UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant þ   Filed by a Party other than the Registrant ¨

Check the appropriate box:

COMVERSE TECHNOLOGY, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

COMVERSE TECHNOLOGY, INC.

170 Crossways Park Drive

Woodbury, New York 11797

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JUNE 15, 2004

NOTICE IS HEREBY GIVEN that the 2004 Annual Meeting of Shareholders (the “Annual Meeting”) of COMVERSE TECHNOLOGY, INC. (the “Company”) will be held at the Hilton Huntington, 598 Broadhollow Road (Route 110), Melville, New York 11747, on Tuesday, June 15, 2004, commencing at 10:00 A.M. (local time) for the following purposes:

1. To elect seven directors who will serve as the Board of Directors of the Company until the next annual meeting of shareholders and the election of their qualified successors.

2. To consider and vote upon a proposal to adopt the Company’s 2004 Stock Incentive Compensation Plan, under which up to 2,500,000 shares of the Company’s Common Stock, par value $.10 per share, may be issued as equity-based compensation to employees, directors and consultants of the Company and its subsidiaries and affiliates.

3. To consider and act upon a proposal to ratify the engagement of Deloitte & Touche LLP as independent auditors of the Company for the year ending January 31, 2005.

4. To transact such other business as may properly come before the meeting or any adjournment thereof.

Only those shareholders of record at the close of business on April 27, 2004 are entitled to receive notice of and to vote at the Annual Meeting or any adjournment thereof.

A copy of the Company’s Annual Report to Shareholders for the year ended January 31, 2004 accompanies this Notice of Meeting.

May 3, 2004

ATTENDANCE AT THE ANNUAL MEETING BY HOLDERS OF AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK, APPEARING IN PERSON OR REPRESENTED BY PROXY, IS NECESSARY TO CONSTITUTE A QUORUM. YOUR ATTENDANCE IS IMPORTANT AND APPRECIATED. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD. YOUR PROXY MAY BE REVOKED IN YOUR DISCRETION AT ANY TIME BEFORE THE SHARES ARE VOTED.

COMVERSE TECHNOLOGY, INC.

170 Crossways Park Drive

Woodbury, New York 11797

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JUNE 15, 2004

This Proxy Statement and the accompanying form of proxy are being furnished in connection with the solicitation of proxies by the Board of Directors of Comverse Technology, Inc., a New York corporation (the “Company”), for use at the Annual Meeting of the Shareholders of the Company to be held on Tuesday, June 15, 2004 or any adjournment thereof (the “Annual Meeting”).

A proxy in the accompanying form, which is properly executed, duly returned to the Company and not revoked, will be voted in accordance with the instructions contained in the proxy. If no instructions are given in a proxy with respect to any matter specified in the Notice of Annual Meeting to be acted upon at the Annual Meeting, such proxy will be voted in favor of such matter. As to any other matters properly brought before the Annual Meeting, the persons named in the proxy will vote in accordance with their best judgment. Any shareholder who desires to revoke a proxy may do so at any time prior to the vote of the associated shares by tendering a written notice of revocation addressed to the Secretary of the Company, by attending the Annual Meeting in person and requesting the return of the proxy or by delivering to the Secretary of the Company another form of proxy bearing a later date of execution.

The cost of the solicitation of proxies will be paid by the Company. In addition to the solicitation of proxies by the use of the mails, regularly engaged employees of the Company may, without additional compensation, solicit proxies by personal interviews, electronic mail, telephone and telefacsimile. The Company will, upon request, reimburse brokers and others who are only record holders of the Company’s common stock, par value $.10 per share (the “Common Stock”), for their reasonable expenses in forwarding proxy material to beneficial owners of such stock and obtaining voting instructions from such owners.

D.F. King & Co., Inc. has been engaged by the Company to assist in the solicitation of proxies and for such services will receive a fee of $7,500, reimbursement of certain out-of-pocket expenses and may be indemnified by the Company against certain losses that may arise from its engagement.

The Board of Directors has fixed the close of business on April 27, 2004 as the record date for determining the shareholders entitled to notice of and to vote at the Annual Meeting (the “Record Date”). As of the Record Date, there were issued, outstanding and entitled to vote an aggregate of 195,571,367 shares of Common Stock. In addition, as of the Record Date, there were reserved for issuance 24,176,614 shares of Common Stock issuable upon the conversion of the Company’s convertible debt; such shares are not eligible to vote at the Annual Meeting. Attendance at the Annual Meeting, in person or represented by proxy, by the holders of a majority of all shares of Common Stock issued, outstanding and entitled to vote constitutes a quorum. Each share of Common Stock entitles the holder thereof to one vote on each matter presented for action at the meeting. The Company believes that abstentions and broker non-votes should be counted for purposes of determining if a quorum is present at the Annual Meeting for the transaction of business.

The affirmative vote of a plurality of the votes of the shares of Common Stock represented and voted at the meeting is required for the election of directors. A properly executed proxy marked “For All Except” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although such proxy will be counted for purposes of determining whether there is a quorum.

For each other item, the affirmative vote of the holders of a majority of the shares of Common Stock represented in person or by proxy and entitled to vote on the item will be required for approval. A properly executed proxy marked “Abstain” with respect to any such matter will not be voted, although it will be counted for purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect of a negative vote.

This Proxy Statement and the accompanying form of proxy are first being mailed on or about May 3, 2004 to shareholders of record on the Record Date.

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Corporate Governance Of The Company

The Board of Directors of Comverse Technology, Inc. (the “Board”) believes that shareholder confidence in the Company, its management and financial reporting is critical to the success of the Company. Our website, www.cmvt.com, provides information regarding the corporate governance policies of the Company. These policies provide a framework for the proper operation of the Company. The Board recognizes that there is an ongoing discussion about governance matters and, as such, the Board continues to review these policies and other aspects of the Company’s governance policies.

The Board adopted the Comverse Technology, Inc. Corporate Governance Guidelines and Principles (the “Guidelines”) to address significant governance issues. The Guidelines provide a framework for the Company’s corporate governance initiatives. The Corporate Governance and Nominating Committee is responsible for overseeing and reviewing the Guidelines and reporting and recommending to the Board any changes to the Guidelines.

The Board of Directors has determined that the Board consists of a majority of independent directors. The Guidelines provide criteria for determining independence as required by applicable law, the Company’s by-laws, and the Nasdaq Stock Market, Inc. (“NASDAQ”) listing standards. A director qualifies as independent only if the Board determines that the director has no relationship that would interfere with the exercise of the director’s independent judgment in carrying out the responsibilities of a director.

The Guidelines provide that the Board shall not consider a director to be independent (subject to the interpretative materials of the NASDAQ) if such director:

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The Board has determined that Messrs. Alon, Friedman, Hiram and Oolie are independent under the Guidelines and that the Board consists of a majority of independent directors. The Board has four standing committees: (1) an Audit Committee, (2) a Compensation Committee, (3) a Corporate Governance and Nominating Committee, and (4) an Executive Committee. The Board has determined that the Audit Committee, Compensation Committee, and the Corporate Governance and Nominating Committee are comprised entirely of independent directors. The Board also has determined that the Executive Committee is comprised of a majority of independent directors.

The Audit Committee assists the Board in fulfilling certain of its responsibilities, including (i) overseeing the Company’s financial reporting process, (ii) overseeing the Company’s compliance with legal and regulatory requirements, (iii) reviewing and evaluating the independent auditors’ qualifications and independence, (iv) reviewing the performance of the Company’s internal audit function, if applicable, and its independent auditors and its systems of internal accounting and financial controls, (v) reviewing and authorizing related-party transactions (as defined in the relevant NASDAQ requirements), (vi) overseeing certain aspects of the Company’s Employee Code of Business Conduct and Ethics, and (vii) preparing the Committee report required to be included in the Company’s annual proxy statement. Two of the Company’s audit committee members, Messrs. Friedman and Hiram, are audit committee financial experts as defined in item 401(h)(2) of Regulation S-K and pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Audit Committee Charter is attached as Annex A and is available on the Company’s website, www.cmvt.com.

The Compensation Committee (i) determines salaries and incentive compensation for the Company’s executive officers, (ii) administers the issuance of awards under the Company’s stock option plans and such other compensation plans as may be assigned by the Board from time to time, (iii) administers the Company’s employee stock purchase plans, and (iv) performs such other duties as may from time to time be assigned by the Board with respect to compensation.

The Corporate Governance and Nominating Committee assists the Board in fulfilling its responsibility to the shareholders, potential shareholders and investment community by (i) identifying individuals qualified to serve as directors and by selecting or recommending that the Board select the nominees for all directorships, whether such directorships are filled by the Board or the shareholders, (ii) developing and recommending to the Board a set of corporate governance guidelines and principles, (iii) overseeing the Company’s Codes of Business Conduct and Ethics, (iv) reviewing the overall corporate governance of the Company and recommending improvements, when necessary, and (v) performing such other duties as may from time to time be assigned by the Board with respect to corporate governance. The Company’s Corporate Governance and Nominating Committee Charter is available on the Company’s website, www.cmvt.com.

The Executive Committee is empowered to exercise the full authority of the Board in circumstances when convening the full Board is not practicable.

