---

---

# UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 20-F/A
(Amendment No. 1)

(Mark
One)

|o | Registration statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of
1934
|- | ----------------------------------------------------------------------------------------------

or

|x | Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of           1934
|- | ----------------------------------------------------------------------------------------------

For the fiscal year ended December
31, 2007

or

|o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

or

|o | Shell Company pursuant to Section 13 or is (d) of the Securities Exchange Act of 1934 \
Date of event requiring this shall Company report ___________
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------

For the transition period from
________ to ________

Commission file number
000-30664

Camtek Ltd.
(Exact
name of Registrant as specified in its charter)

Israel
(Jurisdiction of
incorporation or organization)

Ramat Gavriel
Industrial Zone, P.O. BOX 544, Migdal HaEmek, Israel
(Address of principal
executive offices)

Raanan Dekel, Telephone: (972) (4) 6048100, Facsimile: (972) (4) 6440523, E-mail:
raanand@camtek.co.il,
Ramat Gavriel Industrial
Zone, P.O. BOX 544, Migdal HaEmek, Israel
(Name, Telephone, Facsimile, E-Mail and Address of Company Contact Person)

Securities
registered or to be registered pursuant to Section 12(b) of the Act:
Ordinary
Shares, nominal value 0.01 New Israeli Shekel per share
(Title of each Class)

Nasdaq Global Market
(Name of each Exchange
on which registered)



---

---

Securities
registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

Securities for
which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)

Indicate the number of outstanding
shares of each of the issuers classes of capital or common stock as of the close of
the period covered by the annual report:

30,133,715 Ordinary
Shares, par value NIS 0.01

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes              xNo

If this report is an annual or
transition report, indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes              x No

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

x Yes     o No

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.

o Large Accelerated Filer               o Accelerated Filer     x Non-Accelerated Filer

Indicate by check mark which basis of
accounting the registrant has used to prepare the financial statements included in this
filing:

US GAAP x

International Financial Reporting
Standards as issued by the International Accounting Standards Board o

Other o

If
Other has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to follow.

Item 17 o Item 18 o

If this is an annual report, indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

o Yes              xNo



---

---

# EXPLANATORY NOTE

This
Amendment No. 1 to the Annual Report on Form 20-F for the fiscal year ended December 31,
2007 (the Annual Report) is being filed by Camtek Ltd. (the
Registrant) with the Securities and Exchange Commission for the sole purpose
of filing the audit report of Brightman Almagor & Co. and Goldstein Sabo Tevet in Item
18 of the Annual Report.

This
Amendment No. 1 consists of a cover page, this explanatory note, the financial statements,
as amended, required by Item 18, the exhibit index, the signature page and the required
certifications of the principal executive officer and principal financial officer of the
Registrant.

Other
than expressly set forth herein, this Amendment No. 1 does not, and does not purport to,
amend or restate any other information contained in the Annual Report nor does this
Amendment No. 1 reflect any events that have occurred after the Annual Report was filed.



---

---

|Item 18. |  | Consolidated Financial Statements.
|-------- |  | ----------------------------------

CAMTEK
LTD. 
and its subsidiaries

Consolidated
Financial Statements 
As of and for the year 
ended December 31, 2007

---

---

CAMTEK LTD. and its subsidiaries

INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                         |                
|-------------------------------------------------------- | ---------------
|                                                         | Page           
|                                                         |                
|                                                         |                
|Report of Independent Registered
 Public Accounting Firm | F  2          
|                                                         |                
|Consolidated Balance Sheets                              | F  3          
|                                                         |                
|Consolidated Statements of
 Operations                   | F  4          
|                                                         |                
|Consolidated Statements of
 Comprehensive Income (Loss)  | F  5          
|                                                         |                
|Consolidated Statements of
 Shareholders Equity         | F  6          
|                                                         |                
|Consolidated Statements of Cash
 Flows                   | F  7 to F  8 
|                                                         |                
|Notes to Consolidated Financial
 Statements              | F  9 to F  33
|                                                         |                

---

---

Report of Independent Registered Public Accounting FirmTo the Board of Directors and Shareholders of
Camtek Ltd.

We have audited the accompanying
consolidated balance sheets of Camtek Ltd. and subsidiaries (the Company) as
of December 31, 2007 and 2006, and the related consolidated statements of operations,
comprehensive income (loss), shareholders equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of Camtek Ltd. and subsidiaries as of December 31, 2007 and 2006, and
the results of their operations and their cash flows for the years then ended in
conformity with U.S. generally accepted accounting principles.

As discussed in Note 2Q to the
consolidated financial statements, effective January 1, 2006, the Company adopted the fair
value method of accounting for stock-based compensation as required by Statement of
Financial Accounting Standard No. 123R  Share Based Payment.

/s/ Somekh ChaikinSomekh Chaikin
Certified Public Accountants (Israel)
Member firm of KPMG International

Tel Aviv, Israel

June 30, 2008



---

---

# REPORT OF INDEPENDENT
REGISTRATED PUBLIC ACCOUNTING FIRMS

To the Shareholders of 
Camtek Ltd.

We have audited the accompanying
consolidated balance sheets of Camtek Ltd. (the Company) and its
subsidiaries as of December 31, 2005 and 2004, and the related consolidated
statements of operations, shareholders equity and comprehensive income (loss) and
cash flows for each of the three years then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated
financial statements present fairly, in all material respects, the consolidated financial
position of the Company and its subsidiaries as of December 31, 2005 and 2004 and the
consolidated results of their operations, and their cash flows for each of the three years
then ended, in conformity with U.S. generally accepted accounting principles.

|                                          |                             
|----------------------------------------- | ----------------------------
|
|
|
|
|                                          |                             
|Brightman Almagor & Co.                   | Goldstein Sabo Tevet        
|                                         
|Certified Public Accountants              | Certified Public Accountants
|A member firm of Deloitte Touche Tohmatsu

Tel Aviv, Israel
March 12, 2006.

F - 2

---

---

|                                
|--------------------------------
|CAMTEK LTD. and its subsidiaries
|Consolidated Balance Sheets     
|                                
|(In thousands)                  

|                                                                                                                                                                             |  |                              |        |      |  |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- |  | ------- | -
|                                                                                                                                                                             |  | December
 31,                |       
|                                                                                                                                                                             |  |                              |       
|                                                                                                                                                                             |  | 2007                         |        | 2006 | 
|                                                                                                                                                                             |  |                              |        |      | 
|                                                                                                                                                                             |  | U.S.
 Dollars (In thousands) |       
|                                                                                                                                                                             |  |                              |       
|Assets                                                                                                                                                                       |  |                              |        |      |  |         |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Current
 assets                                                                                                                                                              |  |                              |        |      |  |         |  
|Cash and cash
 equivalents                                                                                                                                                   |  |                              | 18,601 |      |  | 23,358  |  
|Marketable
 securities (Note 3)                                                                                                                                              |  |                              | 1,395  |      |  | 2,099   |  
|Accounts
 receivable, net (Note 11B,C)                                                                                                                                       |  |                              | 23,500 |      |  | 29,434  |  
|Inventories
 (Note 4)                                                                                                                                                        |  |                              | 34,243 |      |  | 41,414  |  
|Due from
 affiliates                                                                                                                                                         |  |                              | 251    |      |  | 180     |  
|Other current
 assets (Note 5)                                                                                                                                               |  |                              | 2,616  |      |  | 2,372   |  
|Deferred tax
 asset (Note 17)                                                                                                                                                |  |                              | 124    |      |  | 65      |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Total current
 assets                                                                                                                                                        |  |                              | 80,730 |      |  | 98,922  |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Fixed
 assets (Note 6)                                                                                                                                                       |  |                              |        |      |  |         |  
|Cost                                                                                                                                                                         |  |                              | 21,632 |      |  | 15,927  |  
|Less -
 Accumulated depreciation                                                                                                                                             |  |                              | 6,307  |      |  | 5,198   |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Fixed assets,
 net                                                                                                                                                           |  |                              | 15,325 |      |  | 10,729  |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Marketable
 securities (Note 3)                                                                                                                                              |  |                              | 1,075  |      |  | -       |  
|Deferred tax
 asset (Note 17)                                                                                                                                                |  |                              | 612    |      |  | 584     |  
|Other assets,
 net (Note 7)                                                                                                                                                  |  |                              | 723    |      |  | 571     |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|                                                                                                                                                                             |  |                              | 2,410  |      |  | 1,155   |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Total
 assets                                                                                                                                                                |  |                              | 98,465 |      |  | 110,806 |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Liabilities
 and shareholders equity                                                                                                                                        |  |                              |        |      |  |         |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Current
liabilities                                                                                                                                                          |  |                              |        |      |  |         |  
|Accounts payable
 trade                                                                                                                                                     |  |                              | 7,960  |      |  | 11,801  |  
|Due to
 affiliates                                                                                                                                                           |  |                              | 866    |      |  | 814     |  
|Convertible loan
  current portion                                                                                                                                          |  |                              | 1,667  |      |  | -       |  
|Other current
 liabilities (Note 8)                                                                                                                                          |  |                              | 11,465 |      |  | 12,831  |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Total current
 liabilities                                                                                                                                                   |  |                              | 21,958 |      |  | 25,446  |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Long
 term liabilities                                                                                                                                                       |  |                              |        |      |  |         |  
|Convertible loan
 (Note 9), net of current portion                                                                                                                           |  |                              | 3,333  |      |  | 5,000   |  
|Liability for
 employee severance benefits (Note 10)                                                                                                                         |  |                              | 268    |      |  | 222     |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Total liabilities                                                                                                                                                            |  |                              | 25,559 |      |  | 30,668  |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Commitments
 and contingencies (Note 11)                                                                                                                                     |  |                              |        |      |  |         |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Shareholders
 equity                                                                                                                                                        |  |                              |        |      |  |         |  
|Ordinary shares
 NIS 0.01 par value, authorized 100,000,000 shares, issued 31,145,334 in 2007
 and 31,052,474 in 2006, outstanding 30,133,715 in 2007 and 30,040,855 in 2006 |  |                              | 132    |      |  | 132     |  
|Additional
 paid-in capital                                                                                                                                                  |  |                              | 59,878 |      |  | 59,420  |  
|Accumulated
 other comprehensive loss                                                                                                                                        |  |                              | -      |      |  | (1      | )
|Retained
 earnings                                                                                                                                                           |  |                              | 13,889 |      |  | 21,580  |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|                                                                                                                                                                             |  |                              | 73,899 |      |  | 81,131  |  
|Treasury stock,
 at cost (1,011,619 shares in 2007 and 2006)                                                                                                                 |  |                              | (993   | )    |  | (993    | )
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Total
 shareholders equity                                                                                                                                                  |  |                              | 72,906 |      |  | 80,138  |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  
|Total
 liabilities and shareholders equity                                                                                                                                  |  |                              | 98,465 |      |  | 110,806 |  
|                                                                                                                                                                             |  |                              |        |      |  |         |  

See accompanying notes to consolidated financial statements

F  3

---

---

|                                     
|-------------------------------------
|CAMTEK LTD.
 and its subsidiaries    
|Consolidated Statements of Operations
|                                     

|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|-------------------------------------------------------- |  | -------------------------------------------------- | ------ | ---- |  | ------- | - |  | ------ | -
|                                                         |  | Year Ended December 31,                            |       
|                                                         |  |                                                    |       
|                                                         |  | 2007                                               |        | 2006 |  | 2005    |  
|                                                         |  |                                                    |        |      |  |         |  
|                                                         |  | U.S. Dollars (In thousands, except per share data) |       
|                                                         |  |                                                    |       
|Revenues:                                                |  |                                                    |        |      |  |         |   |  |        |  
|Sales of products                                        |  |                                                    | 59,654 |      |  | 92,470  |   |  | 56,987 |  
|Service fees                                             |  |                                                    | 11,315 |      |  | 7,585   |   |  | 6,045  |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Total revenues (Note 15)                                 |  |                                                    | 70,969 |      |  | 100,055 |   |  | 63,032 |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Cost of revenues:                                        |  |                                                    |        |      |  |         |   |  |        |  
|Cost of products sold                                    |  |                                                    | 32,769 |      |  | 42,600  |   |  | 28,262 |  
|Cost of services                                         |  |                                                    | 9,171  |      |  | 5,842   |   |  | 4,519  |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Total cost of revenues                                   |  |                                                    | 41,940 |      |  | 48,442  |   |  | 32,781 |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Gross profit                                             |  |                                                    | 29,029 |      |  | 51,613  |   |  | 30,251 |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Research and development costs                           |  |                                                    | 12,111 |      |  | 11,831  |   |  | 8,469  |  
|Selling, general and administrative
 expenses (Note 16A) |  |                                                    | 24,119 |      |  | 27,850  |   |  | 18,760 |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Total operating expenses                                 |  |                                                    | 36,230 |      |  | 39,681  |   |  | 27,229 |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Operating (loss) income                                  |  |                                                    | (7,201 | )    |  | 11,932  |   |  | 3,022  |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Financial expenses, net (Note 16B)                       |  |                                                    | (128   | )    |  | (288    | ) |  | (320   | )
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Income (loss) before income taxes                        |  |                                                    | (7,329 | )    |  | 11,644  |   |  | 2,702  |  
|Income tax expense (Note 17)                             |  |                                                    | (362   | )    |  | (41     | ) |  | -      |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Net income (loss)                                        |  |                                                    | (7,691 | )    |  | 11,603  |   |  | 2,702  |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Earnings (loss) per ordinary share (Note
 14):           |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Basic                                                    |  |                                                    | (0.25  | )    |  | 0.40    |   |  | 0.10   |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Diluted                                                  |  |                                                    | (0.25  | )    |  | 0.39    |   |  | 0.10   |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Weighted average number of ordinary shares
 outstanding: |  |                                                    |        |      |  |         |   |  |        |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Basic                                                    |  |                                                    | 30,145 |      |  | 29,176  |   |  | 27,253 |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  
|Diluted                                                  |  |                                                    | 30,145 |      |  | 29,553  |   |  | 27,586 |  
|                                                         |  |                                                    |        |      |  |         |   |  |        |  

