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Management's Discussion of Results of Operations (Excerpts)

For purposes of readability, Zenith attempts to strip out all tables in excerpts from the Management Discussion. That information is contained elsewhere in our articles. The idea of this summary is simply to review how well we believe Management does its reporting. Also, this highlights what Management believes is important.

In our Decision Matrix at the end of each article, a company with 0 to 2 gets a "-1", and 3 to 5 gets a "+1."

On a scale of 0 to 5, 5 being best, Zenith rates this company's Management's Discussion as a 3.


BUSINESS OVERVIEW

Overview

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

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

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

Location-Based Services

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

Stolen vehicle recovery services

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

Fleet management services

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

Value-added services

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

Wireless Communications Products

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

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

Industry Overview

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

Location-based services

Stolen vehicle recovery

The demand for vehicle security products and services is driven by vehicle 
theft rates, increasing security awareness among customers and insurance 
companies’ efforts to reduce incidents of loss. In addition, in Brazil, which 
is one of our primary markets, a regulation was adopted pursuant to which new 
vehicles (cars, motorcycles, trucks etc.), manufactured in Brazil or imported 
into the country may only be sold when equipped with a blocking (immobilizing) 
and GPS location system or tracking system (such as our products). However such 
regulation was repeatedly postponed and in our understanding this regulation 
will be changed completely in the future or entirely cancelled. In some of our 
markets, demand for SVR services has been enhanced by incidents of carjacking 
and car-related kidnappings that have increased consumers’ perceived crime 
risk. Additionally, theft of trucks carrying valuable or hazardous cargo (e.g., 
microchips and chemicals) represents a threat to commercial, industrial, public 
and personal safety and security.

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

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

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

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

Fleet management

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

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

Wireless communications products

Automatic vehicle location

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

Typical AVL applications include:

Security

Transportation

Telecommunication services

Government

Vehicle tracking

Fleet management

Maintenance vehicle tracking

Government vehicle tracking Driver Behavior and Accident Notification

Parcel tracking

Personal tracking

Public transit

Asset tracking


Currently, the main underlying technologies available for wireless location and 
tracking in the AVL industry are terrestrial network Terrestrial network 
triangulation uses the wireless signals transmitted by an end-unit in the 
vehicle and received by a network of land-based wireless antennas (base 
stations) installed in the relevant coverage region in order to determine the 
precise location of the transmitter.

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

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


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

Our Services and Products

Location-based services

Stolen vehicle recovery

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

Fleet management

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

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

the ability to locate the fleet's vehicles;

continuous data communication with the fleet's vehicles;

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

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

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

connection to standard organization systems;

accident notification;

driver's behavior; and

task management optimization.

Value-added services

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

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

Wireless communications products

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

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

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

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

Fleet Management


Value-added services Asset protection to Auto Lenders

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

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

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

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

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

Customers, Marketing and Sales

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

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

(A) Location-based services

Stolen vehicle recovery

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

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

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

Fleet management

Vehicle fleet management systems are primarily marketed through vehicle fleets' 
departments, which form a part of our regional marketing departments. We 
conduct in-depth research to identify companies that will gain efficiency and 
cost savings through the implementation of our products and services, and 
conduct targeted marketing campaigns to these companies. In addition, we 
participate in professional conventions and advertise in professional 
publications and journals designed for our target customers. Our customers in 
the fleet management market include small-, mid- and large-size enterprises and 
individuals. As of December 31, 2015, we provided our services to approximately 
140,000 end users through 31,000 corporate customers and individuals in Israel, 
Brazil, Argentina and the United States. We are currently exploring 
collaborations with local entities in other regions of the world for the 
marketing of our fleet management services and products in such regions. By the 
date of this report, we have a total of 3,000 end users which are spread in 
various countries (except Israel, Brazil, US and Argentina).


Value-added services

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

(B) Wireless communications products

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

Competition

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

(A) Location-based services

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

Stolen vehicle recovery

Israel. Our primary competitors in Israel are Pointer and Skylock Ltd.

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

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

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

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


Fleet Management

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

Wireless communications products

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

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

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

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

Manufacturing Operations and Suppliers

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

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

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

Proprietary Rights

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

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

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

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

Regulatory Environment

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


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

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

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

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

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

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

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

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

permits from the Israeli Defense Forces;

approval from Israel's Land Administration and/or from Civil Administration in 
the Territories, which usually also involves payment for the land use rights; 
and
building permits from local or regional zoning authorities in Israel and 
Brazil.

