOUNTS PAYABLE AND ACCRUED EXPENSES

        Accounts payable and accrued expenses consist of:
<TABLE>
<CAPTION>
                                                                                     January 31,
                                                                                     -----------
                                                                           2001                       2002
                                                                           ----                       ----
                                                                                   (In thousands)

<S>                                                                    <C>                        <C>
                        Accounts payable                               $    87,999                $   113,566
                        Accrued salaries                                    37,479                     48,074
                        Accrued vacation                                    18,940                     21,092
                        Accrued royalties                                   40,670                     41,105
                        Accrued restructuring                                    -                     36,209
                        Other accrued expenses                             103,833                     62,356
                                                                       -----------                -----------

                                                                       $   288,921                $   322,402
                                                                       ===========                ===========
</TABLE>


11.      CONVERTIBLE DEBENTURES

       In November 2000, the Company issued $500,000,000 aggregate principal
        amount of its 1.50% convertible senior debentures due December 2005 (the
        "Debentures"). In December 2000, the Company issued an additional
        $100,000,000 of the Debentures as a result of the initial purchaser
        exercising in full their over-allotment option. The Debentures are
        unsecured senior obligations of the Company ranking equally with all of
        the Company's existing and future unsecured senior indebtedness and are
        senior in right of payment to any of the Company's existing and future
        subordinated indebtedness. The Debentures are convertible, at the option
        of the holders, into shares of the Company's common stock at a
        conversion price of $116.325 per share, subject to adjustment in certain
        events; and are subject to redemption at any time on or after December
        1, 2003, in whole or in part, at the option of the Company, at
        redemption prices (expressed as percentages of the principal amount) of
        100.375% if redeemed during the twelve-month period beginning December
        1, 2003, and 100% of the principal amount if redeemed thereafter. 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. Upon
        the occurrence of a change in control, instead of paying the repurchase
        price in cash, the Company may pay the repurchase price in common stock.

       In June 1998, the Company issued $300,000,000 of convertible subordinated
       debentures bearing interest at 4.50% per annum, payable semi-annually. In
       June 2001, the Company called these debentures for redemption. The
       debentures were converted into 13,953,462 shares of common stock.

12.     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.

        Under Israeli law, the Company is obligated to make severance payments
        to employees of its Israeli subsidiaries on the basis of each
        individual's current salary and length of employment. These liabilities
        are currently provided primarily by premiums paid by the Company to
        insurance providers.


                                      F-15
<PAGE>

        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 $2,270,000 and $2,631,000 has
        been accrued as of January 31, 2001 and 2002, respectively, relating to
        this liability.

13.      COMMON STOCK

        Stock Splits - 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. On April 3, 2000, the Company effected a two-for-one
        stock split by paying a 100% stock dividend to shareholders of record on
        March 27, 2000. All share and per share information has been
        retroactively restated in the consolidated financial statements to
        reflect these splits.

        Increase in Authorized Common Shares - At the Annual Meeting of
        Shareholders held on September 15, 2000, the Company's shareholders
        approved an amendment to the Company's Certificate of Incorporation to
        increase from 300,000,000 to 600,000,000 the aggregate number of
        authorized common shares of the Company.

        Issuance of Subsidiary Stock - In April 2000, a subsidiary of the
        Company, Ulticom, Inc. ("Ulticom"), issued 4,887,500 shares of its
        common stock in an initial public offering. Proceeds from the offering,
        based on the offering price of $13.00 per share, totaled approximately
        $58,062,000, net of offering expenses. In October 2000, Ulticom issued
        an additional 2,843,375 shares of its common stock in a public offering.
        Proceeds from the offering, based on the offering price of $50.00 per
        share, totaled approximately $137,169,000, net of offering expenses. The
        Company recorded a gain of approximately $145,854,000 which was recorded
        as an increase in stockholders' equity as a result of these issuances.
        As of January 31, 2002, the Company's ownership interest in Ulticom was
        approximately 72.4%.