See
accompanying notes to consolidated financial statements

F  4

---

---

|                                                      
|------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                     
|                                                      
|Consolidated Statements of Comprehensive Income (loss)
|                                                      

|                                                                                                      |  |                             |        |      |  |        |   |  |       |  
|----------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- |  | ------ | - |  | ----- | -
|                                                                                                      |  | Year Ended December 31,     |       
|                                                                                                      |  |                             |       
|                                                                                                      |  | 2007                        |        | 2006 |  | 2005   |  
|                                                                                                      |  |                             |        |      |  |        |  
|                                                                                                      |  | U.S. Dollars (In thousands) |       
|                                                                                                      |  |                             |       
|                                                                                                      |  |                             |        |      |  |        |   |  |       |  
|Net income (loss)                                                                                     |  |                             | (7,691 | )    |  | 11,603 |   |  | 2,702 |  
|                                                                                                      |  |                             |        |      |  |        |   |  |       |  
|Other comprehensive income:                                                                           |  |                             |        |      |  |        |   |  |       |  
|                                                                                                      |  |                             |        |      |  |        |   |  |       |  
|Realization of loss on available for sale
 securities, net of taxes (nil)                             |  |                             | 1      |      |  | 2      |   |  | -     |  
|                                                                                                      |  |                             |        |      |  |        |   |  |       |  
|Unrealized holding loss on available for
 sale securities arising during the year, net of taxes (nil) |  |                             | -      |      |  | (1     | ) |  | (2    | )
|                                                                                                      |  |                             |        |      |  |        |   |  |       |  
|                                                                                                      |  |                             |        |      |  |        |   |  |       |  
|Comprehensive income (loss)                                                                           |  |                             | (7,690 | )    |  | 11,604 |   |  | 2,700 |  
|                                                                                                      |  |                             |        |      |  |        |   |  |       |  

See
accompanying notes to consolidated financial statements

F  5

---

---

|                                                
|------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries               
|Consolidated
 Statements of Shareholders Equity
|                                                

|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |   |  |        |   |  |      |   |  |        |  
|--------------------------------------------------------- |  | ----------------------------------- | ---------- | --------------------------- |  | ---------------------------- |  | ------------------------------------ | ---------- | ------------------------------------------------ |  | ---------------- | - | ------------- | ---- | ------------------------ |  | -- | - |  | ------ | - |  | ---- | - |  | ------ | -
|                                                          |  | Ordinary Shares
 NIS 0.01 par value |            | Number of
 treasury
 shares |  | Additional
 paid-in
 capital |  | Deferred
 share
 based
 compensation |            | Accumulated
 other
 comprehensive
 income (loss) |  | Retainedearnings |   | Treasurystock |      | Totalshareholdersequity | 
|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          | 
|                                                          |  |                                     |            | U.S. Dollars                |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |  
|                                                          |  | Shares                              |            | (In Thousands)              |  | Shares                       |  | U.S. Dollars (In thousands)          |           
|                                                          |  |                                     |            |                             |  |                              |  |                                      |           
|Balances at December 31, 2004                             |  |                                     | 28,085,766 |                             |  | 125                          |  |                                      | (1,011,619 | )                                                |  | 43,732           |   |               | (363 | )                        |  | -  |   |  | 7,275  |   |  | (993 | ) |  | 49,776 |  
|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |   |  |        |   |  |      |   |  |        |  
|Exercise of share options                                 |  |                                     | 9,750      |                             |  | -                            |  |                                      | -          |                                                  |  | 15               |   |               | -    |                          |  | -  |   |  | -      |   |  | -    |   |  | 15     |  
|Cancellation of share options                             |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | (15              | ) |               | 15   |                          |  | -  |   |  | -      |   |  | -    |   |  | -      |  
|Amortization of deferred share options based compensation |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | -                |   |               | 127  |                          |  | -  |   |  | -      |   |  | -    |   |  | 127    |  
|Unrealized loss on marketable securities                  |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | -                |   |               | -    |                          |  | (2 | ) |  | -      |   |  | -    |   |  | (2     | )
|Net income                                                |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | -                |   |               | -    |                          |  | -  |   |  | 2,702  |   |  | -    |   |  | 2,702  |  
|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |   |  |        |   |  |      |   |  |        |  
|Balances at December 31, 2005                             |  |                                     | 28,095,516 |                             |  | 125                          |  |                                      | (1,011,619 | )                                                |  | 43,732           |   |               | (221 | )                        |  | (2 | ) |  | 9,977  |   |  | (993 | ) |  | 52,618 |  
|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |   |  |        |   |  |      |   |  |        |  
|Adoption of SFAS 123-R                                    |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | (221             | ) |               | 221  |                          |  | -  |   |  | -      |   |  | -    |   |  | -      |  
|Share issuance, net of issuance expenses*                 |  |                                     | 2,525,252  |                             |  | 6                            |  |                                      | -          |                                                  |  | 14,442           |   |               | -    |                          |  | -  |   |  | -      |   |  | -    |   |  | 14,448 |  
|Exercise of share options                                 |  |                                     | 431,706    |                             |  | 1                            |  |                                      | -          |                                                  |  | 701              |   |               | -    |                          |  | -  |   |  | -      |   |  | -    |   |  | 702    |  
|Share based compensation expense                          |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | 766              |   |               | -    |                          |  | -  |   |  | -      |   |  | -    |   |  | 766    |  
|Realization of loss on marketable securities              |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | -                |   |               | -    |                          |  | 2  |   |  | -      |   |  | -    |   |  | 2      |  
|Unrealized loss on marketable securities                  |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | -                |   |               | -    |                          |  | (1 | ) |  | -      |   |  | -    |   |  | (1     | )
|Net income                                                |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | -                |   |               | -    |                          |  | -  |   |  | 11,603 |   |  | -    |   |  | 11,603 |  
|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |   |  |        |   |  |      |   |  |        |  
|Balances at December 31, 2006                             |  |                                     | 31,052,474 |                             |  | 132                          |  |                                      | (1,011,619 | )                                                |  | 59,420           |   |               | -    |                          |  | (1 | ) |  | 21,580 |   |  | (993 | ) |  | 80,138 |  
|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |   |  |        |   |  |      |   |  |        |  
|Exercise of share options                                 |  |                                     | 92,860     |                             |  | **                           |  |                                      | -          |                                                  |  | 32               |   |               | -    |                          |  | -  |   |  | -      |   |  | -    |   |  | 32     |  
|Share based compensation expense                          |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | 426              |   |               | -    |                          |  | -  |   |  | -      |   |  | -    |   |  | 426    |  
|Realization of loss on marketable securities              |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | -                |   |               | -    |                          |  | 1  |   |  | -      |   |  | -    |   |  | 1      |  
|Net Loss                                                  |  |                                     | -          |                             |  | -                            |  |                                      | -          |                                                  |  | -                |   |               | -    |                          |  | -  |   |  | (7,691 | ) |  | -    |   |  | (7,691 | )
|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |   |  |        |   |  |      |   |  |        |  
|Balances at December 31, 2007                             |  |                                     | 31,145,334 |                             |  | 132                          |  |                                      | (1,011,619 | )                                                |  | 59,878           |   |               | -    |                          |  | -  |   |  | 13,889 |   |  | (993 | ) |  | 72,906 |  
|                                                          |  |                                     |            |                             |  |                              |  |                                      |            |                                                  |  |                  |   |               |      |                          |  |    |   |  |        |   |  |      |   |  |        |  

|   |                                            
|-- | -------------------------------------------
|*  | Net of issuance expenses of
 $560 thousand.
|  
|** | Less than $ 1 thousand.                    

See accompanying notes to
consolidated financial statements

F   6

---

---

|                                     
|-------------------------------------
|CAMTEK LTD.
 and its subsidiaries    
|                                     
|Consolidated Statements of Cash Flows
|                                     

|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|--------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- |  | ------- | - |  | ------ | -
|                                                                                                    |  | Year Ended December 31,     |       
|                                                                                                    |  |                             |       
|                                                                                                    |  | 2007                        |        | 2006 |  | 2005    |  
|                                                                                                    |  |                             |        |      |  |         |  
|                                                                                                    |  | U.S. Dollars (In thousands) |       
|                                                                                                    |  |                             |       
|                                                                                                   
|Cash flows from operating activities:                                                               |  |                             |        |      |  |         |   |  |        |  
|Net income (loss)                                                                                   |  |                             | (7,691 | )    |  | 11,603  |   |  | 2,702  |  
|Adjustments to reconcile net income (loss)
 to net cash provided by (used in) operating activities: |  |                             |        |      |  |         |   |  |        |  
|Depreciation and amortization                                                                       |  |                             | 1,307  |      |  | 794     |   |  | 658    |  
|Loss (gain) on disposal of fixed assets                                                             |  |                             | (40    | )    |  | 24      |   |  | (6     | )
|Gain from marketable securities, net                                                                |  |                             | (25    | )    |  | (6      | ) |  | -      |  
|Deferred tax expense (benefit)                                                                      |  |                             | (59    | )    |  | (434    | ) |  | -      |  
|Share based compensation expense                                                                    |  |                             | 426    |      |  | 766     |   |  | 127    |  
|Provision for bad debts                                                                             |  |                             | 583    |      |  | 778     |   |  | 680    |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Changes in operating assets and liabilities:                                                        |  |                             |        |      |  |         |   |  |        |  
|Accounts receivable                                                                                 |  |                             | 5,148  |      |  | (4,230  | ) |  | (4,864 | )
|Inventories                                                                                         |  |                             | 4,522  |      |  | (16,472 | ) |  | (50    | )
|Due to / from affiliates                                                                            |  |                             | (19    | )    |  | 924     |   |  | 189    |  
|Other current assets                                                                                |  |                             | (273   | )    |  | (229    | ) |  | (724   | )
|Accounts payable  trade                                                                            |  |                             | (3,841 | )    |  | 3,123   |   |  | 463    |  
|Other current liabilities                                                                           |  |                             | (1,366 | )    |  | 4,110   |   |  | 626    |  
|Liability for employee severance benefits                                                           |  |                             | 46     |      |  | -       |   |  | -      |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Net cash (used in) provided by operating
 activities                                                |  |                             | (1,282 | )    |  | 751     |   |  | (199   | )
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Cash flows from investing activities:                                                               |  |                             |        |      |  |         |   |  |        |  
|Purchase of marketable securities                                                                   |  |                             | (6,770 | )    |  | (3,891  | ) |  | (2,103 | )
|Proceeds from sale of marketable securities                                                         |  |                             | 6,425  |      |  | 3,900   |   |  | -      |  
|Purchase of fixed assets                                                                            |  |                             | (3,236 | )    |  | (1,582  | ) |  | (673   | )
|Purchase of intangible assets                                                                       |  |                             | (169   | )    |  | (114    | ) |  | -      |  
|Proceeds from disposal of fixed assets                                                              |  |                             | 40     |      |  | -       |   |  | 18     |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Net cash used in investing activities                                                               |  |                             | (3,710 | )    |  | (1,687  | ) |  | (2,758 | )
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Cash flows from financing activities:                                                               |  |                             |        |      |  |         |   |  |        |  
|Decrease in short-term bank credit                                                                  |  |                             | -      |      |  | -       |   |  | (2,335 | )
|Net proceeds from issuance of ordinary
 shares                                                      |  |                             | -      |      |  | 14,448  |   |  | -      |  
|Proceeds from exercise of share options                                                             |  |                             | 32     |      |  | 702     |   |  | 15     |  
|Proceeds from long-term convertible loan                                                            |  |                             | -      |      |  | -       |   |  | 5,000  |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Net cash provided by financing activities                                                           |  |                             | 32     |      |  | 15,150  |   |  | 2,680  |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Effect of exchange rate changes on cash                                                             |  |                             | 203    |      |  | 430     |   |  | (150   | )
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Net (decrease) increase in cash and cash
 equivalents                                               |  |                             | (4,757 | )    |  | 14,644  |   |  | (427   | )
|Cash and cash equivalents at beginning of
 the year                                                 |  |                             | 23,358 |      |  | 8,714   |   |  | 9,141  |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  
|Cash and cash equivalents at end of the
 year                                                       |  |                             | 18,601 |      |  | 23,358  |   |  | 8,714  |  
|                                                                                                    |  |                             |        |      |  |         |   |  |        |  