We are continuously in the process of obtaining the relevant permits required 
for the construction of our base sites in Israel, however, to date, we have 
been issued only 29 of these permits (13 of them have expired). With respect to 
the general permit from Israel’s Land Administration, in 2005 we entered into 
an agreement with the Israel’s Land Administration, pursuant to which the 
general permit has been issued to us against an annual consideration based on 
the date of approval of our base sites. The agreement had expired on December 
31, 2010. In the event that the Israel Land Administration claims consideration 
for the erection of the base sites without a permit, we may be subject to 
penalties and payment of annual consideration for the years of use of those 
base sites.

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

a permit from Anatel (National Agency for Telecommunication) n

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

Municipal permits n

a permit from the fire department. n

and a permit from COMAR (Aviation authorities)

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

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


ORGANIZATIONAL STRUCTURE

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


PROPERTY, PLANTS AND EQUIPMENT

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

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

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

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

We lease approximately 7,460 square feet for our offices and control center in 
Florida for a monthly rate of $ 12,900 USD. As of December 31, 2015, the lease 
was on a month by month basis. We plan to extend the lease for an additional 
period of 60 months and to assume additional 1,800 square feet (on top of 
current 7,460 square feet).

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

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

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

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


OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OPERATING RESULTS

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

Introduction

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

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

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

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

Outlook

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

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

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

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

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


Wireless communications products segment

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

Cost of revenues

Location-based services segment

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

Wireless communications products segment

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

Operating expenses

Research and development

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

Selling and marketing

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

General and administrative

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

Operating Income

Location-based services segment

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

Wireless communications products segment

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


Financing expenses (income), net

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

Taxes on income

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

Critical Accounting Policies and Estimates

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

The following are our critical accounting policies and the significant 
judgments and estimates affecting the application of those policies in our 
consolidated financial statements.

Revenue recognition

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

Revenues are recognized as follows:

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

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

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

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

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

Extended warranty

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

Accounting for income taxes

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

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

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

Goodwill and other Intangible Assets Impairment Test

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

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

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

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

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

We apply assumption that market participants would consider in determining the 
fair value of each reporting unit and the fair value of the identifiable assets 
and liabilities of the reporting units, as applicable.

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

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

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


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


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

Revenues

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

Location-based services segment

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

Wireless communications products segment

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

Cost of revenues

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

Location-based services segment

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

Wireless communications products segment

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


Operating expenses

Research and development

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

Selling and marketing

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

General and administrative

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

Other expenses (income), net

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

Operating income

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

Location-based services segment

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

Wireless communications products segment

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

Financing income, net

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


Income Tax

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

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

Revenues

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

Location-based services segment

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

Wireless communications products segment

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

Cost of revenues

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

Location-based services segment

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

Wireless communications products segment

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


Operating expenses

Research and development

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

Selling and marketing

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

General and administrative

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

Other expenses, net

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

Operating income

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

Location-based services segment

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

Wireless communications products segment

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

Other (expenses) Income, net

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

Financing income, net

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

Income Tax

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

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

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

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

The fluctuation of the other currencies in which we incur our expenses or 
generate revenues against the dollar has had the effect of increasing or 
decreasing (as applicable) reported revenues, cost of revenues and operating 
expenses in such foreign currencies when converted into dollars from period to 
period.


Year Ended December 31,

Our policy remains to reduce exposure to exchange rate fluctuations by entering 
into foreign currency forward transactions that qualify as hedging transactions 
under ASC Topic 815, "Derivatives and Hedging", the results of which are 
reflected in our income statements as revenues or cost of revenues. The result 
of these transactions, which are affected by fluctuations in exchange rates, 
could cause our revenues, cost of revenues, gross profit and operating income 
to fluctuate.


LIQUIDITY AND CAPITAL RESOURCES

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

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

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

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

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

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


Foreign Exchange Market:


Since December 10, 2015, the dollar and other currencies float free, and any 
citizen or company is authorized to purchase up to the equivalent of US$ 
2,000,000 per month.


Dividends:


Paying abroad dividends to shareholders is not possible.

Since September 23, 2013, there is an additional rate of 10% Income Tax applied 
on dividends payments that should be withheld at source.