Codes of Business Conduct and Ethics

The Board of Directors has adopted a Code of Business Conduct and Ethics to promote its commitment to the legal and ethical conduct of the Company’s business. The Chief Executive Officer, Chief Financial Officer, and other senior officers are required to abide by the Code of Business Conduct and Ethics, which provides the foundation for compliance with all corporate policies and procedures, and best business practices. The policies and procedures address a wide array of professional conduct, including the establishment of sound employment policies, methods for avoiding and resolving conflicts of interest, safeguarding intellectual property, protecting confidential information, and a strict adherence to all laws and regulations applicable to the conduct of the Company’s business. The Company intends to satisfy its obligations, imposed under the Sarbanes-Oxley Act, to disclose promptly on the Company’s website amendments to, or waivers from, the Code of Business Conduct and Ethics, if any.

The Company also adopted an Employee Code of Business Conduct and Ethics, which can be found on the Company’s website. This Code contains procedures for the Audit Committee to receive, retain and treat complaints received regarding accounting, internal accounting controls or auditing matters, and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

Communicating with the Board

Any shareholder who desires to contact the Board may do so electronically by sending an email to the following address: boardofdirectors@comverse.com. Alternatively, a shareholder can contact the Board by writing to: Board of Directors, Comverse Technology, Inc., 170 Crossways Park Drive, Woodbury, New York 11797. Communications received electronically or in writing are distributed to the Chairman of the Board or other members of the Board, as appropriate, depending on the facts and circumstances outlined in the communication.

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Security Ownership of Management and Principal Shareholders

The following table identifies and sets forth certain information concerning the beneficial ownership of Common Stock by each of the Named Executive Officers of the Company (as defined in the Executive Compensation section below), by each incumbent director, including those who are standing for re-election at the Annual Meeting, by all directors and executive officers as a group and by each person (including any group) known by the Company to beneficially own more than five percent of the issued and outstanding Common Stock. Except as otherwise noted, information is given as of March 22, 2004.

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Background of Directors and Executive Officers

The principal occupation and certain other information about the directors and executive officers of the Company are set forth on the following pages.

Kobi Alexander. Mr. Alexander, age 51, is a founder of the Company and has served as Chairman of the Board of Directors since September 1986 and as Chief Executive Officer since April 1987. Mr. Alexander has served as a director of the Company since its formation in October 1984. Mr. Alexander served as President of the Company from its formation in October 1984 until January 2001. Mr. Alexander also served as Co-Managing Director of the Company’s wholly-owned Israeli subsidiary, Comverse Ltd., from its formation in 1982 until October 1986. From October 1984 to September 1986, Mr. Alexander served as Co-Chairman and Co-Chief Executive Officer of the Company. Prior to the formation of Comverse Ltd., in 1980 and 1981, Mr. Alexander served as an independent financial and business consultant to a number of multinational corporations. Between 1978 and 1980, Mr. Alexander worked in the Corporate Finance Department of Shearson Loeb Rhoades (currently a division of Citigroup Inc.). Mr. Alexander received a B.A., magna cum laude, in Economics from the Hebrew University of Jerusalem in 1977, and an M.B.A. in Finance from New York University in 1980. He has served as the Chairman of the High-Tech Research and Development Section of the Israeli Association of Industrialists. Mr. Alexander is also Chairman of the Board and a director of Ulticom and Verint.

Zeev Bregman. Mr. Bregman, age 42, has served as Chief Executive Officer of Comverse, Inc. (“Comverse”) since January 2001. From 1987, Mr. Bregman served in various management and marketing positions within the Company, including Vice President, EMEA Division of Comverse and Vice President, Messaging Division of Comverse. Prior to joining the Company he was employed by Clarity Ltd. Mr. Bregman received a B.Sc., magna cum laude, in Mathematics and Computer Science and a M.Sc., summa cum laude, in Computer Science from Tel Aviv University. He also earned a Kellogg-Recanati International Executive MBA, a joint degree from the Faculty of Management of Tel-Aviv University and Northwestern University.

Dan Bodner. Mr. Bodner, age 45, has served as President and/or Chief Executive Officer of Verint since February 1994. From 1991 to 1998, Mr. Bodner also served as President and Chief Executive Officer of Comverse Government Systems Corp., a former affiliate of Verint. From 1987 to 1991, Mr. Bodner held various management positions with the Company. Prior to joining the Company, Mr. Bodner was employed for two years as Director of Software Development for Contahal Ltd. Mr. Bodner received a B.Sc., cum laude, in Electrical Engineering from the Technion, Israel Institute of Technology, in 1981 and a M.Sc., cum laude, in Telecommunications and Computer Science from Tel Aviv University in 1987. Mr. Bodner also serves as a director of Verint.

David Kreinberg. Mr. Kreinberg, age 39, has served as Executive Vice President and Chief Financial Officer of the Company since September 2002. Previously, Mr. Kreinberg served as the Company’s Vice President of Finance and Chief Financial Officer from May 1999, as Vice President of Finance and Treasurer from April 1996 and as Vice President of Financial Planning from April 1994. Mr. Kreinberg is a Certified Public Accountant, and prior to joining the Company he served as a senior manager at Deloitte & Touche LLP. Mr. Kreinberg received a B.S., summa cum laude, in accounting from Yeshiva University and an M.B.A. in Finance and International Business from Columbia Business School in 1986 and 1990, respectively. Mr. Kreinberg is also a director of Ulticom and Verint.

Raz Alon. Mr. Alon, age 41, has served as a director since December 2003. Since November 2000, Mr. Alon has served as Chairman of TopView Ventures LLC, an investment firm focused on special situation investments in a broad range of industries. From 1998 to 2000, Mr. Alon served as a Director in the mergers and acquisitions department of Merrill Lynch & Co., Inc. with a focus on private equity and financial sponsor clients. From 1996 to 1998, Mr. Alon served as a Director at SG Securities Inc., the U.S. based mergers and acquisitions and merchant banking business unit of Societe Generale SA. From 1991 to 1996, Mr. Alon worked as an investment banker at Lehman Brothers Inc. Mr. Alon received a B.Sc. in Computer Science and Engineering, magna cum laude, from the University of California, Los Angeles in 1988 and an M.B.A. from Harvard Business School in 1991. Mr. Alon is an independent director.

Itsik Danziger. Mr. Danziger, age 55, has served as a director of the Company since November 1998. Mr. Danziger currently serves as an employee of the Company and Chairman of the Board of Directors of Starhome. Mr. Danziger served as President of the Company from January 2001 until March 2003, as Chief Operating Officer of Comverse from January 1998 and additionally as its President from May 1999 until January 2001. From 1985, Mr. Danziger served in various management positions with the Company,

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including Vice President of research and development, and General Manager and President of the Network Systems Division. Prior to joining the Company, he was employed for 10 years by Tadiran Ltd. in a variety of technical and managerial capacities. Mr. Danziger received a B.Sc. and M.Sc., cum laude, in Electrical Engineering from the Technion, Israel Institute of Technology, in 1974 and 1984, respectively.

John H. Friedman. Mr. Friedman, age 51, has served as a director of the Company since June 1994. Mr. Friedman is Managing Director of Easton Capital Corp., a private investment firm founded by Mr. Friedman in 1991. Mr. Friedman also is Managing Director of Easton Hunt Capital Partners, L.P., a $110 million Small Business Investment Company founded in 1999. From 1989 to 1991, Mr. Friedman was a Managing Director of Security Pacific Capital Investors. Prior to joining that firm, he was a Managing Director of E. M. Warburg, Pincus & Co., Inc., where he was employed from 1981 to 1989. From 1978 to 1980, Mr. Friedman practiced law with the firm of Sullivan & Cromwell in New York City. Mr. Friedman received a B.A., magna cum laude, from Yale University and a J.D. from Yale Law School. Mr. Friedman is also a director of Renovis Inc. and YM BioSciences Inc. Mr. Friedman is an independent director.

Ron Hiram. Mr. Hiram, age 51, has served as a director of the Company since June 2001. Mr. Hiram is a Managing Partner of Eurofund 2000 L.P., a venture capital fund focused on Israeli related companies in the telecommunications, information technology and microelectronic spheres. Previously, Mr. Hiram co-headed TeleSoft Partners’ investment activities in Israel from 2001 to 2002. TeleSoft Partners is a Silicon Valley venture capital fund focusing on companies developing telecommunication-related technologies. From 1994 to 2000, Mr. Hiram served as a Managing Director and Partner of Soros Fund Management LLC (“Soros”), an international hedge fund, devoting the bulk of his time to private equity investments. Prior to joining Soros, Mr. Hiram worked at Lehman Brothers Inc. for thirteen years, most recently serving as Managing Director of a workout and restructuring group. Mr. Hiram was previously a director of the Company in 1986 and 1987. Mr. Hiram received a B. Comm. from the University of Natal, South Africa, in 1978 and an M.B.A. from Columbia University in 1981. Mr. Hiram is also a director of Ulticom. Mr. Hiram is an independent director.