14.     STOCK OPTIONS

       Employee Stock Options - At January 31, 2002, 33,089,823 shares of common
       stock were reserved for issuance upon the exercise of options then
       outstanding and 1,834,615 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
       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 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, up to a maximum term of ten years
       for all options granted.

       The changes in the number of options were as follows:
<TABLE>
<CAPTION>
                                                                          Year Ended January 31,
                                                              -----------------------------------------------
                                                              2000                  2001                 2002
                                                              ----                  ----                 ----
<S>                                                         <C>                    <C>                <C>
       Outstanding at beginning of year                     21,243,496            23,810,758          26,163,560
       Options from pooling


                                      F-16
<PAGE>

              of interests transactions                        224,758               820,882                   -
       Granted during the year                               8,589,990             9,306,315           9,945,007
       Exercised during the year                            (5,477,611)           (6,989,653)         (1,463,467)
       Canceled, terminated and expired                       (769,875)             (784,742)         (1,555,277)
                                                          -------------         -------------       -------------

       Outstanding at end of year                           23,810,758            26,163,560          33,089,823
                                                          ============          ============        ============
</TABLE>

       At January 31, 2002, options to purchase an aggregate of 12,616,756
       shares were vested and currently exercisable under the option plans and
       options to purchase an additional 20,473,067 shares vest at various dates
       extending through the year 2005.

       Weighted average option exercise price information was as follows:
<TABLE>
<CAPTION>
                                                                       Year Ended January 31,
                                                              -----------------------------------------------

                                                              2000                  2001                  2002
                                                              ----                  ----                  ----

<S>                                                         <C>                   <C>                   <C>
       Outstanding at beginning of year                     $  9.59               $ 22.14               $ 45.66
       Assumed from pooling of interests                       3.16                  3.21                      -
       Granted during the year                                43.98                 84.83                 18.03
       Exercised during the year                               8.23                 14.45                 11.43
       Canceled, terminated and expired                       11.96                 31.01                 56.73
       Exercisable at year end                                 9.05                 14.73                 31.23
</TABLE>

       Significant option groups outstanding at January 31, 2002 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>
       $ 0.01 -   10.42      6,837,711            5.74              $  9.06           6,156,650        $  9.26
       $10.71 -   14.75      1,478,273            5.28                13.50           1,417,050          13.48
       $14.82 -   16.05      9,355,953            9.69                16.04              52,629          15.23
       $17.28 -   52.97      6,744,407            7.73                44.81           2,734,653          44.97
       $56.49 -  119.69      8,673,479            8.70                84.56           2,255,774          86.08
                         -------------            ----                -----           ---------          -----
                            33,089,823            8.02               $38.31          12,616,756        $ 31.23
                         =============            ====               ======          ==========        =======
</TABLE>


       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 $45,239,000, $87,112,000 and $181,837,000 or $0.27, $0.47
       and $1.00 per diluted share for the years ended January 31, 2000, 2001
       and 2002, respectively. The weighted average fair value of the options
       granted for the years ended January 31, 2000, 2001 and 2002,
       respectively, is estimated at $21.54, $50.38 and $10.85 on the date of
       grant (using the Black-Scholes option pricing model) with the following
       weighted average assumptions for the years ended January 31, 2000, 2001
       and 2002, respectively: volatility of 56%, 65% and 76%; risk-free


                                      F-17
<PAGE>

       interest rate of 5.9%, 5.5% and 4.0%; and an expected life of 4.1, 4.9
       and 4.3 years.

       Options on Subsidiary Shares - In accordance with the requirements of his
       employment agreement, the chief executive officer of the Company holds
       options to acquire up to 7.5% of the shares of certain subsidiaries,
       other than Comverse, Inc. In addition, the Company has granted options to
       certain other employees to acquire shares of certain subsidiaries, other
       than Comverse, Inc. Such option issuances are not tied to the performance
       of the subsidiaries, but are intended to incentivize employees in the
       units for which they have direct responsibility. 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 20%
       of the shares outstanding assuming exercise in full. The options have
       terms of up to 15 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.