See
accompanying notes to consolidated financial statements

F  7

---

---

|                                     
|-------------------------------------
|CAMTEK LTD.
 and its subsidiaries    
|                                     
|Consolidated Statements of Cash Flows
|                                     

|                                      |                                        |  |                             |       |      |  |      |  |  |     | 
|------------------------------------- | -------------------------------------- |  | --------------------------- | ----- | ---- |  | ---- |  |  | --- | 
|                                      |                                        |  | Year ended December 31,     |      
|                                      |                                        |  |                             |      
|                                      |                                        |  | 2007                        |       | 2006 |  | 2005 | 
|                                      |                                        |  |                             |       |      |  |      | 
|                                      |                                        |  | U.S. Dollars (In thousands) |      
|                                      |                                        |  |                             |      
|Supplementary cash flows information: |                                        |  |                             |       |      |  |      |  |  |    
|A.                                    | Cash paid during the year for:         |  |                             |       |      |  |      |  |  |     | 
|                                      | Interest                               |  | $                           | 320   |      |  | 422  |  |  | 405 | 
|                                      |                                        |  |                             |       |      |  |      |  |  |     | 
|                                      | Income taxes                           |  | $                           | 308   |      |  | 27   |  |  | 216 | 
|                                      |                                        |  |                             |       |      |  |      |  |  |     | 
|                                      |                                        |  |                             |       |      |  |      |  |  |     | 
|B.                                    | Non-cash transactions:                 |  |                             |       |      |  |      |  |  |     | 
|                                      | Transfer of
 inventory to fixed assets |  | $                           | 2,649 |      |  | -    |  |  | -   | 
|                                      |                                        |  |                             |       |      |  |      |  |  |     | 

See accompanying notes to consolidated financial statements.

F  8

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                                 
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 1    BUSINESS

Camtek Ltd.
(Camtek), an Israeli corporation, is a majority owned (61.7%) subsidiary of
Priortech Ltd. (Parent), an Israeli corporation listed on the Tel-Aviv Stock
Exchange. Camtek designs, develops manufactures and markets automatic optical
inspection systems (AOI systems) and related products. Camteks AOI systems are
used for yield enhancement for various applications in the electronic supply
chain industry. The main applications along this supply chain are the
production of Microelectronics, Printed Circuit Boards (PCB) and Electronic
packaging. Camteks activities are conducted in one reportable business
segment.

NOTE 2    SIGNIFICANT ACCOUNTING POLICIES

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A. | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The
 accompanying consolidated financial statements, which include the accounts of
 Camtek and its subsidiaries (collectively the Company), are prepared in
 accordance with U.S. generally accepted accounting principles. All material
 intercompany balances and transactions have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|B. | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The
 preparation of the consolidated financial statements in conformity with U.S.
 generally accepted accounting principles requires management to make
 estimates and assumptions that affect the reported amounts of assets and
 liabilities and disclosure of contingent assets and liabilities at the date
 of the consolidated financial statements and the reported amounts of revenues
 and expenses during the reporting period. Actual results may differ from
 those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|C. | Foreign currency transactions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The
 functional currency of the Company is the U.S. Dollar. Most of the revenue
 generated by the Company is from outside of Israel and a majority thereof is
 received in U.S. Dollars. In addition, materials and components purchased and
 marketing expenses incurred are either paid for in U.S. Dollars or in New
 Israeli Shekels (NIS) linked to changes in the U.S. Dollar/NIS exchange
 rate. A significant portion of the Companys expenses are incurred in Israel
 and paid for in NIS. Transactions not denominated in U.S. Dollar are recorded
 upon their initial recognition according to the exchange rate in effect on
 the date of the transaction. Exchange rate differences arising upon the
 settlement of monetary items or upon reporting the Companys monetary items
 at exchange rates different from that by which they were initially recorded
 during the period, or reported in previous financial statements, are charged
 to financial income or expense.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|D. | Cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | All highly
 liquid investments purchased with original maturities of three months or less
 are considered to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|E. | Marketable securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company
 accounts for its investments in marketable securities in accordance with
 Statement of Financial Accounting Standard (SFAS) No. 115 Accounting for
 Certain Investments in Debt and Equity Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | As of
 December 31, 2007 all marketable securities are designated as
 available-for-sale and accordingly are recorded at fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F  9

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                                 
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 2    SIGNIFICANT ACCOUNTING POLICIES
(Contd)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |           | 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | 
|E. | Marketable securities (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Unrealized
 holding gains and losses, net of the related tax effect, on
 available-for-sale securities are excluded from earnings and are reported as
 a separate component of other comprehensive income (loss) until realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|F. | Allowance for doubtful accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The
 allowance for doubtful accounts represent Managements best estimate of the
 probable loss inherent in existing accounts receivable balances as a result
 of possible non-collection. In determining the appropriate allowance,
 Management bases its estimate on information available about specific
 debtors, including aging of the balance, assessment of the underlying security
 received, the history of write-offs, relationships with the customers and the
 overall creditworthiness of the customers.                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|G. | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Inventories
 consist of completed AOI systems, AOI systems partially completed and
 components, and are recorded at the lower of cost, determined by the moving 
 average cost method basis, or market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Inventory write-downs are recorded for
 damaged, obsolete, excess and slow-moving inventory.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|H. | Fixed assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Fixed assets
 are stated at cost less accumulated depreciation, and are depreciated over
 their estimated useful lives on a straight-line basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Annual rates
 of depreciation are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Building                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 2%        | 
|   | Machinery
 and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 10% - 33% | 
|   | Office
 furniture and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 6% - 20%  | 
|   | Automobiles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 15%       | 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |           | 
|   | Leasehold
 improvements are amortized by the straight-line method over the lower of the
 lease term or the estimated useful economic life of such improvements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|I. | Intangible assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Intangible
 assets, comprised of patents registration costs, are capitalized at cost and
 amortized, beginning with the first year of utilization, over its expected
 life of ten years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|J. | Long-lived assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company
 applies SFAS No. 144, Accounting for the Impairment or Disposal of
 Long-Lived Assets. This Statement requires that long-lived assets be
 reviewed for impairment whenever events or changes in circumstances indicate
 that the carrying amount of an asset may not be recoverable. Recoverability
 of assets to be held and used is measured by a comparison of the carrying
 amount of an asset to undiscounted future cash flows expected to be generated
 by the asset. If the carrying amount of the long lived asset exceeds its
 estimated undiscounted future cash flows, an impairment charge is recognized
 as computed by subtracting the fair market value of the asset from its
 carrying value.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|K. | Fair values of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The carrying
 amounts for cash and cash equivalents, accounts receivable, accounts payable,
 accrued expenses and amounts due to/from affiliates approximate fair value
 because of the short-term duration of those items. Marketable securities are
 carried at quoted market prices, which represent fair value. The carrying
 amounts of convertible loan and amounts due to or from Parent approximate
 fair value because the interest rates on such amounts approximate the market
 rate.                                                                                                                                                                                                                             

F  10

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
  and its subsidiaries                                
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 2    SIGNIFICANT ACCOUNTING POLICIES (Contd)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|L. | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company
  recognizes revenue from sales in accordance with Securities and Exchange
  Commission Staff Accounting Bulletin No. 104 SAB 104 and Financial
  Accounting Standard Boards Emerging Issues Task Force (EITF) Issue No.
  00-21, Revenue Arrangements with Multiple Deliverables. Accordingly, the
  Company recognizes revenue from sales of its products when the products are
  installed at the customers premises and are operating in accordance with its
  specifications, signed documentation of the arrangement, such as a signed
  contract or purchase order, has been received, the price is fixed or
  determinable, and collectibility is reasonably assured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Service
  revenues consist mainly of revenues from maintenance contracts and are
  recognized ratably over the contract period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Revenue
  under multiple element arrangements is recognized in accordance with EITF
  Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Under
  this method, if an element is determined to be a separate unit of accounting,
  the revenue for the element is based on fair value and determined by vendor
  objective evidence (VOE), accordingly, non-standard warranty, with
  determined VOE, is deferred as unearned revenue and is recognized ratably as
  revenue commencing with and over the applicable warranty term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|M. | Warranty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company
  records a liability for product warranty obligations at the time of sale
  based upon historical warranty experience. The term of the warranty is
  generally twelve months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|N. | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company
  accounts for income taxes in accordance with SFAS No. 109, Accounting for
  Income Taxes (SFAS No. 109). This Statement prescribes the use of the
  asset and liability method whereby deferred tax assets and liabilities are
  recognized for the future tax consequences attributable to differences
  between financial reporting and tax bases of assets and liabilities and are
  measured using the enacted tax rates and laws expected to apply to taxable
  income in the years in which those temporary differences are expected to be
  recovered or settled. The Company provides a valuation allowance to reduce
  deferred tax assets to the amount that is more likely than not to be
  realized. Beginning with the adoption of FASB Interpretation No. 48,
  Accounting for Uncertainty in Income Taxes (FIN 48) as of January 1,
  2007, the Company recognizes the effect of income tax positions only if those
  positions are more likely than not of being sustained. Recognized income tax
  positions are measured at the largest amount that is greater than 50% likely
  of being realized. Changes in recognition or measurement are reflected in the
  period in which the change in judgment occurs. The Company records interest
  and penalties related to unrecognized tax benefits as a component of income
  tax expense.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|O. | Research and development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Research and
  development costs are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F  11

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
  and its subsidiaries                                
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 2    SIGNIFICANT ACCOUNTING POLICIES (Contd)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|P. | Earnings / Loss per ordinary share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Basic
  earnings/loss per ordinary share is calculated using only weighted average
  ordinary shares outstanding. Diluted earnings per share, if relevant, gives
  effect to dilutive potential ordinary shares outstanding during the year.
  Such dilutive shares consist of incremental shares, using the treasury stock
  method, from the assumed exercise of share options. For the year ended
  December 31 2007 the effect of the exercise of all outstanding share options
  is anti-dilutive and has not been included in computing dilutive earnings per
  ordinary share. For the years ended December 31, 2006 and 2005 the effect of
  the exercise of all outstanding share options is dilutive, and hence was
  included in computing diluted earning per ordinary share. For the years ended
  December 31, 2007, 2006 and 2005, the effects of warrants and conversion of
  convertible loan are anti-dilutive, and have not been included in computing
  dilutive earnings/loss per ordinary share.                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Q. | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Prior to
  January 1, 2006, the Company applied the intrinsic value method as allowed by
  FASB Statement No. 123, Accounting for Stock-Based Compensation and
  provided pro forma net income and pro forma earnings per share disclosures
  for employee stock option grants as if the fair-value based method defined in
  Statement 123 had been applied.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Effective
  January 1, 2006, the Company adopted FASB Statement No. 123R, Share-Based
  Payment (Statement 123R). This statement replaces FASB Statement No. 123,
  Accounting for Stock-Based Compensation (Statement 123) and supersedes APB
  No. 25. Statement 123R requires that all stock-based compensation be
  recognized as an expense in the financial statements and that such cost be
  measured at the fair value of the award. This statement was adopted using the
  modified prospective method of application, which requires the Company to
  recognize compensation cost on a prospective basis. Therefore, prior years
  financial statements have not been restated. Under this method, the Company
  recorded stock-based compensation expense for awards granted prior to, but
  not yet vested as of January 1, 2006, using the fair value amounts determined
  for pro forma disclosures under Statement 123. For stock-based awards granted
  after January 1, 2006, the Company recognizes compensation expense based on
  estimated grant date fair value using the Black-Scholes option-pricing model.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The
  following table illustrates the effect on net income for the year ended
  December 31, 2005 as if the Company had applied the fair value recognition
  provisions of Statement 123. For purposes of this pro forma disclosure, the
  value of the options is estimated using a Black-Scholes option-pricing model
  and amortized to expense over the options service periods with forfeitures
  recognized as they occurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F  12