Sam Oolie. Mr. Oolie, age 67, has served as a director of the Company since May 1986. Since August 1995, Mr. Oolie has been Chairman of NoFire Technologies, Inc., a manufacturer of high performance fire retardant products. He has been Chairman of Oolie Enterprises, an investment company, since July 1985. He also served as a director of CFC Associates, a venture capital firm, from January 1984 to December 1999. He was Chairman of The Nostalgia Network, a cable television network, from April 1987 to January 1990 and was Vice Chairman and director of American Mobile Communications, Inc., a cellular telephone company, from February 1987 to July 1989. From February 1962 to July 1985, Mr. Oolie was Chairman, Chief Executive Officer and a director of Food Concepts, Inc., a provider of food services to institutions and hospitals. Mr. Oolie received a B.S. from Massachusetts Institute of Technology in 1958 and an M.B.A. from Harvard Business School in 1961. Mr. Oolie also serves as a director of NCT Group, formerly Noise Cancellation Technologies, Inc. Mr. Oolie is an independent director.

William F. Sorin. Mr. Sorin, age 55, has served as a director and Corporate Secretary of the Company since its formation in October 1984. Mr. Sorin is an attorney engaged in private practice and is Senior General Counsel of the Company. Mr. Sorin received a B.A., Phi Beta Kappa, from Trinity College in 1970 and a J.D., cum laude, from Harvard Law School in 1973. Mr. Sorin is also a director of Ulticom and Verint.

Committees of the Board of Directors

The Board has four standing committees: (1) an Audit Committee, (2) a Compensation Committee, (3) a Corporate Governance and Nominating Committee, and (4) an Executive Committee. The Board has determined that the Audit Committee, Compensation Committee, and the Corporate Governance and Nominating Committee are comprised entirely of independent directors. The Board has also determined that the Executive Committee is comprised of a majority of independent directors.

The Audit Committee assists the Board in fulfilling certain of its responsibilities including (i) overseeing the Company’s financial reporting process, (ii) overseeing the Company’s compliance with legal and regulatory requirements, (iii) reviewing and evaluating the independent auditors’ qualifications and independence, (iv) reviewing the performance of the Company’s internal audit function, if applicable, and its independent auditors and its systems of internal accounting and financial controls, (v) reviewing and authorizing related-party transactions (as defined in the relevant NASDAQ requirements), (vi) overseeing certain aspects of the Company’s Employee Code of Business Conduct and Ethics and (vii) preparing the Committee report required to be included in the Company’s annual proxy statement. Two of the Company’s audit committee members, Messrs. Friedman and Hiram, are audit committee financial experts as defined in item 401(h)(2) of Regulation S-K and pursuant to Section 407 of the Sarbanes-Oxley Act.

The Compensation Committee (i) determines salaries and incentive compensation for the Company’s executive officers, (ii) administers the issuance of awards under the Company’s stock option plans and such other compensation plans as may be assigned by the Board from time to time, (iii) administers the Company’s employee stock purchase plans, and (iv) performs such other duties as may from time to time be assigned by the Board with respect to compensation.

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The Corporate Governance and Nominating Committee assists the Board in fulfilling its responsibility to the shareholders, potential shareholders and investment community by (i) identifying individuals qualified to serve as directors and by selecting or recommending that the Board select the nominees for all directorships, whether such directorships are filled by the Board or the shareholders, (ii) developing and recommending to the Board a set of corporate governance guidelines and principles, (iii) overseeing the Company’s Codes of Business Conduct and Ethics (iv) reviewing the overall corporate governance of the Company and recommending improvements, when necessary, and (v) performing such other duties as may from time to time be assigned by the Board with respect to corporate governance.

The Executive Committee is empowered to exercise the full authority of the Board in circumstances when convening the full Board is not practicable.

During the year ended January 31, 2004, there were seven meetings of the Board of Directors of the Company, two meetings and two actions by unanimous written consent of the Executive Committee, two meetings and one action by unanimous written consent of the Corporate Governance and Nominating Committee, eight meetings and four actions by unanimous written consent of the Compensation Committee, and six meetings of the Audit Committee. Each member of the Board of Directors attended at least 75% of the meetings of the Board of Directors and of each Committee of which he was a member during the year. The Board has adopted a policy of scheduled executive sessions where the independent directors will meet without management present. Directors are encouraged to attend annual meetings of the Company’s shareholders. Three directors attended the December 16, 2003 Annual Meeting of Shareholders.

Audit Committee

The Audit Committee assists the Board of Directors in fulfilling its responsibility to oversee management’s conduct of the Company’s financial reporting process, including the selection of the Company’s outside auditors and the review of the financial reports and other financial information provided by the Company to any governmental or regulatory body, the public or other users thereof, the Company’s systems of internal accounting and financial controls, and the annual independent audit of the Company’s financial statements.

The Audit Committee consists of Ron Hiram, John H. Friedman and Sam Oolie. All members of the Audit Committee are “independent”, as independence is defined in Rules 4200 and 4350 of the National Association of Securities Dealers listing standards and further defined in the Company’s By-Laws. Mr. Hiram and Mr. Friedman are audit committee financial experts as defined in item 401(h)(2) of Regulation S-K and pursuant to Section 407 of the Sarbanes-Oxley Act.

Consistent with SEC policies regarding auditors independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent auditors. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditors. The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and representations that no other reports were required, during the fiscal year ended January 31, 2004, all Section 16(a) filing requirements were satisfied.

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EQUITY COMPENSATION PLAN INFORMATION

As of January 31, 2004

As of March 31, 2004, 22,604,921 shares of Common Stock were reserved for issuance upon the exercise of stock options then outstanding and 4,975,908 shares of Common Stock were available for future grants under the Company’s stock incentive plans. The outstanding options have a weighted average exercise price of $14.17 and an average term to expiration of 6.88 years.

Executive Compensation

The following table presents summary information regarding the compensation paid or accrued by the Company for services rendered during the fiscal years ended January 31, 2002, 2003 and 2004 by its Chief Executive Officer and each of the Company’s four other most highly compensated executive officers (the “Named Executive Officers”):

SUMMARY COMPENSATION TABLE

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STOCK OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning options to purchase shares of Common Stock granted during the year ended January 31, 2004 to the Named Executive Officers under the Company’s employee stock option plans:

Individual Grants

The options in the above table vest in increments over the period of four years from the date of grant. The exercise price of the options is equal to the fair market value of the underlying shares at the date of grant.

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OPTION EXERCISES AND YEAR-END VALUE TABLE

The following table sets forth, as to each Named Executive Officer, the shares of Common Stock acquired on exercise of options during the year ended January 31, 2004, value realized, number of unexercised options held at January 31, 2004, currently exercisable and subject to future vesting, and the value of such options based on the closing price of the underlying shares on the NASDAQ of $17.55 on January 30, 2004, net of the associated exercise price.

Aggregated Option Exercises in the Year Ended January 31, 2004

and Value of Unexercised Options at January 31, 2004

See “Options to Purchase Subsidiary Shares” for information regarding the grant to certain executive officers of options to purchase shares of subsidiaries of the Company.

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Employment Agreements

The Company is obligated under employment contracts with Kobi Alexander, its Chairman and Chief Executive Officer, to provide compensation, insurance and fringe benefits through February 1, 2007. Minimum salary payments under the contracts currently amount to $672,000 per year. For fiscal 2003, the Compensation Committee granted Mr. Alexander a bonus of $500,000, which he voluntarily waived. Under the Company’s 2004 Management Incentive Plan for fiscal 2004, Mr. Alexander also is eligible to receive an annual cash bonus determined by specific quantitative targets established in advance by the Compensation Committee. Following termination of his employment with the Company the executive is entitled to receive a severance payment equal to $165,077 times the number of years from January 1983, the amount of which payment increases at the rate of 10% per annum compounded for each year of employment following December 31, 2004, plus continued fringe benefits for three years. In addition to the severance payment, if the executive’s employment is terminated by the Company without “cause”, or by the executive for “good reason”, the executive is entitled to his salary and pro-rata bonus through the date of termination plus three times the executive’s annual salary and three times his annual bonus. If such termination occurs within three months before or within two years following a change in control of the Company, the executive is additionally entitled to the accelerated vesting of all stock options and restricted stock, and payments sufficient to reimburse any associated excise tax liability and income tax resulting from such reimbursement. Stock options and restricted stock granted the executive become fully vested, exercisable and nonforfeitable in the event of the executive’s death or disability. Insurance benefits include life insurance providing cumulative death benefits of approximately $30,000,000, including amounts provided under an arrangement through which the Company is to be reimbursed premiums from the benefit payments or cash surrender value.

The Company is obligated under an agreement with Zeev Bregman, the Chief Executive Officer of Comverse, to provide compensation and fringe benefits through February 1, 2007. Effective from August 1, 2003, Mr. Bregman is entitled to a base monthly salary of approximately 103,000 Israeli shekels, (resulting in a current annual salary equal to approximately $275,000), an increase from his previous salary of 60,000 Israeli shekels a month. For the period until July 31, 2004, Mr. Bregman voluntarily waived the increase he received in his salary and certain related benefits in recognition that Comverse employees generally did not receive salary increases in fiscal 2003. For fiscal 2003, Mr. Bregman was granted a bonus of $250,000 by the Compensation Committee, which he voluntarily waived. Under the Company’s 2004 Management Incentive Plan, Mr. Bregman’s fiscal 2004 bonuses will be determined by specific quantitative targets established in advance by the Compensation Committee. Following termination of his employment with the Company the executive is entitled to continued fringe benefits for eighteen months. If the executive’s employment is terminated by the Company without “cause”, or by the executive for “good reason”, the executive is entitled to his salary and pro-rata bonus through the date of termination plus one year of additional annual salary and bonus. If such termination occurs within three months before or within two years following a change in control of the Company, the executive is entitled to his salary and pro-rata bonus through the date of termination plus three times the executive’s annual salary and three times his annual bonus, the accelerated vesting of all stock options and restricted stock. Stock options and restricted stock granted the executive become fully vested, exercisable and nonforfeitable in the event of the executive’s death or disability.