15.    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
       $7.18 per share. As of January 31, 2002, all such warrants were
       exercised.


16.    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
       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 2,000,000, of which
       1,114,000 had been issued as of January 31, 2002.






                                      F-18
<PAGE>

17.    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 January 31, 2000, 2001 and 2002
        was as follows:
<TABLE>
<CAPTION>
                                     January 31, 2000               January 31, 2001              January 31, 2002
                                -----------------------------  --------------------------   ----------------------
                                                  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              $173,147    145,889 $ 1.19    $ 249,136   161,496  $ 1.54   $ 54,619   179,311    $0.30
                                                    ======                         ======                         =====

        Effect of Dilutive
             Securities
        Options and warrants                13,905                         14,514                        7,123
        Convertible debentures     19,399   19,192               14,552    13,954
                                   ------ --------  ------    ---------  --------  ------   --------   -------  -------

        Diluted EPS             $192,546   178,986  $ 1.08    $263,688   189,964   $ 1.39   $54,619    186,434    $0.29
                                ========   =======  ======    ========   =======   ======   =======  =========    =====
</TABLE>

        Debentures convertible into 1,059,855 weighted average shares and
        11,291,352 weighted average shares as of January 31, 2001 and January
        31, 2002, respectively, were not included in the computation of diluted
        EPS because the effect of including them would not be dilutive.

18.     INTEREST AND OTHER INCOME (EXPENSE), NET

        Interest and other income (expense), net, consists of the following:
<TABLE>
<CAPTION>
                                                                              Year Ended January 31,
                                                                       2000            2001            2002
                                                                       ----            ----            ----
                                                                                  (In thousands)
<S>                                                                  <C>            <C>           <C>
                  Interest and dividend income                       $  36,872      $   63,607    $    71,210
                  Interest expense                                     (19,423)        (18,031)       (18,344)
                  Investment gains (losses), net                         7,039           1,511        (37,079)
                  Foreign currency gains (losses), net                  (9,422)           (646)       (20,788)
                  Other, net                                             1,529         (13,102)          (788)
                                                                     ---------      -----------   ------------
                                                                     $  16,595      $   33,339    $    (5,789)
                                                                     =========      ==========    ============
</TABLE>


                                      F-19
<PAGE>

19.     INCOME TAXES

        The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
                                                                               Year Ended January 31,
                                                                       2000            2001            2002
                                                                       ----            ----            ----
                                                                                  (In thousands)
<S>                                                                <C>              <C>             <C>
           Current:
             Federal                                               $      171       $    1,507      $    6,288
             State                                                        769              844             779
             Foreign                                                   14,743           16,698           6,631
                                                                   ----------       ----------      ----------

                                                                       15,683           19,049          13,698
                                                                   ----------       ----------      ----------

           Deferred (benefit):
             Federal                                                      (49)             (37)         (9,077)
             State                                                          5              (88)           (162)
             Foreign                                                       59              (97)            (23)
                                                                   ----------       -----------     -----------

                                                                           15             (222)         (9,262)
                                                                   ----------       -----------     -----------

                                                                   $   15,698       $   18,827      $    4,436
                                                                   ==========       ==========      ==========


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

                                                                                 Year Ended January 31,
                                                                       2000            2001              2002
                                                                       ----            ----              ----

                  U.S. Federal statutory rate                            35%               35%            35%
                  Consolidated worldwide income
                       in excess of U.S. income                         (36)              (38)           (47)
                  Foreign income taxes                                    8                 6             11
                  Other                                                   1                 4              9
                                                                     --------         ---------      ---------
                  Company's effective tax rate                            8%                7%             8%
                                                                     =======          ========       ========
</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, 2001 and 2002 is as follows:

                                      F-20
<PAGE>
<TABLE>
<CAPTION>
                                                                                            January 31,
                                                                                            -----------
                                                                                     2000                2002
                                                                                     ----                ----
                                                                                          (In thousands)
<S>                                                                                <C>                 <C>
           Deferred tax liability:
             Expenses deductible for tax purposes and
               not for financial reporting purposes                                $        -          $       -
             Unrealized gain on available-for-sale securities                           2,785              1,080
                                                                                   ----------          ---------
                                                                                   $    2,785          $   1,080
                                                                                   ==========          =========
           Deferred tax asset:
             Reserves not currently deductible                                     $   14,173          $  43,532
             Tax loss carryforwards                                                   198,135            253,703
             Inventory capitalization                                                     512                118
                                                                                   ----------          ---------
                                                                                      212,820            297,353
           Less: valuation allowance                                                 (209,452)          (285,801)
                                                                                   -----------         ----------

                 Total deferred tax asset                                          $    3,368          $  11,552
                                                                                   ==========          =========
</TABLE>

        At January 31, 2002, the Company had net operating loss carryforwards
        for Federal income tax purposes of approximately $686 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.


20.     BUSINESS SEGMENT INFORMATION

        The Company's reporting segments are as follows:

        Enhanced Services Solutions Products - Enable telecommunications service
        providers to offer a variety of revenue-generating services accessible
        to large numbers of simultaneous users. These services include a broad
        range of integrated multimodal messaging, information distribution and
        personal communications services, such as call answering with one-touch
        call return, voicemail, IP-based unified messaging (voice, fax and email
        in a single mailbox, media conversion such as email to voice and visual
        mailbox presentation), prepaid wireless calling services, wireless data
        and Internet-based services such as short messaging services, wireless
        information and entertainment services, multimedia messaging services,
        and wireless instant messaging interactive voice response, voice portal
        services, which are part of a voice-controlled portfolio of services
        such as voice dialing, voice-controlled Web browsing and
        voice-controlled messaging, and other applications.

        Service Enabling Signaling Software Products - Interconnect the complex
        circuit switching, database and messaging systems and manage vital
        number, routing and billing information that form the backbone of
        today's public telecommunications networks. These products also are
        embedded in a range of packet softswitching products to interoperate or
        converge voice and data networks and facilitate services such as voice
        over the Internet and Internet offload. This segment represents the
        Company's Ulticom subsidiary.

        Security and Business Intelligence Recording Products - Provides
        analytic solutions for communications interception, digital video
        security and surveillance, and enterprise business intelligence. The
        software generates actionable intelligence through the collection,
        retention and analysis of voice, fax, video, email, Internet and data
        transmissions from multiple types of communications networks. This
        segment represents the Company's Verint subsidiary.



                                      F-21
<PAGE>

        All Other - Includes other miscellaneous operations.

        The table below presents information about operating income/loss and
        segment assets as of and for the years ended January 31, 2000, 2001 and
        2002:
<TABLE>
<CAPTION>
                                                   Service       Security and
                                   Enhanced        Enabling        Business
                                   Services        Signaling     Intelligence
                                   Solutions       Software        Recording        All     Reconciling   Consolidated
                                   Products        Products        Products        Other       Items        Totals
                              -------------------------------------------------------------------------------------------
                                                                  (In thousands)
        Year Ended
        January 31, 2000
        ----------------

<S>                             <C>               <C>            <C>          <C>           <C>           <C>
        Sales                   $    755,597      $   25,831     $  115,551   $   19,494    $    (6,806)  $    909,667

        Operating Income
               (Loss)           $    191,086      $    2,809     $   (9,530)  $   (2,043)   $   (10,072)  $    172,250

        Total Assets            $    694,872      $   17,794     $   99,183   $   39,512    $   521,486   $  1,372,847