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
  and its subsidiaries                                
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 2    SIGNIFICANT ACCOUNTING POLICIES (Contd)

|   |                           
|-- | --------------------------
|Q. | Stock Option Plan (contd)

|                                                                                         |  |                            |  
|---------------------------------------------------------------------------------------- |  | -------------------------- | -
|                                                                                         |  | 2005                       |  
|                                                                                         |  |                            |  
|                                                                                         |  | U.S. Dollars(In thousands) |  
|                                                                                         |  |                            |  
|Net income, as reported                                                                  |  | 2,702                      |  
|Share-based employee compensation expense
  included in reported net income              |  | 127                        |  
|Share-based employee compensation expense
  determined under the fair value based method |  | (560                       | )
|                                                                                         |  |                            |  
|Pro forma net income                                                                     |  | 2,269                      |  
|                                                                                         |  |                            |  
|Earnings per share:                                                                      |  |                            |  
|                                                                                         |  |                            |  
|Basic  as reported                                                                      |  | 0.10                       |  
|                                                                                         |  |                            |  
|Basic  pro forma                                                                        |  | 0.08                       |  
|                                                                                         |  |                            |  
|Diluted  as reported                                                                    |  | 0.10                       |  
|                                                                                         |  |                            |  
|Diluted  pro forma                                                                      |  | 0.08                       |  
|                                                                                         |  |                            |  

|   |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|R. | Reclassification                                                                                                               
|   |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Certain
  prior years amounts have been reclassified in conformity with the current
  years financial statements presentation.
|   |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|S. | Recently Issued Accounting Standards                                                                                           
|   |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | 1.                                                                                                                              | In February
  2007, the FASB issued Statement of Financial Accounting Standards No. 159,
  The Fair Value Option for Financial Assets and Financial Liabilities 
  including an amendment of FASB Statement No. 115 (Statement 159). Statement
  159 gives the Company the irrevocable option to carry most financial assets
  and liabilities at fair value that are not currently required to be measured
  at fair value. If the fair value option is elected, changes in fair value
  would be recorded in earnings at each subsequent reporting date. SFAS 159 is
  effective for the Companys 2008 fiscal year. The Company has evaluated the
  impact of this statement and believes that adoption of SFAS No. 159
  prospectively on January 1, 2008 will not have a material effect on its
  consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | 2.                                                                                                                              | In September
  2006, the FASB issued FASB Statement No. 157, Fair Value Measurement
  (Statement 157). Statement 157 defines fair value, establishes a framework
  for the measurement of fair value, and enhances disclosures about fair value
  measurements. The Statement does not require any new fair value measures. The
  Statement is effective for fair value measures already required or permitted
  by other standards for fiscal years beginning after November 15, 2007. The
  Company is required to adopt Statement 157 beginning on January 1, 2008.
  Statement 157 is required to be applied prospectively, except for certain
  financial instruments. Any transition adjustment will be recognized as an
  adjustment to opening retained earnings in the year of adoption. In February
  2008, the FASB approved FSP FAS 157-2, which grants a one-year deferral of
  Statement 157s fair-value measurement requirements for nonfinancial assets
  and liabilities, except for items that are measured or disclosed at fair
  value in the financial statements on a recurring basis. The Company is
  currently evaluating the impact of adopting Statement 157 on its results of
  operations and financial position.

F  13

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
  and its subsidiaries                                
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 2    SIGNIFICANT ACCOUNTING POLICIES (Contd)

|   |                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|S. | Recently Issued Accounting Standards (contd)
|   |                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | 3.                                            | In June
  2007, the FASB issued EITF Issue No. 07-03 (EITF 07-03), Accounting for
  Non-Refundable Advance Payments for Goods or Services to Be Used in Future
  Research and Development Activities. EITF 07-03 provides guidance on whether
  non-refundable advance payments for goods that will be used or services that
  will be performed in future research and development activities should be
  accounted for as research and development costs or deferred and capitalized
  until the goods have been delivered or the related services have been
  rendered. EITF 07-03 is effective for fiscal years beginning after December
  15, 2007. The Company is currently evaluating the impact of adopting EITF
  07-03 on its results of operations and financial position.                                                                                                                                                                                                                                     
|   |                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | 4.                                            | In December
  2007, the FASB issued FASB Statement No. 141R, Business Combinations
  (Statement 141R) and FASB Statement No. 160, Noncontrolling Interests in
  Consolidated Financial Statements an amendment to ARB No. 51 (Statement
  160). Statements 141R and 160 require most identifiable assets, liabilities,
  noncontrolling interests, and goodwill acquired in a business combination to
  be recorded at full fair value and require noncontrolling interests
  (previously referred to as minority interests) to be reported as a component
  of equity, which changes the accounting for transactions with noncontrolling
  interest holders. Both Statements are effective for periods beginning on or
  after December 15, 2008, and earlier adoption is prohibited. Statement 141R will
  be applied to business combinations occurring after the effective date.
  Statement 160 will be applied prospectively to all noncontrolling interests,
  including any that arose before the effective date.

F  14

---

---

CAMTEK LTD.
and its subsidiaries

|                                                                   |                      
|------------------------------------------------------------------ | ---------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  
|                                                                  
|NOTE 3                                                            | MARKETABLE SECURITIES

|                          |  |                    |                             |      |  |       |  |  |       | 
|------------------------- |  | ------------------ | --------------------------- | ---- |  | ----- |  |  | ----- | 
|                          |  | Interest Rate 
  % |                             | 2007 |  | 2006  | 
|                          |  |                    |                             |      |  |      
|                          |  |                    | U.S. Dollars (In thousands) |     
|                          |  |                    |                             |      |  |      
|                          |  |                    |                             |      |  |       |  |  |       | 
|Available
  for sale:     |  |                    |                             |      |  |       |  |  |       | 
|Corporate debt
securities |  |                    | 5                           |      |  | 1,195 |  |  | 599   | 
|Auction rate
securities   |  |                    | 6                           |      |  | 1,275 |  |  | 1,500 | 
|                          |  |                    |                             |      |  |       |  |  |       | 
|                          |  |                    |                             |      |  | 2,470 |  |  | 2,099 | 
|                          |  |                    |                             |      |  |       |  |  |       | 
|                          |  |                    |                             |      |  |       |  |  |       | 

The carrying
amount, gross unrealized holding losses, and fair value of available-for-sale
debt securities by major security type and class of security at December 31,
2007 and 2006 were as follows:

|                          |  |                             |       |                                      |  |            |   |  |       | 
|------------------------- |  | --------------------------- | ----- | ------------------------------------ |  | ---------- | - |  | ----- | 
|                          |  | Carrying 
  amount          |       | Gross unrealized 
  Holding (losses) |  | Fair value |  
|                          |  |                             |       |                                      |  |            |  
|                          |  | U.S. Dollars (In thousands) |      
|                          |  |                             |      
|At December
  31, 2007:   |  |                             |       |                                      |  |            |   |  |       | 
|Available
  for sale:     |  |                             |       |                                      |  |            |   |  |       | 
|Corporate debt
securities |  |                             | 1,195 |                                      |  | -          |   |  | 1,195 | 
|Auction rate
securities   |  |                             | 1,275 |                                      |  | -          |   |  | 1,275 | 
|                          |  |                             |       |                                      |  |            |   |  |       | 
|                          |  |                             | 2,470 |                                      |  | -          |   |  | 2,470 | 
|                          |  |                             |       |                                      |  |            |   |  |       | 
|At December
  31, 2006:   |  |                             |       |                                      |  |            |   |  |       | 
|Available
  for sale:     |  |                             |       |                                      |  |            |   |  |       | 
|Corporate debt
securities |  |                             | 600   |                                      |  | (1         | ) |  | 599   | 
|Auction rate
securities   |  |                             | 1,500 |                                      |  | -          |   |  | 1,500 | 
|                          |  |                             |       |                                      |  |            |   |  |       | 
|                          |  |                             | 2,100 |                                      |  | (1         | ) |  | 2,099 | 
|                          |  |                             |       |                                      |  |            |   |  |       | 

Maturities of
debt securities classified as available-for-sale were as follows at December
31, 2007:

|                                       |  |                             |       |            |  |       | 
|-------------------------------------- |  | --------------------------- | ----- | ---------- |  | ----- | 
|                                       |  | Carrying amount             |       | Fair value | 
|                                       |  |                             |       |            | 
|                                       |  | U.S. Dollars (In thousands) |      
|                                       |  |                             |      
|Available
  for sale:                  |  |                             |       |            |  |       | 
|First year                             |  |                             | 1,195 |            |  | 1,195 | 
|Due after five years through
ten years |  |                             | 1,275 |            |  | 1,275 | 
|                                       |  |                             |       |            |  |       | 
|                                       |  |                             | 2,470 |            |  | 2,470 | 
|                                       |  |                             |       |            |  |       | 

Proceeds from
the sale of investment securities available for sale were $6,425, $3,900 and
nil in 2007, 2006 and 2005, respectively; gross realized gains included in
other finance income in 2007, 2006 and 2005 were $25, $6 and nil, respectively.

The marketable
securities are presented in:

|                   |  |                             |       |                   |  |       | 
|------------------ |  | --------------------------- | ----- | ----------------- |  | ----- | 
|                   |  | December 31, 2007           |       | December 31, 2006 | 
|                   |  |                             |       |                   | 
|                   |  | U.S. Dollars (In thousands) |      
|                   |  |                             |      
|Current
  assets   |  |                             | 1,395 |                   |  | 2,099 | 
|Long term
  assets |  |                             | 1,075 |                   |  | -     | 
|                   |  |                             |       |                   |  |       | 
|                   |  |                             | 2,470 |                   |  | 2,099 | 
|                   |  |                             |       |                   |  |       | 
|                   |  |                             |       |                   |  |       | 

F  15

---

---

CAMTEK LTD.
and its subsidiaries

|                                                                   |            
|------------------------------------------------------------------ | -----------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  
|NOTE 4                                                            | INVENTORIES

|                                                                                |  |                             |        |      |  |        | 
|------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- |  | ------ | 
|                                                                                |  | December 31,                |       
|                                                                                |  |                             |       
|                                                                                |  | 2007                        |        | 2006 | 
|                                                                                |  |                             |        |      | 
|                                                                                |  | U.S. Dollars (In thousands) |       
|                                                                                |  |                             |       
|                                                                               
|Components                                                                      |  |                             | 14,654 |      |  | 17,702 | 
|Systems
  partially completed                                                   |  |                             | 3,739  |      |  | 5,340  | 
|Completed
  systems, including systems not yet purchased, at customer locations |  |                             | 15,850 |      |  | 18,372 | 
|                                                                                |  |                             |        |      |  |        | 
|                                                                                |  |                             |        |      |  |        | 
|                                                                                |  |                             | 34,243 |      |  | 41,414 | 
|                                                                                |  |                             |        |      |  |        | 

|          |                     
|--------- | --------------------
|NOTE 5   | OTHER CURRENT ASSETS

|                                  |  |                             |       |      |  |       | 
|--------------------------------- |  | --------------------------- | ----- | ---- |  | ----- | 
|                                  |  | December 31,                |      
|                                  |  |                             |      
|                                  |  | 2007                        |       | 2006 | 
|                                  |  |                             |       |      | 
|                                  |  | U.S. Dollars (In thousands) |      
|                                  |  |                             |      
|                                 
|Due from
  Government institution |  |                             | 1,265 |      |  | 689   | 
|Income tax
  receivables          |  |                             | 128   |      |  | 54    | 
|Due from
  employees              |  |                             | 146   |      |  | 196   | 
|Prepaid
  expenses                |  |                             | 485   |      |  | 480   | 
|Advances to
  suppliers           |  |                             | 6     |      |  | 519   | 
|Deposits for
  operating leases   |  |                             | 202   |      |  | 110   | 
|Other                             |  |                             | 384   |      |  | 324   | 
|                                  |  |                             |       |      |  |       | 
|                                  |  |                             |       |      |  |       | 
|                                  |  |                             | 2,616 |      |  | 2,372 | 
|                                  |  |                             |       |      |  |       | 

|          |             
|--------- | ------------
|NOTE 6   | FIXED ASSETS

|                                 |  |                             |        |      |  |        | 
|-------------------------------- |  | --------------------------- | ------ | ---- |  | ------ | 
|                                 |  | December 31,                |       
|                                 |  |                             |       
|                                 |  | 2007                        |        | 2006 | 
|                                 |  |                             |        |      | 
|                                 |  | U.S. Dollars (In thousands) |       
|                                 |  |                             |       
|                                
|Land                             |  |                             | 863    |      |  | 815    | 
|Building                         |  |                             | 9,695  |      |  | 7,998  | 
|Machinery
  and equipment        |  |                             | 5,885  |      |  | 3,102  | 
|Office
  furniture and equipment |  |                             | 4,272  |      |  | 3,233  | 
|Automobiles                      |  |                             | 169    |      |  | 295    | 
|Leasehold
  improvements         |  |                             | 748    |      |  | 484    | 
|                                 |  |                             |        |      |  |        | 
|                                 |  |                             |        |      |  |        | 
|                                 |  |                             | 21,632 |      |  | 15,927 | 
|Less
  accumulated depreciation  |  |                             | 6,307  |      |  | 5,198  | 
|                                 |  |                             |        |      |  |        | 
|                                 |  |                             |        |      |  |        | 
|                                 |  |                             | 15,325 |      |  | 10,729 | 
|                                 |  |                             |        |      |  |        | 

Depreciation
expenses for the years ended December 31, 2007, 2006 and 2005 aggregated to
$1,289, $792 and $658 thousand, respectively.