Mr. Bodner is employed as President and Chief Executive Officer of Verint at an annual salary of $325,000. Mr. Bodner also is eligible to receive an annual cash bonus, at the discretion of the Verint Compensation Committee, based upon its assessment of the performance of Mr. Bodner and Verint, and he receives certain other fringe benefits.

The Company is obligated under an employment contract with David Kreinberg, its Executive Vice President and Chief Financial Officer, to provide compensation, insurance and fringe benefits through February 1, 2007. Minimum salary payments under the contract currently amount to $325,000 per year. For fiscal 2003, Mr. Kreinberg was granted a bonus of $250,000 by the Compensation Committee. Under the Company’s 2004 Management Incentive Plan, Mr. Kreinberg’s fiscal 2004 bonuses will be determined by specific quantitative targets established in advance by the Compensation Committee. Following termination of his employment with the Company the executive is entitled to receive a severance payment equal to $22,000 times the number of years from and including 1994, the first year 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 January 31, 2004, plus continued fringe benefits for eighteen months. In addition to the severance payment, if the executive’s employment is terminated by the Company without “cause”, or by the executive for “good reason”, the executive is entitled to his salary and pro-rata bonus through the date of termination plus one year of additional annual salary and bonus. If such termination occurs within three months before or within two years following a change in control of the Company, the executive is entitled to his salary and pro-rata bonus through the date of termination plus three times the executive’s annual salary and three times his annual bonus, the accelerated vesting of all stock options and restricted stock, and payments sufficient to reimburse any associated excise tax liability and income tax resulting from such reimbursement. Stock options and restricted stock granted the executive become fully vested, exercisable and nonforfeitable in the event of the executive’s death or disability. Insurance benefits include life insurance providing cumulative death benefits of approximately $12,500,000, including amounts provided under an arrangement through which the Company is to be reimbursed premiums from the benefit payments or cash surrender value.

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Compensation of Directors

Each independent director receives compensation in the amount of $2,750 for each meeting of the Board and for attendance at certain committee meetings of the Board. Each independent director also is entitled to receive an annual stock option grant under the Company’s Stock Option Plans entitling such director to purchase 27,000 shares of Common Stock at a price per share equal to the fair market value of the Common Stock as reported on the NASDAQ on the date two business days after the publication of the audited year-end financial statements of the Company. Such options vest and become non-forfeitable incrementally, to the extent of 5,400 shares per meeting of the Board, and any committees of the Board of which such director is a member and attended by the recipient during the year of grant. Each independent director is entitled to reimbursement of expenses incurred for attendance at meetings of the Board, up to the amount of $2,000 for each meeting attended.

Severance Benefits Following a Change in Control

The Company has instituted severance benefits arrangements for eligible employees, other than Messrs. Alexander, Bregman and Kreinberg (whose benefits are described above), due in the event of the termination of employment, within two years following a change in control of the Company, either by the Company without cause or by an employee under specified circumstances. In the event of such termination following a change in control, key executives, as designated from time to time by the Compensation Committee, are generally entitled to receive (a) payment of salary and pro-rated bonus through the date of termination (computed at the rates then in effect or, if higher, during specified periods prior to the date of change in control), (b) an additional payment equal to the sum of annual salary and bonus (as so computed), (c) the accelerated vesting of all stock options and retirement benefits, (d) continuation for one additional year of certain employment-related benefits and (e) in the discretion of the Compensation Committee, a payment in an amount necessary to discharge without cost to the employee any excise tax imposed in respect of the payments due under the severance arrangement. Other employees generally are entitled to receive, in the event of the involuntary termination of their employment following a change in control, (a) payment of their then current salary through the date of termination, (b) an additional payment equal to one month of salary for each year of employment with the Company, up to a maximum of twelve months, (c) the accelerated vesting of stock options and retirement benefits, and (d) continuation of certain employment-related benefits.

Compensation Committee Interlocks and Insider Participation

None.

Options to Purchase Subsidiary Shares

Certain executive officers and other employees of the Company and its subsidiaries, have been granted options to acquire shares of certain subsidiaries and affiliates of the Company, other than Comverse. Such option awards are not tied to the performance of the respective subsidiaries or affiliates, but generally are intended to incentivize employees in the units in which they are employed and for which they have direct responsibility. The amount of shares issuable upon exercise of such options varies among the subsidiaries and affiliates affected, not exceeding in any instance 20% of the shares outstanding of the respective subsidiary or affiliate assuming exercise in full. These options have terms ranging 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 by the Board of Directors of the applicable subsidiary or affiliate or by a committee of the Board of Directors of the Company.

These options (and any shares received by the holders upon exercise) provide the option holders with a potentially larger equity interest in the respective subsidiaries and affiliates than in the Company, which, under certain circumstances, could cause the option holders’ interests to conflict with those of the Company’s shareholders generally.

Certain Relationships and Related Transactions

From February 1, 2003 until January 31, 2004, the Company paid or accrued legal fees to William F. Sorin, a director and Senior General Counsel of the Company, in the amount of $84,313 for legal services rendered to the Company during such period.

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Report of the Compensation Committee Concerning Executive Compensation

The Compensation Committee is composed entirely of independent directors and is responsible for the establishment and oversight of the Company’s executive compensation program. It reviews, recommends and approves the compensation of the Chairman and Chief Executive Officer and other executive officers of the Company.

The Company’s executive compensation program is intended to motivate and reward highly qualified executives for long-term strategic management and the enhancement of shareholder value and to attract and retain executives whose abilities are critical to the long-term success and competitiveness of the Company. The program is oriented heavily toward long-term incentive compensation tied to increases in shareholder value.

The Compensation Committee conducts a review of the Company’s executive compensation program to permit an evaluation of the Company’s performance and its executive compensation in the context of the compensation programs of other companies. This review is performed with the assistance of an independent outside consultant whose services are retained by the Compensation Committee. This review includes analyzing survey data comparing the competitiveness of the Company’s executive compensation with a select group of companies. The key elements of the Company’s executive compensation program consist of base salary, an annual cash incentive program, and a long-term incentive program consisting of stock incentive compensation. During fiscal 2003, certain executive officers of the Company were eligible for discretionary annual bonuses. Messrs. Alexander and Bregman voluntarily waived their fiscal 2003 annual bonuses in the amounts of $500,000 and $250,000, respectively. The Company also granted stock options and restricted stock to executive officers during fiscal 2003. Those grants were designed to align the interests of each executive officer with those of the shareholders and provide each individual with a significant incentive to manage the Company from the perspective of an owner with an equity stake in the Company.

The number of shares subject to each option and restricted stock grant issuance is based on the executive officer’s current position with the Company, the size of comparable awards made to individuals in similar positions, the individual’s potential for increased responsibility and promotion over the term of the award and the individual’s personal performance in recent periods. The Company’s executive compensation program also considers the number of unvested options or shares of Common Stock held by the executive officer in order to maintain an appropriate level of equity incentive for that individual. However, the Compensation Committee does not adhere to any specific guidelines as to the relative share holdings of the Company’s executive officers.

Salary levels throughout the Company’s distinct business units are reviewed annually, and are adjusted periodically when the Company believes that adjustments are required, taking into account competitive factors in the industries and locations of the Company’s activities, as well as performance of the Company’s individual business units. In establishing compensation levels throughout the organization, the Company relies to a significant extent on its direct experience in the recruitment of personnel as well as reported compensation levels of senior management of other, similarly situated companies. Supplemental cash bonus awards are made in accordance with recommendations by senior management, and in certain instances in accordance with formulas based on the financial performance of the Company or its individual business units.

Historically, employees of the Company have benefited from the Company’s practice of awarding stock options to personnel throughout the organization, and the resulting value associated with the increase in the market price of the Company’s shares. The Committee believes that equity-based incentive arrangements, such as employee stock options, restricted stock and employee stock purchase plans, are among the most effective means available to the Company of aligning the interests of employees with the objectives of shareholders generally, and of building their long term commitment to the organization. The Company emphasizes stock option awards as an essential element of the compensation package available to its executives and employees. The Company considers both available competitive data and subjective performance evaluations in determining the amount of long-term incentive compensation to grant to its officers and key employees. Stock options typically vest in increments over four years to encourage long-term commitment to the Company by the grantees.

Certain key executives and other employees have options entitling them to acquire shares of certain of the Company’s subsidiaries and affiliates, as a means of providing incentives directly tied to the performance of those business units with which the recipients are directly involved. (See “Options to Purchase Subsidiary Shares”). These options (and any shares received by the holders upon exercise) provide the option holders with a potentially larger equity interest in the respective subsidiaries and affiliates than in the Company, which, under certain circumstances, could cause the option holders’ interests to conflict with those of the Company’s shareholders generally.