        Year Ended
        January 31, 2001
        ----------------


        Sales                   $  1,032,860      $   47,441     $  139,252   $   15,233    $    (9,728)  $  1,225,058

        Operating Income
               (Loss)           $    251,748      $    8,356     $   (5,963)(1)$  (1,955)   $   (17,562)(2)$   234,624

        Total Assets            $  1,041,622      $  232,187     $  118,484   $   80,571    $ 1,152,400   $  2,625,264

        Year Ended
        January 31, 2002
        ----------------


        Sales                   $  1,080,694      $   58,156     $  131,235   $   9,966     $    (9,833)   $ 1,270,218

        Operating Income
             (Loss)             $     66,105(3)   $    8,523     $   (2,533)(4)$   (984)    $    (6,267)  $     64,844

        Total Assets            $  1,168,075      $  240,675     $  116,726   $  56,930     $ 1,121,757   $  2,704,163

       (1) Operating income, excluding acquisition expenses of $10,909,000, would have been $4,946,000.
       (2) Includes acquisition expenses of $5,062,000.
       (3) Operating income, excluding restructuring charges of $60,808,000, would have been $126,913,000.
       (4) Operating income, excluding restructuring charges of $2,754,000, would have been $221,000.
</TABLE>


Reconciling items consist of the following:

          Sales - elimination of intersegment revenues.
          Operating Income (Loss) - elimination of intersegment operating income


                                      F-22
<PAGE>

          and corporate operations. Total Assets - elimination of intersegment
          receivables and unallocated corporate assets.


          Sales by country, based on end-user location, as a percentage of total
          sales, for the years ended January 31, 2000, 2001 and 2002 were as
          follows:
<TABLE>
<CAPTION>
                                                                                January 31,
                                                                                -----------
                                                               2000                 2001                2002
                                                               ----                 ----                ----
<S>                                                             <C>                  <C>                  <C>
                           United States                        24%                  25%                  30%
                           Germany                              10                   11                   12
                           Other foreign                        66                   64                   58
                                                              -------              -------             --------
                           Total                               100%                 100%                 100%
                                                              =======              =======             ========

           No customer accounted for 10% or more of sales for the years ended
           January 31, 2000, January 31, 2001 or January 31, 2002.

           Long-lived assets by country of domicile consist of:

                                                                                            January 31,
                                                                                     2001                2002
                                                                                     ----                ----
                                                                                          (In thousands)

                 United States                                                     $  182,473        $   128,681
                 Israel                                                               142,569            158,726
                 Other                                                                  8,625             10,850
                                                                                   ----------        -----------

                                                                                   $  333,667        $   298,257
                                                                                   ==========        ===========
</TABLE>

21.     COMMITMENTS AND CONTINGENCIES

        Leases - The Company leases office, manufacturing, and warehouse space
        under non-cancelable operating leases. Rent expense for all leased
        premises approximated $22,500,000, $28,304,000 and $36,461,000 in the
        years ended January 31, 2000, 2001 and 2002, respectively.




                                      F-23
<PAGE>

       As of January 31, 2002, the minimum annual rent obligations of the
Company were approximately as follows:

                  Twelve Months Ended
                       January 31,                             Amount
                       -----------                             ------
                                                           (In thousands)

                          2003                             $    34,007
                          2004                                  30,234
                          2005                                  20,253
                          2006                                  18,981
                     2007 and thereafter                        33,666
                                                           -----------

                                                           $   137,141
                                                           ===========