F  16

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                                 
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 7    OTHER ASSETS

|                               |  |                             |     |      |  |     | 
|------------------------------ |  | --------------------------- | --- | ---- |  | --- | 
|                               |  | December 31,                |    
|                               |  |                             |    
|                               |  | 2007                        |     | 2006 | 
|                               |  |                             |     |      | 
|                               |  | U.S. Dollars (In thousands) |    
|                               |  |                             |    
|                               |  |                             |     |      |  |     | 
|Deposits for
 operating leases |  |                             | 460 |      |  | 459 | 
|Intangible
 assets (A)         |  |                             | 263 |      |  | 112 | 
|                               |  |                             |     |      |  |     | 
|                               |  |                             |     |      |  |     | 
|                               |  |                             | 723 |      |  | 571 | 
|                               |  |                             |     |      |  |     | 

|   |                            
|-- | ---------------------------
|A. | Patents
 registration costs

| |                             |  |                             |     |                           |  |                         |  |                      |     |  |  |    | 
| | --------------------------- |  | --------------------------- | --- | ------------------------- |  | ----------------------- |  | -------------------- | --- |  |  | -- | 
| |                             |  | December 31, 2007           |    
| |                             |  |                             |    
| |                             |  | Gross carrying
 amount      |     | Accumulated
 amortization |  | Intangible
 Assets, net |  | Amortization
 period |    
| |                             |  |                             |     |                           |  |                         |  |                      |    
| |                             |  | U.S. Dollars (In thousands) |     | Years                     | 
| |                             |  |                             |     |                           | 
| | Patents
 registration costs |  |                             | 283 |                           |  | 20                      |  |                      | 263 |  |  | 10 | 
| |                             |  |                             |     |                           |  |                         |  |                      |     |  |  |    | 

| |                             |  |                             |     |                           |  |                         |  |                      |     |  |  |    | 
| | --------------------------- |  | --------------------------- | --- | ------------------------- |  | ----------------------- |  | -------------------- | --- |  |  | -- | 
| |                             |  | December 31, 2006           |    
| |                             |  |                             |    
| |                             |  | Gross carrying
 amount      |     | Accumulated
 amortization |  | Intangible
 Assets, net |  | Amortization
 period |    
| |                             |  |                             |     |                           |  |                         |  |                      |    
| |                             |  | U.S. Dollars (In thousands) |     | Years                     | 
| |                             |  |                             |     |                           | 
| | Patents
 registration costs |  |                             | 114 |                           |  | 2                       |  |                      | 112 |  |  | 10 | 
| |                             |  |                             |     |                           |  |                         |  |                      |     |  |  |    | 

Amortization
expense for the years ended December 31, 2007, 2006 and 2005 aggregated to $18,
$2 and nil thousand, respectively.

As of December 31, 2007, the estimated
aggregate amortization of intangible assets for the years 2008 to 2012 is $28
thousands for each of the years.

NOTE 8    OTHER CURRENT LIABILITIES

|                                               |  |                             |        |      |  |        | 
|---------------------------------------------- |  | --------------------------- | ------ | ---- |  | ------ | 
|                                               |  | December 31,                |       
|                                               |  |                             |       
|                                               |  | 2007                        |        | 2006 | 
|                                               |  |                             |        |      | 
|                                               |  | U.S. Dollars (In thousands) |       
|                                               |  |                             |       
|                                               |  |                             |        |      |  |        | 
|Accrued
 compensation and related benefits     |  |                             | 4,330  |      |  | 4,825  | 
|Government
 institutions                       |  |                             | 315    |      |  | 383    | 
|Income tax
 payables                           |  |                             | 421    |      |  | 460    | 
|Accrued
 warranty costs                        |  |                             | 934    |      |  | 1,057  | 
|Commissions                                    |  |                             | 2,204  |      |  | 2,077  | 
|Advances
 from customers and deferred revenues |  |                             | 2,207  |      |  | 3,125  | 
|Other                                          |  |                             | 1,054  |      |  | 904    | 
|                                               |  |                             |        |      |  |        | 
|                                               |  |                             |        |      |  |        | 
|                                               |  |                             | 11,465 |      |  | 12,831 | 
|                                               |  |                             |        |      |  |        | 

Changes in the
product warranty obligation are as follows:

| |                      |  |                             |        |      |  |        |   |  |        |  
| | -------------------- |  | --------------------------- | ------ | ---- |  | ------ | - |  | ------ | -
| |                      |  | December 31,                |       
| |                      |  |                             |       
| |                      |  | 2007                        |        | 2006 |  | 2005   |  
| |                      |  |                             |        |      |  |        |  
| |                      |  | U.S. Dollars (In thousands) |       
| |                      |  |                             |       
| | Beginning of
 year   |  |                             | 1,057  |      |  | 1,162  |   |  | 1,703  |  
| | Change in
 estimates |  |                             | -      |      |  | (442   | ) |  | -      |  
| | New warranties       |  |                             | 1,534  |      |  | 2,020  |   |  | 2,003  |  
| | Reductions           |  |                             | (1,657 | )    |  | (1,683 | ) |  | (2,544 | )
| |                      |  |                             |        |      |  |        |   |  |        |  
| | End of year          |  |                             | 934    |      |  | 1,057  |   |  | 1,162  |  
| |                      |  |                             |        |      |  |        |   |  |        |  

F  17

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                                 
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 9    CONVERTIBLE LOAN

|                              |  |                             |       |      |  |       | 
|----------------------------- |  | --------------------------- | ----- | ---- |  | ----- | 
|                              |  | December 31,                |      
|                              |  |                             |      
|                              |  | 2007                        |       | 2006 | 
|                              |  |                             |       |      | 
|                              |  | U.S. Dollars (In thousands) |      
|                              |  |                             |      
|                              |  |                             |       |      |  |       | 
|U.S. Dollar
 denominated loan |  |                             | 3,333 |      |  | 5,000 | 
|                              |  |                             |       |      |  |       | 

Repayment dates of convertible
loan subsequent to December 31, 2008:

|                                                                     |  |                               |       | 
|-------------------------------------------------------------------- |  | ----------------------------- | ----- | 
|                                                                     |  | U.S. Dollars 
 (In thousands) |      
|                                                                     |  |                               |      
|2009                                                                 |  |                               | 1,667 | 
|2010                                                                 |  |                               | 1,666 | 
|                                                                     |  |                               |       | 
|                                                                     |  |                               |       | 
|U.S. Dollar
 denominated loan, bearing annual interest of Libor+2.1% |  |                               | 3,333 | 
|                                                                     |  |                               |       | 

On August 23,
2005 (the closing date) the Company raised $5 million as a convertible loan
from FIMI Opportunity Fund L.P and FIMI Israel Opportunity Fund, Limited
Partnership (FIMI). The loan is payable in three equal annual payments
starting at the third anniversary of the closing date. The lenders have the
right to postpone the repayments to the end of the fifth anniversary from the
closing date. The loan bears annual interest of Libor + 2.1%. The interest is
payable every three months. Conversion of the loan, in a whole or in part, is
at the lenders option on any given business day after the closing date.

Conversion price per one ordinary share is $5.50, however, in the event that
the average closing price of the Companys shares as reported on Nasdaq for the
sixty consecutive trading days immediately preceding the first and second
anniversary of the loan agreement closing date, is lower than the conversion
price in effect on such date, the conversion price in effect on such date shall
be reduced to equal the higher of the average closing price and $2.00. As of
December 31, 2007 the conversion price per one ordinary share is $3.19.

The
Company is subject to the following main covenants:

|   |                                                                                                                                                                                                                                                                                                                                                   
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | The
 shareholders equity should not decrease to below $45 million, or, $40
 million as a result of dividend distributions. Shareholders equity may not
 decrease by more then 10%, unless such deviation is cured within three
 consecutive financial quarters immediately following the financial quarter in
 which such decrease had occurred.
|   |                                                                                                                                                                                                                                                                                                                                                   
|2. | The
 shareholders equity shall represent at least 55% of the total assets of the
 Company.                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                   
|3. | The net loss
 shall not exceed an aggregate of $10 million in any single financial quarter
 or any year.                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                   
|4. | No further
 borrowings which exceed the aggregate amount of $15 million (other than the
 loans and credit lines which were in effect at the closing date) and no new
 transactions with the Companys affiliates.                                                                                                                                 

As of December 31, 2007 the
 Company was in compliance with the aforementioned covenants.

F  18

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                                 
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 10    SEVERANCE PAY

Under Israeli
law and labor agreements, the Israeli companies are required to make severance
and pension payments to their retired or dismissed employees and to employees
leaving employment in certain other circumstances.

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | The
 liability in respect of most of its employees is discharged by participating
 in a defined contribution pension plan and making regular deposits with a
 pension fund. The liability deposited with the pension fund is based on
 salary components as prescribed in the existing labor agreement. The custody
 and management of the amounts so deposited are independent of the companies
 and accordingly such amounts funded (included in expenses on an accrual
 basis) and related liabilities are not reflected in the balance sheet.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2. | In respect
 of the liability to other employees, individual insurance policies are
 purchased and deposits are made with recognized severance pay funds. The
 liability for severance pay is calculated on the basis of the latest salary
 paid to each employee multiplied by the number of years of employment. The
 liability is covered by the amounts deposited including accumulated income
 thereon as well as by the unfunded provision, which amounted to $268 and $222
 thousand as of December 31, 2007 and 2006, respectively.       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3. | Severance
 pay expenses were $851, $750 and $544 thousand in 2007, 2006 and 2005,
 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F  19

---

---

CAMTEK LTD. and its
subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 11    COMMITMENTS AND CONTINGENCIES
(contd)

|   |                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A. | Operating leases                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                 
|   | The
 Companys subsidiaries have entered into various nonconancelable operating
 lease agreements, principally for office space. In May 2007, the Company
 entered into a noncancelable operating lease for vehicles for a period of 36
 months.
|   |                                                                                                                                                                                                                                                 
|   | As of
 December 31, 2007, minimum future rental payments under such noncancelable operating
 leases are as follows:                                                                                                                             

|                          |  |                            |       | 
|------------------------- |  | -------------------------- | ----- | 
|Year Ending
 December 31, |  | U.S. Dollars(In thousands) |      
|                          |  |                            |      
|2008                      |  |                            | 1,657 | 
|2009                      |  |                            | 1,182 | 
|2010                      |  |                            | 465   | 
|2011                      |  |                            | 168   | 
|Thereafter                |  |                            | 53    | 
|                          |  |                            |       | 
|                          |  |                            | 3,525 | 
|                          |  |                            |       | 

|   |                                                                                                                                    
|-- | -----------------------------------------------------------------------------------------------------------------------------------
|   | Aggregate
 office rent expenses amounted to $730, $572 and $546 thousand in 2007, 2006
 and 2005, respectively.                    
|   |                                                                                                                                    
|B. | Valuation and qualifying accounts                                                                                                  
|   |                                                                                                                                    
|   | The
 following is a summary of the allowance for doubtful accounts related to
 accounts receivable for the years ended December 31:

|     |  |                                  |       |           |  |           |  |                            |      |   |  |       | 
|---- |  | -------------------------------- | ----- | --------- |  | --------- |  | -------------------------- | ---- | - |  | ----- | 
|     |  | Balance at
 beginning
 of period |       | Provision |  | Write-off |  | Balance at
 end of
 period |     
|     |  |                                  |       |           |  |           |  |                            |     
|     |  | U.S. Dollars (In thousands)      |      
|     |  |                                  |      
|2005 |  |                                  | 2,236 |           |  | 680       |  |                            | (710 | ) |  | 2,206 | 
|2006 |  |                                  | 2,206 |           |  | 778       |  |                            | (131 | ) |  | 2,853 | 
|2007 |  |                                  | 2,853 |           |  | 583       |  |                            | (167 | ) |  | 3,269 | 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|C. | Factoring of financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | The Company
 entered into accounts receivable factoring agreements with two financial
 institutions (the banks). Under the terms of the agreements, the Company
 has the option to factor receivables, with the banks on a non-recourse basis,
 provided that the banks approve the receivables in advance. In some cases,
 the Company continues to be obligated in the event of commercial disputes,
 (such as product defects) which are not covered under the credit insurance
 policy, unrelated to the credit worthiness of the customer. The Company
 accounts for the factoring of its financial assets in accordance with the
 provisions of SFAS 140 Accounting for Transfers and Servicing of
 Financial Assets and Extinguishments of Liabilities- a replacement of FASB
 Statement No. 125. The Company does not expect any reimbursements
 to take place in the foreseeable future.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The
 factoring fees of the above mentioned agreements aggregate $ 52 thousands in
 2007. ($ 51 thousands in 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | As of December
 31, 2007 trade receivables amounting to approximately $ 560 thousands, were
 factored. (December 31, 2006 - $ 2,500 thousands).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F  20