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Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), places a limit of $1,000,000 on the amount of compensation that may be deducted by the Company in any year with respect to the Chief Executive Officer and each of the Company’s other four most highly paid executive officers. Certain performance-based compensation that has been approved by shareholders is not subject to the deduction limit. Based on shareholder approval at the Company’s December 16, 2003 Annual Meeting of the Company’s 2004 Management Incentive Plan, executive officers’ incentive compensation awarded under that plan is deductible.

Compensation of the Chief Executive Officer

The Board of Directors believes Mr. Alexander, the Chairman and Chief Executive Officer, has provided effective leadership and executed a successful business plan for the Company.

The Compensation Committee believes that Mr. Alexander has guided the Company successfully during an extremely difficult business environment, attracted and retained a high caliber management team, and returned the Company to profitability. In support of the Company’s cost-reduction efforts, Mr. Alexander has not received an increase in salary this year or during the previous three years. In further support of the Company’s cost-reduction efforts, Mr. Alexander also voluntarily waived over $1.9 million in salary and bonus for the year ended January 31, 2002. Mr. Alexander did not receive a bonus for the year ended January 31, 2003 and he voluntarily waived a $500,000 bonus for the year ended January 31, 2004.

Base Salary. Mr. Alexander received a base salary of $672,000 for the year ended January 31, 2004 pursuant to his employment agreements.

Annual Incentive Program. For fiscal 2003, Mr. Alexander voluntarily waived a $500,000 bonus awarded to him by the Compensation Committee in recognition of his leadership, vision and exceptional performance in leading the Company to sequential growth and improved operating results in each quarter, and meeting the Company’s goal of returning to profitability by the fourth quarter of fiscal 2003.

Long-Term Compensation. In consultation with a leading independent consulting firm, the Compensation Committee awarded Mr. Alexander 179,600 restricted shares and 461,000 stock options. As with the stock options provided to all other Company employees, Mr. Alexander’s options will vest over four years and have a ten-year term. The realization of remuneration from Mr. Alexander’s equity awards will depend on the future performance of the Company and the value of its stock.

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Stock Performance Graph

The following table compares the five year cumulative return on a hypothetical investment in Comverse Technology, Inc. (CMVT), the S&P 500 Index and the S&P 500 Telecommunications Equipment Index, assuming an investment of $100 on January 31, 1999 and the reinvestment of any dividends.

Total Return To Shareholders

(Includes reinvestment of dividends)

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Report of the Audit Committee

Concerning the Company’s Audited Financial Statements

for the Fiscal Year Ended January 31, 2004.

The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls.

In this context, the Committee has met and held discussions with management and the independent auditors regarding the fair and complete presentation of the Company’s results. The Committee has discussed critical accounting policies applied by the Company in its financial statements, as well as alternative treatments. Management represented to the Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Committee has reviewed and discussed the consolidated financial statements with management and the independent auditors. The Committee discussed with the independent auditors matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU380), SAS 99 (Codification of Fraud in a Financial Statement Audit) and Securities and Exchange Commission rules discussed in Final Releases Nos. 33-8183 and 33-8183a.

In addition, the Committee has discussed with the independent auditors the auditors’ independence from the Company and its management, including the matters in the written disclosures required by the Independence Standards Board Standard No. 1 (Independence Discussions With Audit Committees). The Committee also has considered whether the independent auditors’ provision of non-audit services to the Company is compatible with the auditors’ independence. The Committee has concluded that the independent auditors are independent from the Company and its management.

The Committee discussed with the Company’s independent auditors the overall scope and plans for their audit. The Committee meets with the independent auditors to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2004, for filing with the Securities and Exchange Commission. The Committee has selected and the Board of Directors has ratified, subject to shareholder approval, the selection of the Company’s independent auditors.

The information contained in the (i) Report of the Audit Committee, (ii) Report of the Compensation Committee and (iii) Performance Graph shall not be deemed to be “soliciting material” or deemed to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.

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PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING

Proposal No. 1—Election of Directors

It is the intention of the Board of Directors to nominate at the Annual Meeting each of the individuals named below for election as the Board of Directors of the Company until the next Annual Meeting of Shareholders and the election of their qualified successors, or their earlier resignation or removal. In the event that any of such nominees should become unwilling or unable to stand for election at the Annual Meeting for any reason, at present unknown, it is intended that votes will be cast pursuant to the accompanying proxy for such substitute nominee or nominees as the Board of Directors may designate.

The Board of Directors recommends the election at the Annual Meeting of the seven individuals named above.

Proposal No. 2—Adoption of the 2004 Stock Incentive Compensation Plan

Introduction

The Board of Directors has approved the 2004 Stock Incentive Compensation Plan (the “Incentive Plan”) and has recommended that the Incentive Plan be submitted to the shareholders for adoption at the Annual Meeting. The purposes of the Incentive Plan are to attract, retain and motivate directors, employees and consultants, to align their respective interests with shareholders’ interests through equity-based compensation and to permit the granting of awards that is intended to constitute performance-based compensation for certain executive officers under Section 162(m) of the Code. Shareholder approval of the Incentive Plan is required by the NASDAQ, where our stock is listed, and is necessary to ensure that the Company is not limited in deducting for income tax purposes certain “performance-based compensation,” and is also necessary in order to be able to grant our employees incentive stock options (or ISOs).

As of March 31, 2004, 22,604,921 shares of Common Stock were reserved for issuance upon the exercise of stock options then outstanding and 4,975,908 shares of Common Stock were available for future grant under the Company’s stock incentive plans. The outstanding options have a weighted average exercise price of $14.17 and an average term to expiration of 6.88 years.

The Board of Directors recommends a vote for the adoption of this proposal.

Summary of the Incentive Plan

The following summary describes the material terms of the Incentive Plan but is qualified in its entirety by reference to the Incentive Plan, a copy of which is attached as Annex B to this Proxy Statement. Capitalized terms not otherwise defined in this summary have the meanings given to them in the text of the Incentive Plan.

Administration. The Incentive Plan will be administered by the Compensation Committee, which will consist of at least three directors who are intended to be “non-employee directors” as defined in Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and “outside directors” within the meaning of Section 162(m) of the Code. The Compensation Committee has the authority to determine the recipients of Awards (as defined below), the timing of Awards and the type, size and terms of each Award. It also has the authority to construe, interpret and implement the Incentive Plan, including adopting rules thereunder.

Shares Available Under the Incentive Plan. The total number of shares of Common Stock available for Awards under the Incentive Plan is 2,500,000 shares. These shares may consist of authorized and unissued shares or treasury shares. The maximum number of shares of Common Stock subject to all Awards that may be awarded to any participant in the Incentive Plan may not exceed 1,000,000 during any calendar year (the “Individual Limit”). These numbers may be adjusted upon changes in the capitalization of the Company. In addition, if any shares subject to an Award are forfeited or such Award otherwise terminates without the issuance of such shares or the payment of other consideration in lieu of such shares, the shares subject to such Award, to the extent of any such forfeiture or termination, will again be available for Awards under the Incentive Plan. Lastly, any shares issued by the Company through the assumption or substitution of outstanding grants from an acquired company do not (i) reduce the shares available for Awards under the Incentive Plan or (ii) count against the Individual Limit.

Eligibility. Employees or consultants of the Company or any of its subsidiaries or affiliates and non-employee directors of the Company selected by the Compensation Committee are eligible to receive Awards under the Incentive Plan (each, a “Plan Participant”). In each fiscal year of the Company, each non-employee director shall receive options to purchase not more than 27,000

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shares of Common Stock. As of March 31, 2004, the Company estimates that it had approximately 4,700 employees, consultants and non-employee directors. As of that date, no Awards had been made under the Incentive Plan, and it is not possible to determine the benefits or amounts that will be received by any particular employee, consultant, non-employee director or group of them in the future.

Awards Under the Incentive Plan. The Incentive Plan provides, in general, for grants of incentive stock options described in Code Section 422 (“ISOs”), options to acquire Common Stock that do not qualify as ISOs (“Nonqualified Options”, and, together with ISOs, “Options”), stock appreciation rights (“SARs”), restricted stock (“Restricted Stock”) and deferred stock (“Deferred Stock”) (each of the foregoing grants, an “Award”). Awards may be granted alone or in tandem, and on such terms and conditions as the Compensation Committee determines, subject to certain limitations contained in the Incentive Plan.

Options and SARs. An Option Award is the right to purchase a specified number of shares of Common Stock, Deferred Stock or Restricted Stock (as selected by the Compensation Committee) from the Company for a specified time period at a fixed price. The option agreement will specify when an Option may be exercised and conditions applicable to it. The exercise price of each Option will be determined by the Compensation Committee, but the exercise price of an ISO must not be less than the Fair Market Value (as defined in the Incentive Plan) of a share of Common Stock on the grant date. The exercise price of an ISO granted to a person who owns, directly or indirectly, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or a subsidiary (“Ten Percent Shareholder”) must not be less than 110% of the Fair Market Value of a share of Common Stock on the date of grant. If granted expressly in lieu of cash compensation, the exercise price of a Non-Qualified Option may be set at a discount of not more than 15% from Fair Market Value on the grant date.