       Employment Agreements - The Company is obligated under employment
       contracts with Kobi Alexander, its Chairman and Chief Executive Officer,
       to provide salary, bonuses, insurance and fringe benefits through January
       31, 2004. Minimum salary payments under the contracts currently amount to
       $672,000 per year. The executive is entitled to annual bonuses equal to
       at least 2.75% of the Company's consolidated after-tax net income during
       each year, determined without regard to acquisition-related expenses and
       charges. During the year ended January 31, 2002, Mr. Alexander was
       entitled to receive $672,000 in salary and a bonus of approximately
       $1,500,000. Mr. Alexander voluntarily forfeited ninety percent (90%)
       (approximately $1,955,000) of such amount, resulting in total cash
       compensation, excluding amounts paid for accrued vacation, of
       approximately $217,000. Following termination or expiration of the term
       of employment, the executive is entitled to receive a severance payment
       equal to $112,736 times the number of years from the beginning of his
       employment with the Company, the amount of which payment increases at the
       rate of 10% per annum compounded for each year of employment following
       December 31, 2000, plus continued fringe benefits for three years and
       insurance coverage for up to 10 years. If the executive's employment is
       terminated by the Company without "cause", or by the executive for "good
       reason" (as those terms are defined in the agreement), the executive is
       entitled to additional payments attributable to the salary, bonus and the
       monetary equivalence of other benefits which he otherwise would have
       expected to receive for a period of three years or the balance of the
       agreement term, whichever is longer. If such termination occurs following
       a change in control of the Company, the required additional payment is
       three times the executive's annual salary and bonus, and the executive is
       additionally entitled to the accelerated vesting of all retirement
       benefits and stock options, and payments sufficient to reimburse any
       associated excise tax liability and income tax resulting from such
       reimbursement. 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, Inc., at prices equal to the higher of
       the 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. These options, as well as any options granted the
       executive under the Company's stock option or stock incentive plans,
       become fully vested, exercisable and nonforfeitable in the event of a
       change in control of the Company, the termination of the executive's
       employment by the Company without cause or by the executive for good
       reason, or the executive's death or disability. Insurance benefits
       include life insurance providing cumulative death benefits of
       approximately $40,000,000, including amounts provided under a split
       dollar arrangement through which the Company is to be reimbursed premiums
       from the benefit payments or cash surrender value.

        Most other employment agreements of the Company are terminable with or
        without cause with prior notice of 90 days or less. In certain
        instances, the termination of employment agreements without cause


                                      F-24
<PAGE>

        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" 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 currently pays royalties on certain
        of its product sales 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 in respect of
        research and development projects, are required to be paid until the
        funding organization has received total royalties up to 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, a subsidiary of CTI and Quantum Industrial
        Holdings Ltd. organized two new companies to make investments, including
        investments in high technology ventures. Each participant committed a
        total of $37,500,000 to the capital of the new companies, for use as
        suitable investment opportunities are identified. Quantum Industrial
        Holdings Ltd. is a member of the Quantum Group of Funds managed by Soros
        Fund Management LLC. and affiliated management companies. As of January
        31, 2001 and 2002, the Company has invested approximately $22,640,000
        and $25,026,000 respectively, related to these ventures which are
        included in the caption "Investments" in the accompanying balance
        sheets. In addition, the Company has committed $27,726,000 to various
        companies, ventures and funds which may be called at the option of the
        investee.

        Guaranties - The Company has obtained bank guaranties primarily for
        performance of certain obligations under contracts with customers. These
        guaranties, which aggregated approximately $23,421,000 at January 31,
        2002, are to be released by the Company's performance of specified
        contract milestones, which are scheduled to be completed primarily
        during 2002.

        Litigation - On or about October 19, 2001, Kevin Beier v. Comverse
        Technology, Inc., et al., CV 016972, the first of four virtually
        identical purported securities class action complaints was filed against
        CTI and certain of its executive officers in the United States District
        Court for the Eastern District of New York. The four actions were
        consolidated into the Beier action on January 15, 2002 and an amended
        consolidated complaint was filed on March 4, 2002. The consolidated
        complaint generally alleges violations of federal securities laws on
        behalf of individuals who allege that they purchased CTI's common stock
        during a purported class period between April 30, 2001 and July 10,
        2001. The consolidated complaint seeks an unspecified amount in damages
        on behalf of persons who purchased CTI stock during the purported class
        period. The Company believes all claims in the complaints to be without
        merit and will vigorously defend against these claims.