---

---

CAMTEK LTD. and its
subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 11    COMMITMENTS AND CONTINGENT
LIABILITIES (Contd)

|   |            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ---------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|D. | Litigation
|   |           
|   | 1.         | On May 10,
 2004, a lawsuit was filed against the Company in the District Court in
 Nazareth, Israel, by a competitor, Orbotech Ltd., alleging that the Dragon
 and Falcon systems infringe upon a patent held by Orbotech Ltd. and
 requesting an injunctive relief and damages. Currently, the issue dealt with
 by the court is the validity of the asserted patent, which expired in
 February 2008. The Company based on the opinion of its legal advisors,
 believes that any liability arising from the law suit is not probable.
 Accordingly, no provision has been recorded by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | 2.         | On February
 23, 2005, a lawsuit was filed against the Company in the District Court in
 Jerusalem by Orbotech Ltd., alleging infringement of patent held by Orbotech
 Ltd. regarding a specific illumination block, seeking injunctive relief and
 damages. The court ruled, based on a courts scientific advisor opinion, that
 the Company allegedly infringed the patent, and granted Orbotech a
 provisional remedy. Following the grant of the provisional remedy by the
 District Court, the Company filed a motion for leave to appeal. The Supreme
 Court rejected the Companys request since the provisional remedy was granted
 on the basis of prime facie evidence only. The claim is currently in the
 preliminary stage of discovery and only after evidence is presented and cross
 examinations are conducted will a final judgment be rendered by the District
 Court, subject to the right to appeal. The particular illumination block was
 at the time of the preliminary ruling still in a development stage. The
 Companys temporary inability to manufacture and sell the specific
 illumination block, does not affect its ability to manufacture and sell products
 incorporating other illumination blocks; the Company manufactures its
 products with several other illumination blocks. In February 2007 the patent
 referring to the specific illumination block expired. The Company has filed
 two requests for the lawsuit to be dismissed. The Company based on the
 opinion of its legal advisors, believes that any liability arising from the
 law suit is not probable. The Company further believes that it has claims
 with respect to the validity of the asserted patent, as well as other
 defenses such as estoppel and lack of good faith on the part of Orbotech.
 Accordingly, no provision has been recorded by the Company.
|   |            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | 3.         | On July 14,
 2005, a lawsuit was filed against the Company in the United States District
 Court for the District of Minnesota by one of the Companys competitors in
 the field of semiconductor manufacturing and packaging, August Technology
 Corporation (today Rudolph Technologies Inc. together with August Technology
 Corporation), alleging infringement of a patent and seeking injunctive relief
 and damages. The Company has filed an answer and counterclaims alleging,
 inter-alia, non-infringement, invalidity and unenforceability of the patent.
 The fact and expert discovery have been completed. On February 2008, the Company
 filled a motion for summary judgment of invalidity of the asserted patent. A
 Hearing on Camteks motion for summary judgment was held on April 25, 2008.
 The court took the motion under advisement and will issue an order in due
 course. The Company based on the opinion of its legal advisors, believes that
 any liability arising from the Augusts allegations is not probable.
 Accordingly, no provision has been recorded by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | 4.         | See Note 19B.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F  21

---

---

CAMTEK LTD. and its
subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 12    CONCENTRATION OF RISK

Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash equivalents, short-term bank deposits, marketable
securities and trade receivables. The Companys cash equivalents and marketable
securities are maintained with high-quality institutions and the composition
and maturities of investments are regularly monitored by management. Generally,
these securities and deposits are traded in a highly liquid market, may be
redeemed upon demand and bear minimal risk.

The Companys
marketable securities include auction rate securities and highly rated
corporate bonds. The trade receivables of the Company are derived from sales to
a large number of customers, mainly large industrial corporations located
mainly in Asia, the United States and Europe. The Company generally does not
require collateral: however, in certain circumstances, the Company may require
letter of credit, other collateral or additional guarantees. An allowance for
doubtful accounts is determined with respect to those amounts that the Company
has determined to be doubtful of collection. The Company performs ongoing
credit evaluations of its customers. The carrying amounts of financial
instruments approximate fair value.

NOTE 13    SHAREHOLDERS EQUITY

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A. | Initial Public Offering                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company shares are traded on the NASDAQ National Market under the
 symbol of CAMT.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | In December 2005 the Company registered its shares to be listed and
 traded in the Tel-Aviv stock exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|B. | Private Placement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | In April 2006, the Company raised $14.5 million, net of issuance
 expenses, by issuing 2,525,252 ordinary shares at a price of $5.94 per share
 in a private placement to Israeli institutional investors. The private
 placement also included warrants that are exercisable into 1,262,626 ordinary
 shares at a price of $6.83 per share during a period of four years. The
 warrants issued in April 2006 have been classified in equity.                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|C. | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | As of December 31, 2007, the Company has five stock option plans for
 employees and directors. Future options will be granted only pursuant to the
 2003 Share Option Plan described below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | In October 2003, the Company adopted a stock option plan (the Plan)
 pursuant to which the Companys board of directors may grant stock options to
 officers and key employees. The total number of options, which may be granted
 to directors, officers, employees and consultants under this plan, is limited
 to 998,800 options. Stock options can be granted with an exercise price equal
 to or less than the stocks fair market value at the date of grant. All stock
 options have 10-year terms and vest and become fully exercisable after 4
 years from the date of grant with 30% to vest at the end of each of the first
 three years and remaining 10% to vest at the end of the fourth year following
 the grant date.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | As of December 31, 2007, there were no additional shares available
 for the Company grant under the Plan. The fair value of each option award is
 estimated on the date of grant using the Black-Scholes option-pricing model
 that used the weighted average assumptions in the following table. The
 risk-free rate for the expected term of the option is based on the U.S.
 Treasury yield curve in effect at the time of grant.                                                                                                                                                                                                                                                                                                   

F  22

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
  and its subsidiaries                                
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

|           |                              
|---------- | -----------------------------
|NOTE 13   | SHAREHOLDERS EQUITY (Contd)

|   |                           
|-- | --------------------------
|C. | Stock Option Plan (Contd)

| |                            |  |            |  |            |  |           
| | -------------------------- |  | ---------- |  | ---------- |  | ----------
| |                            |  | 2007 Grant |  | 2006 Grant |  | 2005 Grant
| |                            |  |            |  |            |  |           
| | Dividend
  yield           |  | 0          |  | 0          |  | 0         
| | Expected
  volatility *    |  | 83%-84%    |  | 86%-87%    |  | 90%       
| | Risk-free
  interest rate  |  | 5%         |  | 5%         |  | 4.2%      
| | Expected
  life (years) ** |  | 6          |  | 6          |  | 6         

| |                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------
| | *                                                                                                                                                                                                                                                                                                                                                                                               | Historical
  volatility                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                       
| | **                                                                                                                                                                                                                                                                                                                                                                                              | The company
  used the simplified method to estimate the expected life as permissible under
  SAB 107.
| |                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                       
| | The weighted
  average grant date fair value of options granted during the years ended 2007,
  2006 and 2005 was $3.19, $5.38 and $2.30 respectively. The total intrinsic
  value of options exercised during the years ended December 31, 2007, 2006 and
  2005 was $101,128, $246,756 and $5,859 respectively. The total intrinsic
  value of options vested at December 31, 2007 is $63,151.
| |                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                       
| | As of
  December 31, 2007, there was $378,143 of total unrecognized compensation cost
  related to nonvested share-based compensation arrangements. That cost is
  expected to be recognized over a weighted-average period of 1.5 years.                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                       
| | Share option
  activity during the past three years is as follows:                                                                                                                                                                                                                                                                                                                             

|                           |  |                         |         |                                           |  |                |  |                                           |           |                |  |                                        |  |  |           |   |  |      | 
|-------------------------- |  | ----------------------- | ------- | ----------------------------------------- |  | -------------- |  | ----------------------------------------- | --------- | -------------- |  | -------------------------------------- |  |  | --------- | - |  | ---- | 
|                           |  | Year Ended December 31, |        
|                           |  |                         |        
|                           |  | 2007                    |         | 2006                                      |  | 2005           | 
|                           |  |                         |         |                                           |  |                | 
|                           |  | Number
  of
  shares    |         | Weighted
  average
  exercise
  price US$ |  | Numberofshares |  | Weighted
  average
  exercise
  price US$ |           | Numberofshares |  | Weighted
  average
  exerciseprice US$ | 
|                           |  |                         |         |                                           |  |                |  |                                           |           |                |  |                                        | 
|Outstanding
  at January 1 |  |                         | 929,964 |                                           |  | 2.46           |  |                                           | 1,315,650 |                |  | 2.06                                   |  |  | 1,250,000 |   |  | 1.98 | 
|Granted                    |  |                         | 45,000  |                                           |  | 4.32           |  |                                           | 60,000    |                |  | 5.19                                   |  |  | 144,000   |   |  | 3.00 | 
|Forfeited                  |  |                         | (74,263 | )                                         |  | 2.78           |  |                                           | (13,980   | )              |  | 2.37                                   |  |  | (68,600   | ) |  | 2.59 | 
|Exercised                  |  |                         | (92,860 | )                                         |  | 0.34           |  |                                           | (431,706  | )              |  | 1.63                                   |  |  | (9,750    | ) |  | 1.56 | 
|                           |  |                         |         |                                           |  |                |  |                                           |           |                |  |                                        |  |  |           |   |  |      | 
|                           |  |                         |         |                                           |  |                |  |                                           |           |                |  |                                        |  |  |           |   |  |      | 
|Outstanding
  at year end  |  |                         | 807,841 |                                           |  | 2.78           |  |                                           | 929,964   |                |  | 2.46                                   |  |  | 1,315,650 |   |  | 2.06 | 
|                           |  |                         |         |                                           |  |                |  |                                           |           |                |  |                                        |  |  |           |   |  |      | 
|                           |  |                         |         |                                           |  |                |  |                                           |           |                |  |                                        |  |  |           |   |  |      | 
|Vested at
  year end       |  |                         | 670,841 |                                           |  | 2.56           |  |                                           | 665,729   |                |  | 2.22                                   |  |  | 702,990   |   |  | 1.95 | 
|                           |  |                         |         |                                           |  |                |  |                                           |           |                |  |                                        |  |  |           |   |  |      | 

| |                                                    |  |                           |         |                                  |  |                                                             |  |                                           |      |  |  |         | 
| | -------------------------------------------------- |  | ------------------------- | ------- | -------------------------------- |  | ----------------------------------------------------------- |  | ----------------------------------------- | ---- |  |  | ------- | 
| |                                                    |  | Numberofsharesoutstanding |         | Weightedaverageexerciseprice US$ |  | Weighted
  average
  remaining
  contractual
  term (years) |  | AggregateintrinsicValue (inUS$ thousands) |     
| |                                                    |  |                           |         |                                  |  |                                                             |  |                                           |     
| |                                                    |  |                           |         |                                  |  |                                                             |  |                                           |     
| | Outstanding as of December 31, 2007                |  |                           | 807,841 |                                  |  | 2.78                                                        |  |                                           | 6.55 |  |  | 244,340 | 
| |                                                    |  |                           |         |                                  |  |                                                             |  |                                           |      |  |  |         | 
| | Vested and expected to vest at December 31,
  2007 |  |                           | 759,371 |                                  |  | 2.78                                                        |  |                                           | 6.55 |  |  | 229,680 | 
| |                                                    |  |                           |         |                                  |  |                                                             |  |                                           |      |  |  |         | 
| |                                                    |  |                           |         |                                  |  |                                                             |  |                                           |      |  |  |         | 
| | Exercisable at December 31, 2007                   |  |                           | 670,841 |                                  |  | 2.52                                                        |  |                                           | 6.17 |  |  | 176,090 | 
| |                                                    |  |                           |         |                                  |  |                                                             |  |                                           |      |  |  |         | 

F  23

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
  and its subsidiaries                                
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

|           |                              
|---------- | -----------------------------
|NOTE 13   | SHAREHOLDERS EQUITY (Contd)