Except as provided in an Option agreement, the option price of the shares of Common Stock upon the exercise of an Option is to be paid in full at the time of the exercise, in cash, in shares of Common Stock valued at Fair Market Value on the date of exercise or a combination of cash and such shares of Common Stock, or through a cashless exercise method; provided, however, that shares used for payment must be shares of Common Stock held by the optionee for more than six months. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. With the consent of the Compensation Committee, payment upon the exercise of a Non-Qualified Option may be made in whole or in part by Restricted Stock. In such case the Common Stock to which the Option relates shall be subject to the same forfeiture restrictions originally imposed on the Restricted Stock exchanged therefor. The Committee may prescribe any other method of payment that it determines to be consistent with applicable law and the purpose of the Incentive Plan.

A SAR Award is the right to receive a payment in cash, Common Stock, Restricted Stock or Deferred Stock (as selected by the Compensation Committee) equal to the increase in the Fair Market Value of a specified number of shares of Common Stock from the date of grant of the SAR to the date of exercise. A SAR may be granted in tandem with an Option (“Tandem SAR”) or separately (“Freestanding SAR”). A Tandem SAR may be granted at the time of the Option grant or at any time during the Option term, and will be exercisable to the extent that the related Option is exercisable. Upon exercise of a SAR, a Plan Participant will receive an amount equal to the excess of the Fair Market Value of the shares of Common Stock covered by the SAR on the exercise date over the SARs base price, which will be (i) the related Option price, in case of a Tandem SAR, and (ii) as determined by the Committee (but not less than 85% of the Fair Market Value of the Common Stock on the grant date) in the case of a Freestanding SAR.

The term of an Option or a SAR may not be greater than 10 years, except that the term of an ISO granted to a Ten Percent Shareholder may not be greater than five years. No SAR can be exercised within the first six months of its grant. If a Plan Participant’s service with the Company or its affiliates terminates by reason of death or disability, all unexercised Options and SARs held by him or her become immediately exercisable, unless otherwise specified in the Award agreement. If a Plan Participant’s service with the Company or its affiliates terminates for any other reason, all unexercised Options and SARs held by him or her terminate on the date specified in the Award agreement or, if none is specified, 90 days after such termination of service, except that all unexercised Options and SARs held by a non-employee director terminate on the date specified in the Award agreement, or, if none is specified, three years after such termination of service. However, the Compensation Committee may extend the period during which a Plan Participant may exercise an Option or SAR for not more than three years after termination of his or her service with the Company or its affiliates.

Deferred Stock and Restricted Stock. Deferred Stock Awards are agreements by the Company to deliver a specified number of shares of Common Stock at the end of a specified deferral period. Dividends declared during the deferral period with respect to shares covered by a Deferred Stock Award may or may not be paid, deferred or reinvested as determined by the Compensation Committee and specified in the Deferred Stock agreement. The deferral period, which is determined by the Compensation Committee, shall provide a three-year minimum period before a deferred stock award shall be fully delivered. The Committee may condition the grant of Deferred Stock Awards or the expiration of the deferral period upon the holder’s achievement of specified performance goals. The Committee may accelerate the delivery of Deferred Stock Awards or waive the deferral limitations on such Awards in certain circumstances including, among others, a holder’s death, disability or a Change in Control.

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Restricted Stock Awards are grants of shares of Common Stock that are subject to forfeiture upon the happening of specified events. Restricted Stock Awards will be evidenced by Restricted Stock agreements. Unless otherwise determined by the Compensation Committee, during the restriction period the holder will have the right to receive dividends from and vote the shares of Restricted Stock. The restriction period, which is determined by the Committee, shall provide a three-year minimum period before a restricted stock award shall fully vest. The Committee may condition the grant of Restricted Stock Awards or the expiration of the restriction period upon the holder’s achievement of specified performance goals. The Committee also may modify or accelerate the vesting and delivery of shares of Restricted Stock in certain circumstances including, among others, a holder’s death, disability or a Change in Control.

Performance Based Awards. The Compensation Committee may condition the grant of any Award or the lapse of any Deferral or Restriction Period (or any combination thereof) upon the holder’s achievement of a “performance goal” that is established by the Compensation Committee before the grant of the Award. For this purpose, a “Performance Goal” means a goal that must be met by the end of a period specified by the Compensation Committee (but that is substantially uncertain to be met before the grant of the Award) based upon: (i) the price of Common Stock; (ii) the market share of the Company, its subsidiaries or affiliates (or any business unit thereof); (iii) sales by the Company, its subsidiaries or affiliates (or any business unit thereof); (iv) earnings per share of Common Stock; (v) pre-tax or net income of the Company, its subsidiaries or affiliates (or any business unit thereof); (vi) net revenue, operating income, or cash flow of the Company, its subsidiaries, or affiliates (or any business unit thereof); (vii) return on assets, investments or shareholder equity of the Company; or (viii) costs of the Company, its subsidiaries or affiliates (or any business unit thereof). An Award that is subject to the achievement of a Performance Goal is, for the purposes of the Incentive Plan, referred to as a “Performance Based Award.” The Committee has discretion to determine the specific targets with respect to each of these categories of Performance Goals. Before granting an Award or permitting the lapse of any Deferral or Restriction Period, the Committee must certify that an individual has satisfied the applicable Performance Goal. In its discretion, the Committee may reduce the amount available to vest, become exercisable or be delivered or paid under any Performance Based Award based on factors it determines appropriate.

In general, payments under Performance Based Awards are intended to constitute qualified performance-based compensation which, if received by an employee (a “Section 162(m) Covered Employee”) covered by Section 162(m) of the Code (“Section 162(m)”) (generally, the Company’s Chief Executive Officer and four other highest paid executive officers), would be excluded from the Section 162(m) limit on deductibility.

Transferability. In general, Awards may not be pledged, assigned or transferred for any reason during the holder’s lifetime. The Compensation Committee may grant Awards (except ISOs) that are transferable by the holder during his lifetime, provided that the transferee of the holder is subject to the provisions of the agreement between the Company and the holder.

Adjustment upon a Change in Control. Upon the occurrence of any “change in control” of the Company (as defined in the Incentive Plan), other than a “hostile change in control” (as defined in the Incentive Plan), the Committee may elect to provide that all outstanding Options and SARs will immediately vest and become exercisable, each Deferral Period and Restriction Period will immediately lapse or all shares of Deferred Stock subject to outstanding Awards will be issued and delivered to holders. In the event of “hostile change in control,” each of the foregoing actions would occur automatically upon such change in control. Before any change in control, the Committee may, without the consent of any holder of an Option or SAR, (i) require the entity effecting a change in control to assume all outstanding Options and SAR or substitute equivalent options and stock appreciation rights, or (ii) terminate and cancel all outstanding Options and SARs upon the change in control and cause the payment to each holder of Options and SARs a cash amount calculated in accordance with the Incentive Plan.

Adjustments Upon Changes in Capitalization. In the event of a reorganization, recapitalization, stock split, spin-off, split-off, split-up, stock dividend, issuance of stock rights, combination of shares, merger, consolidation or any other change in the corporate structure of the Company affecting Common Stock, or any distribution to shareholders other than a regular cash dividend, the Board may make appropriate adjustment in the number and kind of shares authorized by the Plan, the Individual Limit, and any adjustments to outstanding Awards as it determines appropriate. No fractional shares of Common Stock will be issued as a result of such adjustment, and the Committee may determine to pay the Fair Market Value of any fractional shares resulting from such adjustments in cash.

Tax Withholding. In connection with the transfer of shares of Common Stock as a result of the exercise or vesting of an Award or upon any other event that would subject the holder of the Award to taxation, the Company will have the right (a) (1) to require the holder to pay an amount in cash or (2) to retain or sell without notice, or to demand surrender of, shares of Common Stock in value sufficient to cover the minimum amount of any tax, including any Federal, state or local income tax, required by any governmental entity to be withheld or otherwise deducted and paid with respect to such transfer (“Withholding Tax”), and (b) to make payment (or to reimburse itself for payment made) to the appropriate taxing authority of an amount in cash equal to the amount of such Withholding Tax, remitting any balance to the holder.

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Effective Date, Termination and Amendment. The Incentive Plan will become effective upon approval by the shareholders of the Company and will remain in effect until the earlier of June 14, 2014 or the date it is terminated by the Board. The Board shall have the power to amend, suspend or terminate the Plan at any time, provided that no such amendment shall be made without shareholder approval which shall (i) increase (with certain exceptions) the number of shares available for issuance under the Incentive Plan, (ii) reduce the exercise price of outstanding Options or SARs or cancel or amend outstanding Options or SARs for the purpose of repricing, replacing, or regranting such Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; (iii) modify the Individual Limit (with certain exceptions), (iv) change the class of individuals eligible to receive an Award, or (v) materially change the provision of the Incentive Plan setting forth the types of amendments requiring shareholders approval.

Certain Federal Income Tax Consequences

Set forth below is a general summary of certain of the principal federal income tax consequences to Plan Participants and the Company of Awards under the Incentive Plan. The following discussion is general in nature and is not intended to be a complete analysis of all potential tax consequences to Plan Participants or the Company of such Awards. This discussion is based on the Code as currently in effect.

Options. The grant of a Nonqualified Option will not result in the recognition of taxable income by the Plan Participant or a deduction to the Company. Ordinary income generally will be recognized by Plan Participants at the time the Nonqualified Option is exercised. The amount of such income generally will be equal to the excess of the fair market value of the shares on the exercise date over the exercise price. The Company will generally be entitled to a deduction at the same time and in the same amount as the Plan Participant recognizes ordinary income in connection with the exercise of a Nonqualified Option (subject to the satisfaction of Section 162(m) of the Code, in the case of Options subject thereto, and Section 280G of the Code). Gain or loss upon a subsequent sale of any Common Stock received upon the exercise of a Nonqualified Option generally would be taxed as capital gain or loss (long-term or short-term, depending upon the holding period of the Common Stock sold).