        From time to time, the Company is subject to claims in legal proceedings
        arising in the normal course of its business. The Company does not
        believe that it is currently party to any pending legal action that
        could reasonably be expected to have a material adverse effect on its
        business or operating results.


                                      F-25
<PAGE>

22.     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.
<TABLE>
<CAPTION>
                                                            January 31,
                                  ---------------------------------------------------------------
                                              2001                                2002
                                              ----                                ----
                                    Carrying        Estimated            Carrying       Estimated
                                     Amount        Fair Value             Amount       Fair Value
                                     ------        ----------             ------       ----------
                                                           (In thousands)
<S>                               <C>              <C>                 <C>            <C>
       Liabilities:
         Convertible debentures   $   900,000      $ 2,307,000         $   600,000    $   471,000
</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 Debentures - 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, 2002. Such amounts
        have not been comprehensively revalued for purposes of these financial
        statements since January 31, 2002, and current estimates of fair value
        may differ significantly from the amounts presented herein.


23.     EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS


        In 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
        No. 133 "Accounting for Derivative Instruments and Hedging Activities"
        which was subsequently amended by SFAS Nos. 137 and 138 (collectively
        "SFAS 133"). SFAS 133 establishes accounting and reporting standards for
        derivative instruments, including certain derivatives embedded in other
        contracts, and hedging activities and requires that an entity recognize
        all derivatives as either assets or liabilities and measure those
        instruments at fair value. Under SFAS 133, certain contracts that were
        not formerly considered derivatives may now meet the definition of a
        derivative. SFAS 133 is effective for all fiscal quarters of fiscal
        years beginning after June 15, 2000. The Company adopted SFAS 133
        effective February 1, 2001. The adoption of SFAS 133 did not have a
        material effect on the Company's consolidated financial statements.

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations."
         SFAS No. 141 applies prospectively to all business combinations
         initiated after June 30, 2001 and to all business combinations
         accounted using the purchase method for which the date of acquisition
         is July 1, 2001, or later. The Statement requires all business
         combinations to be accounted for using one method, the purchase method.
         Under previously existing accounting rules, business combinations were
         accounted for using one of two methods, the pooling-of-interests method
         or the purchase method. The adoption of SFAS No. 141 is not expected to


                                      F-26
<PAGE>

         have a material effect on the Company's consolidated financial
         statements.

         In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
         Intangible Assets." SFAS No. 142 addresses financial accounting and
         reporting for acquired goodwill and other intangible assets. Under SFAS
         No. 142, goodwill and some intangible assets will no longer be
         amortized, but rather reviewed for impairment on a periodic basis. The
         provisions of this Statement are required to be applied starting with
         fiscal years beginning after December 15, 2001. This Statement is
         required to be applied at the beginning of the Company's fiscal year
         and is to be applied to all goodwill and other intangible assets
         recognized in its financial statements at that date. Impairment losses
         for goodwill and certain intangible assets that arise due to the
         initial application of this Statement are to be reported as resulting
         from a change in accounting principle. Goodwill and intangible assets
         acquired after June 30, 2001 will be subject immediately to the
         provisions of this Statement. The adoption of SFAS No. 142 is not
         expected to have a material effect on the Company's consolidated
         financial statements.

         In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
         Retirement Obligations." SFAS No. 143 establishes accounting standards
         for recognition and measurement of a liability for an asset retirement
         obligation and the associated asset retirement cost. SFAS No. 143
         applies to legal obligations associated with the retirement of a
         tangible long-lived asset that result from the acquisition,
         construction, development and/or normal operation of a long-lived
         asset. This Statement is effective for fiscal years beginning after
         June 15, 2002; however, early adoption is encouraged. The adoption of
         SFAS No. 143 is not expected to have a material effect on the Company's
         consolidated financial statements.