The following table summarizes information about
share options at
December 31, 2007:

| |  |                            |           |                   |  |                                                              |  |  |                                  |      |  |                   |  |                                  |      |  |  |  |         |  |  |      | 
| |  | -------------------------- | --------- | ----------------- |  | ------------------------------------------------------------ |  |  | -------------------------------- | ---- |  | ----------------- |  | -------------------------------- | ---- |  |  |  | ------- |  |  | ---- | 
| |  | Range ofexercise price US$ |           | Numberoutstanding |  | Weighted
  average
  remaining
  contractual
  life in years |  |  | Weightedaverageexerciseprice US$ |      |  | Numberexercisable |  | Weightedaverageexerciseprice US$ |     
| |  |                            |           |                   |  |                                                              |  |  |                                  |      |  |                   |  |                                  |     
| |  |                            |           |                   |  |                                                              |  |  |                                  |      |  |                   | 
| |  |                            | 0.00      |                   |  | 116,540                                                      |  |  |                                  | 5.56 |  |                   |  |                                  | 0.00 |  |  |  | 116,540 |  |  | 0.00 | 
| |  |                            | 2.98-3.29 |                   |  | 461,301                                                      |  |  |                                  | 5.98 |  |                   |  |                                  | 2.98 |  |  |  | 461,301 |  |  | 2.98 | 
| |  |                            | 3.00      |                   |  | 125,000                                                      |  |  |                                  | 7.74 |  |                   |  |                                  | 3.00 |  |  |  | 75,000  |  |  | 3.00 | 
| |  |                            | 5.00      |                   |  | 50,000                                                       |  |  |                                  | 8.38 |  |                   |  |                                  | 5.00 |  |  |  | 15,000  |  |  | 5.00 | 
| |  |                            | 6.15      |                   |  | 10,000                                                       |  |  |                                  | 8.58 |  |                   |  |                                  | 6.15 |  |  |  | 3,000   |  |  | 6.15 | 
| |  |                            | 4.50      |                   |  | 30,000                                                       |  |  |                                  | 9.07 |  |                   |  |                                  | 4.50 |  |  |  | -       |  |  | 4.50 | 
| |  |                            | 3.95      |                   |  | 15,000                                                       |  |  |                                  | 9.24 |  |                   |  |                                  | 3.95 |  |  |  | -       |  |  | 3.95 | 
| |  |                            |           |                   |  |                                                              |  |  |                                  |      |  |                   |  |                                  |      |  |  |  |         |  |  |      | 
| |  |                            |           |                   |  | 807,841                                                      |  |  |                                  | 6.55 |  |                   |  |                                  | 2.78 |  |  |  | 670,841 |  |  | 2.56 | 
| |  |                            |           |                   |  |                                                              |  |  |                                  |      |  |                   |  |                                  |      |  |  |  |         |  |  |      | 

The
following table summarizes information about nonvested options at December 31,
2007:

| |                                |  |         |          |                                        |  |  |      | 
| | ------------------------------ |  | ------- | -------- | -------------------------------------- |  |  | ---- | 
| |                                |  | Options |          | Weighted averagegrant- date fair value | 
| |                                |  |         |          |                                        | 
| |                                |  |         |          |                                       
| | Balance at
  January 1, 2007   |  |         | 264,235  |                                        |  |  | 2.87 | 
| | Granted                        |  |         | 45,000   |                                        |  |  | 3.19 | 
| | Vested                         |  |         | (157,820 | )                                      |  |  | 2.06 | 
| | Forfeited                      |  |         | (14,415  | )                                      |  |  | 3.60 | 
| |                                |  |         |          |                                        |  |  |      | 
| | Balance at
  December 31, 2007 |  |         | 137,000  |                                        |  |  | 3.84 | 
| |                                |  |         |          |                                        |  |  |      | 

|   |                           
|-- | --------------------------
|D. | Restricted Share Unit Plan

In August 2007,
the Company adopted a Restricted Share Unit (RSU) Plan (the Plan) pursuant
to which the Companys board of directors may grant shares to officers and key
employees.The total number of
shares, which may be granted to directors, officers, employees and consultants
under this plan, is limited to 180,000 authorized but unissued Shares.

The Exercise
Price for each Grantee shall be as determined by the Board and specified in the
applicable RSU Notice of Grant; provided, however, that unless otherwise determined
by the Board (which determination shall not require shareholder approval unless
so required in order to comply with Mandatory Law), the Exercise Price shall be
no more than the underlying Shares nominal value. For the removal of any
doubt, the Board is authorized (without the need for shareholder approval
unless so required in order to comply with Mandatory Law) to determine that the
Exercise Price of an RSU is to be $0.00.

Unless
otherwise determined by the Board with respect to any specific Grantee or to
any specific grant, (which determination shall not require shareholder approval
unless so required in order to comply with Mandatory Law) and provided
accordingly in the applicable RSU Notice of Grant, the RSUs shall vest (become
automatically exercised) according to the following 4-year vesting schedule:

a. Upon the
completion of a full 12 (twelve) months of continuous Service25%.

b. Upon the
lapse of each full additional 3 (three) month(s) of the Grantees continuous
Service thereafter, until all the RSU are vested, i.e. 100% of the grant will
be vested after 4 years.6.25%.

On December
27, 2007, 25,200 RSU were granted. The share price at the grant date was $1.88.
The total compensation amounted to $47 thousands, which is being amortized over
vesting period. All of the RSUs are not yet vested. (see also note 19)

F  24

---

---

CAMTEK LTD.
and its subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  
|                                                                  
|NOTE 13    SHAREHOLDERS EQUITY (Contd)                         

|   |                                                                                  
|-- | ---------------------------------------------------------------------------------
|D. | Restricted Share Unit Plan (contd)                                              
|   |                                                                                  
|   | As of the
 balance sheet date the number of RSUs available for grant is 154,800.
|   |                                                                                  
|   | Activity
 under the Restricted Share Unit Plan is as follows:                    

| |                                  |  |                              |         |                                |  |                                |  |   |      | 
| | -------------------------------- |  | ---------------------------- | ------- | ------------------------------ |  | ------------------------------ |  | - | ---- | 
| |                                  |  | Awards
 Available
 For grant |         | Number of
 awards
 outstanding |  | Weighted-
 average
 fair value | 
| |                                  |  |                              |         |                                |  |                                | 
| |                                  |  |                              |         |                                |  |                                | 
| | Balance as
 of January 1, 2007   |  |                              | -       |                                |  | -                              |  | $ | -    | 
| | RSU Plan                         |  |                              | 180,000 |                                |  | -                              |  |   | -    | 
| | Awards
 granted                  |  |                              | (25,200 | )                              |  | 25,200                         |  |   | 1.88 | 
| |                                  |  |                              |         |                                |  |                                |  |   |      | 
| | Balance as
 of December 31, 2007 |  |                              | 154,800 |                                |  | 25,200                         |  |   | 1.88 | 
| |                                  |  |                              |         |                                |  |                                |  |   |      | 

NOTE 14    EARNINGS (LOSS) PER ORDINARY SHARE

The following
table summarizes information related to the computation of basic and diluted
earnings (loss) per Ordinary Share for the years indicated:

|                                                                                                                |  |                         |        |      |   |        |  |   |        | 
|--------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | ------ | 
|                                                                                                                |  | Year ended December 31, |       
|                                                                                                                |  |                         |       
|                                                                                                                |  | 2007                    |        | 2006 |   | 2005   | 
|                                                                                                                |  |                         |        |      |   |        | 
|                                                                                                                |  | (In thousands)          |       
|                                                                                                                |  |                         |       
|Net income (loss) attributable to Ordinary
 Shares                                                              |  | $                       | (7,473 | )    | $ | 11,603 |  | $ | 2,702  | 
|                                                                                                                |  |                         |        |      |   |        |  |   |        | 
|Weighted average number of Ordinary Shares
 outstanding used in basic earnings per Ordinary Share calculation   |  |                         | 30,145 |      |   | 29,176 |  |   | 27,253 | 
|                                                                                                                |  |                         |        |      |   |        |  |   |        | 
|Add assumed exercise of outstanding dilutive
 potential Ordinary Shares                                         |  |                         | -      |      |   | 377    |  |   | 333    | 
|                                                                                                                |  |                         |        |      |   |        |  |   |        | 
|Weighted average number of Ordinary Shares
 outstanding used in diluted earnings per Ordinary Share calculation |  |                         | 30,145 |      |   | 29,553 |  |   | 27,586 | 
|                                                                                                                |  |                         |        |      |   |        |  |   |        | 
|                                                                                                                |  |                         |        |      |   |        |  |   |        | 
|Basic earnings (losses) per Ordinary
Share                                                                      |  |                         | (0.25  | )    | $ | 0.40   |  | $ | 0.10   | 
|                                                                                                                |  |                         |        |      |   |        |  |   |        | 
|Diluted earnings (losses) per Ordinary
 Share                                                                   |  |                         | (0.25  | )    | $ | 0.39   |  | $ | 0.10   | 
|                                                                                                                |  |                         |        |      |   |        |  |   |        | 

The number of
options which were not considered in computing dilutive earnings (losses) per
share because their impact is anti-dilutive aggregated 176,314 in 2007.

Convertible
loan which is convertible to 1,567,398 and 909,091 shares in 2007 and 2006,
respectively, was not considered in computing diluted earnings (losses) because
of anti-dilutive impact.

F  25

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                                 
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 15    GEOGRAPHIC INFORMATION

Substantially
all fixed assets are located in Israel and substantially all revenues are
derived from shipments to other countries. Revenues are attributable to
geographic areas/countries based upon the destination of shipment of products
and related services as follows:

|                     |  |                             |        |      |  |         |  |  |        | 
|-------------------- |  | --------------------------- | ------ | ---- |  | ------- |  |  | ------ | 
|                     |  | Year Ended December 31,     |       
|                     |  |                             |       
|                     |  | 2007                        |        | 2006 |  | 2005    | 
|                     |  |                             |        |      |  |         | 
|                     |  | U.S. Dollars (In thousands) |       
|                     |  |                             |       
|China and
 Hong Kong |  |                             | 30,187 |      |  | 33,713  |  |  | 24,665 | 
|Asia- Other          |  |                             | 12,676 |      |  | 20,413  |  |  | 5,036  | 
|United
 States       |  |                             | 3,983  |      |  | 15,622  |  |  | 11,484 | 
|Taiwan               |  |                             | 12,935 |      |  | 12,895  |  |  | 12,258 | 
|Western
 Europe      |  |                             | 8,081  |      |  | 9,170   |  |  | 6,597  | 
|Japan                |  |                             | 2,134  |      |  | 6,716   |  |  | 2,065  | 
|Rest of the
 world   |  |                             | 973    |      |  | 1,526   |  |  | 927    | 
|                     |  |                             |        |      |  |         |  |  |        | 
|                     |  |                             | 70,969 |      |  | 100,055 |  |  | 63,032 | 
|                     |  |                             |        |      |  |         |  |  |        | 

NOTE 16    SELECTED INCOME STATEMENT DATA

|   |                                             
|-- | --------------------------------------------
|A. | Selling, general and administrative expenses

|   |                                             |  |                             |        |      |  |        |  |  |        | 
|-- | ------------------------------------------- |  | --------------------------- | ------ | ---- |  | ------ |  |  | ------ | 
|   |                                             |  | Year Ended December 31,     |       
|   |                                             |  |                             |       
|   |                                             |  | 2007                        |        | 2006 |  | 2005   | 
|   |                                             |  |                             |        |      |  |        | 
|   |                                             |  | U.S. Dollars (In thousands) |       
|   |                                             |  |                             |       
|  
|   | Selling (a1)                                |  |                             | 17,309 |      |  | 21,000 |  |  | 14,559 | 
|   | General and
 administrative                 |  |                             | 6,810  |      |  | 6,850  |  |  | 4,201  | 
|   |                                             |  |                             |        |      |  |        |  |  |        | 
|   |                                             |  |                             | 24,119 |      |  | 27,850 |  |  | 18,760 | 
|   |                                             |  |                             |        |      |  |        |  |  |        | 
|   | (a1)
 Including shipping and handling costs |  |                             | 2,173  |      |  | 2,626  |  |  | 1,890  | 
|   |                                             |  |                             |        |      |  |        |  |  |        | 
|   |                                             |  |                             |        |      |  |        |  |  |        | 
|B. | Financial expenses, net                     |  |                             |        |      |  |        |  |  |        | 

| |                   |  |                             |      |      |  |      |   |  |      |  
| | ----------------- |  | --------------------------- | ---- | ---- |  | ---- | - |  | ---- | -
| |                   |  | Year Ended December 31,     |     
| |                   |  |                             |     
| |                   |  | 2007                        |      | 2006 |  | 2005 |  
| |                   |  |                             |      |      |  |      |  
| |                   |  | U.S. Dollars (In thousands) |     
| |                   |  |                             |     
|
| | Interest
 expense |  |                             | 320  |      |  | 422  |   |  | 405  |  
| | Interest
 income  |  |                             | (311 | )    |  | (795 | ) |  | (336 | )
| | Other, net        |  |                             | 119  |      |  | 661  |   |  | 251  |  
| |                   |  |                             |      |      |  |      |   |  |      |  
| |                   |  |                             | 128  |      |  | 288  |   |  | 320  |  
| |                   |  |                             |      |      |  |      |   |  |      |  

Other, net
includes foreign currency income (expense) resulting from transactions not denominated
in U.S. Dollars amounting to $ 66, $ (435) and $(238) thousand in 2007, 2006
and 2005, respectively.