ISOs are intended to be incentive stock options under the Code. Upon the grant or exercise of an incentive stock option complying with the Code, the Plan Participant does not realize income and the Company is not entitled to any deduction. However, the excess of the fair market value of the Common Stock as of the exercise date over the exercise price will constitute an adjustment to the Plan Participant’s taxable income for purposes of the alternative minimum tax. If the shares of Common Stock are not disposed of within the one-year period beginning on the Option exercise date, or within the two-year period beginning on the Option grant date, any profit realized by the Plan Participant upon such disposition will be taxed as capital gain and the Company will receive no deduction. If the shares of Common Stock are disposed of within the one-year period from the date of Option exercise or within the two-year period from the Option grant date, the excess of the fair market value of the shares on the exercise date or generally, if less, the fair market value on the disposition date, over the exercise price will be taxable as ordinary income of the Plan Participant at the disposition date, and the Company will be generally entitled to a corresponding deduction (subject to the satisfaction of Section 162(m) of the Code, in the case of Options subject thereto, and Section 280G of the Code).

If a Section 162(m) Covered Employee’s taxable compensation from the Company in any year (including compensation related to Options) exceeds $1,000,000, such compensation in excess of $1,000,000 may not be tax-deductible by the Company under Section 162(m). Section 162(m) Covered Employees are determined at the end of the Company’s taxable year. Excluded from the calculation of taxable compensation for this purpose is compensation that is “performance-based” within the meaning of Section 162(m). Compensation realized upon the exercise of an Option granted under the Incentive Plan with an exercise price of not less than Fair Market Value on the grant date is intended to qualify as “performance-based” under Section 162(m) so that such compensation may be deductible without regard to the limits of Section 162(m).

If an Option is exercised through the use of Common Stock previously owned by the employee, such exercise generally will not be considered a taxable disposition of the previously owned shares and, thus, no gain or loss will be recognized with respect to such shares upon such exercise. However, if the previously owned shares were acquired by the exercise of an ISO or other tax-qualified stock option and the holding period requirement for those shares was not satisfied at the time they were used to exercise an ISO, such use would constitute a disqualifying disposition of such previously owned shares which may result in the recognition of ordinary income in the amount described above. If an otherwise qualifying ISO first becomes exercisable in any one year for shares having a value in excess of $100,000 (grant date value), the portion of the option in respect of such excess shares will be treated as a Nonqualified Option.

Stock Appreciation Rights. No income will be recognized by a Plan Participant who is awarded an SAR until cash, Restricted Stock or Deferred Stock representing the amount of the appreciation are transferred to the Plan Participant pursuant to exercise of the SAR. If the settlement or vesting of Common Stock transferred upon exercise is deferred following the date of exercise, income recognition will generally be deferred until the date of vesting. The amount of income will equal the amount of cash or fair market value of Common Stock delivered to the Plan Participant and will be ordinary income. The Company will generally be entitled to a deduction at the same time and in the same amount (subject to the satisfaction of Section 162(m) of the Code, in the case of SARs

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subject thereto, and Section 280G of the Code). Compensation realized upon the exercise of an SAR granted under the Incentive Plan with an exercise price or base price, as the case may be, of not less than Fair Market Value on the grant date is intended to qualify as “performance based” under Section 162(m) so that compensation may be deductible without regard to the limits of Section 162(m).

Restricted Stock and Deferred Stock. A Plan Participant who is awarded Restricted Stock or Deferred Stock will not be taxed at the time of grant unless, in the case of Restricted Stock, the Plan Participant makes a special election with the Internal Revenue Service pursuant to Section 83(b) of the Code, as discussed below. Upon lapse of the restrictions on transferability applicable to the Restricted Stock or upon the expiration of the deferral period applicable to Deferred Stock, the Plan Participant will recognize ordinary income on the then fair market value of the Restricted Stock or Deferred Stock and a corresponding deduction will generally be allowable to the Company (subject to the satisfaction of an exclusion from Section 162(m) limit in the case of Restricted Stock or Deferred Stock held by Section 162(m) Covered Employees and to Section 280G of the Code). In such case, the Plan Participant’s basis in the Common Stock will be equal to the ordinary income so recognized. Upon subsequent disposition of such Common Stock, the Plan Participant will realize long-term or short-term capital gain or loss.

Pursuant to Section 83(b) of the Code, the Plan Participant may elect (a “Section 83(b) Election”) within 30 days of the grant of Restricted Stock to recognize ordinary income in an amount equal to the fair market value of the Restricted Stock at the time of grant (determined without regard to any restrictions which may lapse). In that case, the Plan Participant will acquire a tax basis in such Common Stock equal to the ordinary income recognized by the Plan Participant on the grant date. No tax will be payable upon lapse or release of the restrictions or at the time the Restricted Stock first becomes transferable, and any gain or loss upon subsequent disposition will be a capital gain or loss. In the event of a forfeiture of Restricted Stock with respect to which a Plan Participant previously made a Section 83(b) Election, the Plan Participant will not be entitled to a loss deduction.

Change in Control Payments. If any payments under the Incentive Plan are contingent on a change in control within the meaning of Section 280G of the Code (which could include, for example, the accelerated vesting of Options upon a change in control), then the Company may be denied an income tax deduction and the Plan Participant may be subject to a 20 percent excise tax in addition to income taxes which may otherwise be imposed on a portion of such payments. (See “Employment Agreements” and “Severance Benefits Following a Change in Control”).

Other. The closing price of a share of Common Stock on the NASDAQ on April 27, 2004 was $17.98 per share.

Proposal No. 3—Ratification of Engagement of Independent Auditors

Shareholders will be requested at the Annual Meeting to ratify the engagement of Deloitte & Touche LLP (“D&T”) to serve as independent auditors of the Company for the year ending January 31, 2005. D&T has served as the Company’s auditors since 1988. A representative of the firm is expected to be present at the Annual Meeting and will be available to respond to appropriate questions.

The Board of Directors recommends a vote for the adoption of this proposal.

Independent Accounting Firm Fees

The following table sets forth the approximate aggregate amount of fees billed by D&T to the Company and its subsidiaries (including Comverse, Verint, Ulticom, Starhome, Startel and CTI Capital) for the audit of the Company’s annual financial statements for fiscal 2003 and fiscal 2002 and fees billed for audit-related services, tax services and all other services rendered by D&T for fiscal 2003 and fiscal 2002:

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Consistent with SEC policies regarding auditors’ independence, the Company and the Audit Committee are committed to ensuring the independence of the independent auditors, both in appearance and in fact. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services, and other non-audit services.

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Shareholder Proposals for 2005 Annual Meeting

The Company currently expects to hold its next Annual Meeting of Shareholders on or about June 15, 2005. Any shareholder who wishes to make a proposal for consideration at that meeting and wishes to have that proposal included in the proxy statement for the meeting must submit the proposal to the Secretary of the Company no later than December 29, 2004. Such a proposal will be included in next year’s proxy statement to the extent required by the regulations of the Securities and Exchange Commission. If a shareholder makes a proposal at the 2005 Annual Meeting, but does not wish to have the proposal included in the proxy statement for that meeting, management will have the right to vote proxies in its discretion with respect to such proposal, if presented at the meeting, without including information regarding such proposal in the Company’s proxy materials if the Company is notified after March 10, 2005 (if such meeting is held on the date expected) of an intent to present the proposal. Notices of intention to present proposals at the 2005 Annual Meeting should be addressed to the Secretary of the Company.

Shareholders who wish to recommend individuals as nominees for director for consideration by the Corporate Governance and Nominating Committee may do so by submitting a written recommendation to the Secretary of the Company. Submissions must include sufficient biographical information concerning the recommended individual, including age, employment and board memberships (if any), for the Committee to consider. The submission must be accompanied by a written consent by the nominee to stand for election if nominated by the Board of Directors and to serve if elected by the shareholders. Recommendations received by January 15, 2005 will be considered for nomination at the 2005 Annual Meeting of Shareholders.

Other Business

The Board of Directors does not know of any matter to be brought before the Annual Meeting other than the matters specified in the Notice of Annual Meeting accompanying this Proxy Statement. The persons named in the form of proxy solicited by the Board of Directors will vote all proxies that have been properly executed. If any matters not set forth in the Notice of Annual Meeting are properly brought before the Annual Meeting, such persons will vote thereon in accordance with their best judgment.

Woodbury, New York

May 3, 2004

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Annex A

COMVERSE TECHNOLOGY, INC.

AUDIT COMMITTEE CHARTER

This Charter is intended as a component of the flexible framework within which the Board, assisted by its committees, directs the affairs of the Company. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, as well as in the context of the Company’s Certificate of Incorporation and By-Laws, it is not intended to establish by its own force any legally binding obligations.