         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
         Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses
         financial accounting and reporting for the impairment or disposal of
         long-lived assets. SFAS No. 144 supercedes certain provisions of SFAS
         No. 121, "Accounting for the Impairment of Long-Lived Assets to Be
         Disposed Of" and Accounting Principles Board Opinion No. 30, "Reporting
         the Results of Operations-Reporting the Effects of Disposal of a
         Segment of a Business, and Extraordinary, Unusual and Infrequently
         Occurring Events and Transactions." SFAS No. 144 is effective for
         financial statements issued for fiscal years beginning after December
         15, 2001 and interim periods within those fiscal years; however, early
         adoption is encouraged. The Company is currently evaluating the impact,
         if any, that SFAS No. 144 will have on its consolidated financial
         statements.

24.      SUBSEQUENT EVENT

         On February 1, 2002, Verint acquired the digital video recording
         business of Lanex, LLC. The Lanex business provides digital video
         recording solutions for security and surveillance applications
         primarily to North American banks. The purchase price consisted of $9.5
         million in cash and a $2.2 million convertible note. The note is
         non-interest bearing and matures on February 1, 2004. The holder of the
         note may elect to convert the note, in whole or in part, into shares of
         Verint's common stock at a conversion price of $16.06 per share at any
         time on or after the completion of an initial public offering by
         Verint. The note is guaranteed by CTI. Pro forma results of operations
         have not been presented because the effects of this acquisition are not
         material.


                                      F-27
<PAGE>

25.      QUARTERLY INFORMATION (UNAUDITED)

        The following table shows selected results of operations for each of the
        quarters during the years ended January 31, 2001 and 2002:
<TABLE>
<CAPTION>
                                                                        Fiscal Quarter Ended
                                     April 30,    July 31,   Oct. 31,   Jan. 31,     April 30,  July 31,    Oct. 31,    Jan. 31
                                       2000         2000       2000       2001         2001       2001        2001       2002
                                       ----         ----       ----       ----         ----       ----        ----       ----
<S>                                 <C>         <C>         <C>         <C>           <C>         <C>       <C>        <C>
        Sales                       $   268,469 $   292,070 $   317,966 $  346,553    $365,037    $345,090  $295,032   $ 265,059
        Gross profit                    161,538     176,754     193,185    210,923     222,415     198,439   169,822     154,062
        Net income (loss)                56,206      51,703      64,362     76,865      78,956      27,984     1,695     (54,016)

        Diluted earnings per share  $      0.32 $      0.30 $      0.35 $     0.41 $      0.43 $      0.15  $  0.01    $   (0.29)
                                    =========== =========== =========== ========== =========== ===========  =======    ==========
</TABLE>


                                      F-28
<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)


April 26, 2002                 By:    S/ Kobi Alexander
                                      ---------------------------------------
                                      Kobi Alexander, Chief Executive Officer


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 26, 2002
--------------------------------------------
Kobi Alexander,
Chairman of the Board and
Chief Executive Officer; Director


S / Itsik Danziger                                          April 26, 2002
--------------------------------------------
Itsik Danziger, President; Director


S / David Kreinberg                                         April 26, 2002
--------------------------------------------
David Kreinberg,
Chief Financial Officer


S / Zvi Alexander                                           April 26, 2002
--------------------------------------------
Zvi Alexander, Director


S / John H. Friedman                                        April 26, 2002
--------------------------------------------
John H. Friedman, Director


S / Francis E. Girard                                       April 26, 2002
--------------------------------------------
Francis E. Girard, Director


S / Ron Hiram                                               April 26, 2002
--------------------------------------------
Ron Hiram, Director


S / Sam Oolie                                               April 26, 2002
--------------------------------------------
Sam Oolie, Director


S / William F. Sorin                                        April 26, 2002
--------------------------------------------
William F. Sorin, Director


S / Shaula A. Yemini                                        April 26, 2002
--------------------------------------------
Dr. Shaula A. Yemini, Director


                                      F-29