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

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

Following the revision of our dividend policy in 2012, we declared and paid 
regularly quarterly dividends in 2012, 2013, and 2015. On 2015 we declared and 
paid such dividends as follows: On February 2, 2015 we declared a quarterly 
dividend in the amount of NIS 27.3 million or $7 million, which was paid on 
April 8, 2015, with respect to the fourth quarter of 2014. On May 18, 2015 we 
declared a quarterly dividend in the amount of NIS 12.8 million or $3.4 
million, which was paid on July 2, 2015, with respect to the first quarter of 
2015. On August 13, 2015 we declared a quarterly dividend in the amount of NIS 
11.1 million or $3.0 million, which was paid on October 7, 2015, with respect 
to the second quarter of 2015. On November 18, 2015 we declared a quarterly 
dividend in the amount of NIS 12.2 million or $3.1 million, which was paid on 
January 6, 2016, with respect to the third quarter of 2015. On February 24, 
2016 we declared a quarterly dividend in the amount of NIS 25.4 million or $6.5 
million, which was paid on April 6, 2016, with respect to the fourth quarter of 
2015.

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


Years ended December 31, 2015, December 31, 2014 and December 31, 2013

Net cash provided by operating activities

Our operating activities provided cash of $46.7 million in 2013, $37.7 million 
in 2014 and $35.9 million in 2015.

The decrease of approximately $1.8 million in cash from operating activities in 
2015 as opposed to 2014 was due primarily to:

-

An increase in other current and non-current assets in amount of $3.9 million

-

An increase of equity loss in amount of $2 million.

-

An increase in other current and non-current liabilities in amount of $3 
million

-

An increase in accounts receivables in amount of $2 million.

as offset by:

-

A decrease in the net income for the year, excluding depreciation, amortization 
and impairment of goodwill and excluding a gain from sale a subsidiary in an 
amount of approximately $7.5 million.

-

A decrease in the outstanding inventory in amount of $1.4 million.

-

An increase in accounts payable of $2.1 million.

-

An increase in liability for employee rights upon retirement in amount of $0.9 
million.

-

A decrease in deferred revenues in amount of $0.9 million.

The decrease of approximately $9 million in cash from operating activities in 
2014 as opposed to 2013 was due primarily to:

-

an increase in the net income for the year, excluding depreciation, 
amortization and impairment of goodwill in an amount of approximately $3.4 
million;

as offset by:

-

an increase in other current and non-current assets in a total amount pf 
approximately $5.3 million;

-

a decrease in current and non-current liabilities in a total amount of 
approximately $6.8 million;

Net cash used in investing activities

Net cash used in investing activities in 2015 in an amount of approximately 
$25.7 million, includes mainly capital expenditures in the amount of $18.7 
million, and investment in affiliated companies in the amount of $ 6 million.

Net cash used in investing activities in 2014 in an amount of approximately 
$13.2 million, includes mainly capital expenditures in the amount of $15 
million, an investment in marketable securities in the amount of $2.8 million 
and on the other hand we have exercised a deposit in escrow in the amount of $5 
million.

Net cash used in investing activities in 2013 in an amount of approximately 
$15.5 million, includes mainly capital expenditures in the amount of $14.2 
million and an investment in an associate company in the amount of $1.4 
million.


Net cash used in financing activities

Net cash used in financing activities in 2015 in an amount of approximately 
$18.7 million consisted primarily of a cash dividend payment in an amount of 
$17.6 million and a cash dividend payment in an amount of approximately $1.2 
million paid by our subsidiary to the non-controlling interest.

Net cash used in financing activities in 2014 in an amount of approximately 
$22.4 million consisted primarily of a cash dividend payment in an amount of 
$19.3 million and a cash dividend payment in an amount of approximately $2.6 
million paid by our subsidiary to the non-controlling interest.

Net cash used in financing activities in 2013 in an amount of approximately 
$17.6 million consisted primarily of a cash dividend payment in an amount of 
$16.1 million and a cash dividend payment in an amount of approximately $1.3 
million paid by our subsidiary to the non-controlling interest.


RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

All of our research and development activities take place in Israel. Our 
Research and Design department is constantly working on upgrading the service 
infrastructure and improving our fleet management applications, including by 
introducing new services and uses of the system, while utilizing both internal 
development staff and outsourcing such activities to third parties, as well as 
developing new service platforms for cellular/GPS based devices.

Expenditures for research and development activities undertaken by us were 
approximately $2.4 million in 2015, $2.5 million in 2014 and $2.4 million in 
2013.


OFF-BALANCE SHEET ARRANGEMENTS

We do not have off-balance sheet arrangements (as such term is defined in Item 
E(2) of the Form 20-F) that have or are reasonably likely to have a current or 
future effect on our financial condition, changes in financial conditions, 
revenues or expenses, results of operations, liquidity, capital expenditures or 
capital resources that are material to investors.