The Audit Committee (the “Committee”) shall assist the Board of Directors (the “Board” or the “Board of Directors”) of Comverse Technology, Inc. (the “Company”) in fulfilling certain of its responsibilities to oversee management regarding: (i) overseeing the conduct and integrity of the Company’s financial reporting process to any governmental or regulatory body, the public or other users thereof; (ii) overseeing the Company’s compliance with legal and regulatory requirements, (iii) reviewing and evaluating the qualifications, engagement, compensation, independence and performance of the Company’s independent auditors, their conduct of the annual audit, and their engagement for any other services; (iv) reviewing the performance of the Company’s internal audit function, if applicable, and its systems of internal accounting and financial and disclosure controls, (v) reviewing and authorizing related-party transactions (as defined in the relevant NASDAQ requirements), (vi) overseeing the Company’s code of business conduct and ethics as established by the Board, and (vii) preparing the Committee report required to be included in the Company’s annual proxy statement.

In discharging its oversight role, the Committee is authorized: (i) to investigate any matter that the Committee deems appropriate, with access to all books, records, facilities and personnel of the Company; and (ii) to retain independent counsel, auditors or other experts, with adequate funding provided by the Company.

The Committee shall be comprised of three or more members of the Board of Directors, each of whom is determined by the Board of Directors to be “independent” in accordance with applicable rules of the Securities & Exchange Commission (“SEC”) and the rules of the Nasdaq National Market. All members of the Committee shall meet the financial literacy requirements of the Nasdaq National Market. In addition, at least one member shall comply with the requirements of Regulation S-K 401(h) as an “audit committee financial expert.”

The members of the Committee shall be elected by the Board and serve until their successors shall be duly elected and qualified. Any member may be removed, with or without cause, by the Board of Directors at any time. The Board of Directors may appoint one member to be the Chairman. If the Board fails to appoint a Chairman, the members of the Committee shall elect a Chairman by majority vote of all members. The Chairman will chair all regular sessions of the Committee and set the agenda for Committee meetings.

The Committee shall meet at least quarterly, or more frequently as it deems appropriate and as circumstances dictate. Any member of the Committee may call a special meeting of the Committee. Meetings of the Committee may be held telephonically.

The Committee shall periodically meet with each of management (including the Chief Financial Officer) and the independent auditors (including the audit engagement partner) in separate executive sessions to discuss any matters that the Committee or each of these groups believe would be appropriate to discuss privately. The Committee also expects to meet with the independent auditors and management quarterly to review the company’s financial statements.

In addition, the Committee may invite to its meetings any director, member of management of the company and such other persons as it deems appropriate in order to carry out its responsibilities. The Committee may also exclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.

A-1

The Committee’s primary responsibility is one of oversight, and it recognizes that the Company’s management is responsible for preparing the Company’s financial statements and that the independent auditors are responsible for auditing those financial statements. The Committee also recognizes that the Company’s financial management, as well as the independent auditors, have more time, knowledge and more detailed information on the Company than do Committee members. Consequently, in carrying out its oversight responsibilities, the Committee is not providing any expert or special assurance as to the Company’s financial statements or any professional certification as to the independent auditors’ work. The Committee shall also carry out any other responsibilities assigned to it by the Board of Directors from time to time.

The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services provided that the decisions of such subcommittee to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting.

The following responsibilities are set forth as a guide with the understanding that the Committee may diverge as appropriate given the circumstances. The Committee is authorized to carry out these and such other responsibilities assigned by the Board from time to time, and take any actions reasonably related to the mandate of this Charter.

In fulfilling its responsibilities, the Committee shall:

Independent Auditors

A-2

Financial Reporting Process

Review of Reports and Earnings Press Releases

Legal Compliance

A-3

General

Annual Self-Evaluation

A-4

Annex B

COMVERSE TECHNOLOGY, INC.

2004 STOCK INCENTIVE COMPENSATION PLAN

The purposes of the Plan are to assist the Company, its Subsidiaries and Affiliates in attracting and retaining valued Directors, Employees and Consultants, to align their respective interests with shareholders’ interests through equity-based compensation and to permit the granting of awards that is intended to constitute performance-based compensation for certain executive officers under Section 162(m) of the Code.

B-1

B-2

B-3

An Award of Deferred Stock is an agreement by the Company to deliver to the recipient a specified number of shares of Common Stock at the end of a specified deferral period or periods. Such an Award shall be subject to the following terms and conditions.

B-4

An Award of Restricted Stock is a grant by the Company of a specified number of shares of Common Stock to the Employee or Consultant, which shares are subject to forfeiture upon the happening of specified events. Such an Award shall be subject to the following terms and conditions:

Options give an Employee, Consultant or Director the right to purchase a specified number of shares of Common Stock, Deferred Stock or Restricted Stock (as selected by the Committee) from the Company for a specified time period at a fixed price. Options granted to Employees may be either Incentive Stock Options or Non-Qualified Options. Option granted to Directors and Consultants shall be Non-Qualified Options. The grant of Options shall be subject to the following terms and conditions:

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B-6

SARs are rights to receive a payment in cash, Common Stock, Restricted Stock or Deferred Stock (as selected by the Committee) equal to the increase in the Fair Market Value of a specified number of shares of Common Stock from the date of grant of the SAR to the date of exercise. The grant of SARs shall be subject to the following terms and conditions:

In the event of a reorganization, recapitalization, stock split, spin-off, split-off, split-up, stock dividend, issuance of stock rights, combination of shares, merger, consolidation or any other change in the corporate structure of the Company affecting Common Stock, or any distribution to shareholders other than a regular cash dividend, the Board shall make appropriate adjustment in the number and kind of shares authorized by the Plan, the Individual Limit set forth in Section 5.2, and any adjustments to outstanding Awards as it determines appropriate. No fractional shares of Common Stock shall be issued pursuant to such an adjustment. The Committee may determine to pay the Fair Market Value of any fractional shares resulting from adjustments pursuant to this Section in cash to the Holder.

Except as otherwise provided in an applicable agreement, upon the occurrence of a Change in Control (other than a Hostile Change in Control), the Committee may elect to provide that all outstanding Options and SARs shall immediately vest and become exercisable, each Deferral Period and Restriction Period shall immediately lapse or all shares of Deferred Stock subject to outstanding Awards shall be issued and delivered to the Holder. In the event of a Hostile Change in Control, each of the foregoing actions shall occur automatically upon the occurrence of such Hostile Change in Control. At any time before a Change in Control, the Committee may, without the consent of any Holder of an Option, (i) require the entity effecting the Change in Control or a parent or subsidiary of such entity to assume each outstanding Option and SAR or substitute an equivalent option or stock appreciation right therefor or (ii) terminate and cancel all outstanding Options and SARs upon the Change in Control and cause the payment to the Holder of each such Option or SAR, cash equal to the product of (x) the difference between the Fair Market Value of Common Stock on the date of the Change in Control and the exercise price (or base price) of such Option or SAR and (y) the number of shares of Common Stock subject to such Option or SAR. For the purposes of this Section, an Option or SAR shall be considered assumed if, following the closing of the Change in Control transaction, the Option or SAR confers the right to purchase (or determines appreciation), for each share of Common Stock subject to the Option or SAR immediately prior to the closing of such transaction, the

B-7

consideration (whether stock, cash, or other securities or property) received in such transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in such Change in Control transaction was not solely common stock of the successor corporation or its parent, the Committee may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or SAR, for each share of Common Stock subject to the Option or SAR, to be solely (or to be based solely on) common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of Common Stock in such transaction.

The Plan shall become effective upon approval of the Plan by the shareholders of the Company and shall remain in full force and effect until the earlier of June 14, 2014 or the date it is terminated by the Board. The Board shall have the power to amend, suspend or terminate the Plan at any time, provided that no such amendment shall be made without shareholder approval which shall:

Termination of the Plan pursuant to this Section 12 shall not affect Awards outstanding under the Plan at the time of termination.

Except as provided below, Awards may not be pledged, assigned or transferred for any reason during the Holder’s lifetime, and any attempt to do so shall be void. The Committee may grant Awards (except Incentive Stock Options) that are transferable by the Holder during such Holder’s lifetime, but such Awards shall be transferable only to the extent specifically provided in the agreement entered into with the Holder. The transferee of the Holder shall, in all cases, be subject to the provisions of the agreement between the Company and the Holder.

B-8

B-9

¨                

COMVERSE TECHNOLOGY, INC.

170 Crossways Park Drive

Woodbury, New York 11797

Proxy for Annual Meeting of Shareholders on June 15, 2004

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF

COMVERSE TECHNOLOGY, INC.

The undersigned having received the Notice of Meeting and Proxy Statement of Comverse Technology, Inc. (the “Company”), dated May 3, 2004, and Annual Report for the fiscal year ended January 31, 2004, hereby appoints and constitutes Kobi Alexander, David Kreinberg and William Sorin, and each of them, proxies with full power of substitution to vote for the undersigned at the Company’s Annual Meeting of Shareholders to be held on June 15, 2004, and at any adjournments thereof (the “Annual Meeting”), as follows and in their discretion upon any other matters that may properly come before the Annual Meeting:

(Continued and to be signed on the reverse side)

		14475

ANNUAL MEETING OF SHAREHOLDERS OF

COMVERSE TECHNOLOGY, INC.

June 15, 2004

Please date, sign and mail

your proxy card in the

envelope provided as soon

as possible.

		Please detach along perforated line and mail in the envelope provided.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2 AND 3.

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE  x