F  26

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                                 
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 17    INCOME TAXES

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|A. | Tax under various laws                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company
 and its subsidiaries are assessed for tax purposes on an unconsolidated
 basis. The Company is assessed under the provisions of the Income Tax Law
 (Inflationary Adjustments), 1985 (the inflationary Adjustments Law),
 pursuant to which the results for tax purposes are measured in Israeli
 currency in real terms in accordance with changes in the Israeli Consumer
 Price Index (CPI). Each of the subsidiaries is subject to the tax rules
 prevailing in the country of incorporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|B. | Tax benefits under the Law for Encouragement of Capital Investments,
 1959 (the Investment Law)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The
 Companys production facilities have been granted Approved Enterprise
 status under the Investment Law. The Company participates in the Alternative
 Benefits Program and, accordingly, income from its Approved Enterprises will
 be tax exempt for a period of 10 years, commencing in the first year in which
 the Approved Enterprise first generates taxable income due to the fact that
 the Company operates in Zone A in Israel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | On April 1,
 2005, an amendment to the Investment Law came into effect (the Amendment)
 and has significantly changed the provisions of the Investment Law. The
 Amendment limits the scope of an enterprise, which may be approved by the
 Investment Center by setting criteria for the approval of a facility as a
 Beneficiating Enterprise, such provisions generally require that at least
 25% of the Beneficiating Enterprises income will be derived from export.
 Additionally, the Amendment enacted major changes in the manner in which tax
 benefits are awarded under the Investment Law so that companies no longer
 require Investment Center approval in order to qualify for the tax benefits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | In addition,
 the Amendment provides that terms and benefits included in any approval
 certificate issued prior to December 31, 2004 will remain subject to the
 provisions of the Investment Law as they were on the date of such prior
 approval. Therefore, the Companys existing Approved Enterprise will
 generally not be subject to the provisions of the Amendment. As a result of
 the Amendment, tax-exempt income generated under the provisions of the new
 law, as part of a new Beneficiating Enterprise, will subject the Company to
 taxes upon distribution or liquidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company
 has been granted the status of Approved Enterprises, under the Investment
 Law, for investment programs for the periods ending in 2007 and 2010, and the
 status of Beneficiating Enterprise according to the Amendment, for the period
 ending in 2014 (Programs).Out of the Companys retained earnings as of
 December 31, 2007 approximately $19.4 million are tax-exempt earnings
 attributable to its Approved Enterprise and approximately $ 2.8 million are
 tax-exempt earnings attributable to its Beneficiating Enterprise. The
 tax-exempt income attributable to the Approved and Beneficiating Enterprises
 cannot be distributed to shareholders without subjecting the Company to
 taxes. If these retained tax-exempt profits are distributed, the Company
 would be taxed at the reduced corporate tax rate applicable to such profits
 (currently - 25% pursuant to the implementation of the Investment Law;
 effectively 33%). According to the Amendment, tax-exempt income generated
 under the Beneficiating Enterprise will be taxed upon dividend distribution
 or complete liquidation, whereas tax exempt income generated under the
 Approved Enterprise will be taxed only upon dividend distribution (but not
 upon complete liquidation, as the tax liability will be incurred by the
 shareholders). As of December 31, 2007, if the income attributed to the
 Approved Enterprise were distributed as dividend, the Company would incur a
 tax liability of approximately $4.9 million. If income attributed to the
 Beneficiating Enterprise were distributed as dividend, or upon liquidation,
 the Company would incur a tax liability in the amount of approximately $ 0.7
 million. These amounts will be recorded as an income tax expense in the
 period in which the Company declares the dividend.

F  27

---

---

|                                                                  
|------------------------------------------------------------------
|CAMTEK LTD.
 and its subsidiaries                                 
|                                                                  
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 17    INCOME TAXES (Contd)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|B. | Tax benefits under the Law for Encouragement of Capital Investments,
 1959 (the Investments Law) (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company
 intends to indefinitely reinvest the amount of its tax-exempt income and not
 distribute any amounts of its undistributed tax exempt income as dividend.
 Accordingly, no deferred tax liabilities have been provided on income attributable
 to the Companys Approved and Beneficiating Enterprise Programs as the
 undistributed tax exempt income is essentially permanent in duration.                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The
 entitlement to the above benefits is conditional upon the Companys
 fulfilling the conditions stipulated by the law and the regulations published
 thereunder as well as the criteria set forth in the approval for the specific
 investments in the Approved Enterprises. In the event of failure to meet such
 requirements in the future, income attributable to its Programs could be
 subject to the statutory Israeli corporate tax rates and the Company could be
 required to refund a portion of the tax benefits already received, with
 respect to such Programs. The Companys management believes that the Company
 has met the aforementioned conditions.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|C. | Tax benefits under the Law for the Encouragement of Industry (Taxes),
 1969                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company
 is an industrial company as defined by this law and as such is entitled to
 certain tax benefits, mainly accelerated depreciation as prescribed by
 regulations published under the Inflationary Adjustments Law and the right to
 deduct issuance costs as an expense for tax purposes.                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|D. | Composition of income (loss) before income taxes and income tax
 expense (benefit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                                     |  |                             |        |      |  |        |   |  |       | 
| | ----------------------------------- |  | --------------------------- | ------ | ---- |  | ------ | - |  | ----- | 
| |                                     |  | Year Ended December 31,     |       
| |                                     |  |                             |       
| |                                     |  | 2007                        |        | 2006 |  | 2005   |  
| |                                     |  |                             |        |      |  |        |  
| |                                     |  | U.S. Dollars (In thousands) |       
| |                                     |  |                             |       
| | Income
 (loss) before income taxes: |  |                             |        |      |  |        |   |  |       | 
| | Israel                              |  |                             | (9,515 | )    |  | 10,256 |   |  | 2,399 | 
| | Non-Israeli                         |  |                             | 2,186  |      |  | 1,388  |   |  | 303   | 
| |                                     |  |                             |        |      |  |        |   |  |       | 
| |                                     |  |                             | (7,329 | )    |  | 11,644 |   |  | 2,702 | 
| |                                     |  |                             |        |      |  |        |   |  |       | 
| |                                     |  |                             |        |      |  |        |   |  |       | 
| | Income tax
 expense (benefit):      |  |                             |        |      |  |        |   |  |       | 
| | Current:                            |  |                             |        |      |  |        |   |  |       | 
| | Israel                              |  |                             | -      |      |  | -      |   |  | -     | 
| | Non-Israeli                         |  |                             | 394    |      |  | 475    |   |  | -     | 
| |                                     |  |                             |        |      |  |        |   |  |       | 
| |                                     |  |                             | 394    |      |  | 475    |   |  | -     | 
| |                                     |  |                             |        |      |  |        |   |  |       | 
| | Deferred:                           |  |                             |        |      |  |        |   |  |       | 
| | Israel                              |  |                             | 16     |      |  | (160   | ) |  | -     | 
| | Non-Israeli                         |  |                             | (48    | )    |  | (274   | ) |  | -     | 
| |                                     |  |                             |        |      |  |        |   |  |       | 
| |                                     |  |                             | (32    | )    |  | (434   | ) |  | -     | 
| |                                     |  |                             |        |      |  |        |   |  |       | 
| |                                     |  |                             | 362    |      |  | 41     |   |  | -     | 
| |                                     |  |                             |        |      |  |        |   |  |       | 

F  28

---

---

CAMTEK LTD.
and its subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 17     INCOME TAXES (Contd)

|   |                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|E. | Income taxes included in the income statements:                                                                                                                                                                              
|   |                                                                                                                                                                                                                              
|   | The
  following is a reconciliation of the theoretical income tax expense
  (benefit), assuming all income is taxed at the statutory tax rate applicable
  to Israeli companies, and the actual income tax expense (benefit):

| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------- | ------ | ---- | - | ------ | - | - | ------ | -
| |                                                                                                                                                                                      |  | Year Ended December 31,     |       
| |                                                                                                                                                                                      |  |                             |       
| |                                                                                                                                                                                      |  | 2007                        |        | 2006 |   | 2005   |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |  
| |                                                                                                                                                                                      |  | U.S. Dollars (In thousands) |       
| |                                                                                                                                                                                      |  |                             |       
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Income (loss) before income taxes                                                                                                                                                    |  |                             | (7,329 | )    |   | 11,644 |   |   | 2,702  |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Statutory tax rate                                                                                                                                                                   |  |                             | 29     | %    |   | 31     | % |   | 34     | %
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Theoretical income tax expense (benefit)                                                                                                                                             |  |                             | (2,125 | )    |   | 3,610  |   |   | 918    |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Increase (decrease) in income tax expense
  resulting from:                                                                                                                          |  |                             |        |      |   |        |   |   |        |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Tax benefits arising from Approved and
  Beneficiating Enterprises                                                                                                                 |  |                             | -      |      |   | (1,641 | ) |   | (281   | )
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Decrease in taxes resulting from
  utilization of carryforward tax losses and deductible temporary differences
  for which deferred tax benefits were not provided in previous years |  |                             | (1,205 | )    |   | (1,337 | ) |   | (2,066 | )
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Tax losses and deductible temporary
  differences for which no tax benefit has been recorded                                                                                         |  |                             | 6,931  |      |   | 351    |   |   | 371    |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Permanent differences and nondeductible
  expenses, including difference between Israeli CPI-adjusted tax returns and
  dollar-adjusted financial statements-net                     |  |                             | (2,560 | )    |   | (1,318 | ) |   | 970    |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Nondeductible stock-based compensation                                                                                                                                               |  |                             | 124    |      |   | 237    |   |   | 43     |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Prior period adjustments                                                                                                                                                             |  |                             | 138    |      |   | 61     |   |   | -      |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Other *                                                                                                                                                                              |  |                             | (941   | )    |   | 78     |   |   | 45     |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Actual income tax expense                                                                                                                                                            |  |                             | 362    |      |   | 41     |   |   | -      |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Per share effect of the tax benefits
  arising from Approved and Beneficiating Enterprises:                                                                                        |  |                             |        |      |   |        |   |   |        |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Basic                                                                                                                                                                                |  | $                           | 0.00   |      | $ | 0.06   |   | $ | 0.01   |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  
| | Diluted                                                                                                                                                                              |  | $                           | 0.00   |      | $ | 0.06   |   | $ | 0.01   |  
| |                                                                                                                                                                                      |  |                             |        |      |   |        |   |   |        |  

| |                                       
| | --------------------------------------
| | * Mainly due
  to different tax rates.

F  29

---

---

CAMTEK LTD.
and its subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 17    INCOME TAXES (Contd)

|   |                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|F. | Income taxes included in the balance sheet                                                                                                         
|   |                                                                                                                                                    
|   | The tax
  effects of temporary differences that give rise to significant portions of
  the deferred tax assets and liabilities are presented below:

| |                                                  |  |                             |        |      |  |        |  
| | ------------------------------------------------ |  | --------------------------- | ------ | ---- |  | ------ | -
| |                                                  |  | December 31                 |       
| |                                                  |  |                             |       
| |                                                  |  | 2007                        |        | 2006 | 
| |                                                  |  |                             |        |      | 
| |                                                  |  | U.S. Dollars (In thousands) |       
| |                                                  |  |                             |       
| | Current:                                         |  |                             |        |      |  |        |  
| | Provision for doubtful accounts                  |  |                             | 294    |      |  | 194    |  
| | Accrued warranty                                 |  |                             | 15     |      |  | 97     |  
| | Unearned revenue                                 |  |                             | 230    |      |  | 185    |  
| | Net operating losses carryforwards               |  |                             | -      |      |  | 91     |  
| | Accrued expenses                                 |  |                             | 215    |      |  | 134    |  
| | Other temporary differences *                    |  |                             | 538    |      |  | -      |  
| |                                                  |  |                             |        |      |  |        |  
| | Total gross current deferred tax assets          |  |                             | 1,292  |      |  | 701    |  
| | Valuation allowance                              |  |                             | (1,168 | )    |  | (636   | )
| |                                                  |  |                             |        |      |  |        |  
| | Current deferred tax asset, net of
  allowance   |  |                             | 124    |      |  | 65     |  
| |                                                  |  |                             |        |      |  |        |  
| |                                                  |  |                             |        |      |  |        |  
| | Long-term:                                       |  |                             |        |      |  |        |  
| | Net operating losses carryforwards               |  |                             | 3,552  |      |  | 1,759  |  
| | Severance pay                                    |  |                             | 5      |      |  | 14     |  
| | Fixed assets                                     |  |                             | (19    | )    |  | (53    | )
| | Other temporary differences *                    |  |                             | 536    |      |  | 413    |  
| |                                                  |  |                             |        |      |  |        |  
| | Total gross long-term deferred tax assets        |  |                             | 4,074  |      |  | 2,133  |  
| | Valuation allowance                              |  |                             | (3,462 | )    |  | (1,549 | )
| |                                                  |  |                             |        |      |  |        |  
| | Long-term deferred tax asset, net of
  allowance |  |                             | 612    |      |  | 584    |  
| |                                                  |  |                             |        |      |  |        |  
|
| | Net deferred tax assets                          |  |                             | 736    |      |  | 649    |  
| |                                                  |  |                             |        |      |  |        |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * Other
  temporary differences mainly relate to research and development expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Under SFAS
  No. 109, deferred tax assets are to be recognized for the anticipated tax
  benefits associated with net operating loss carryforwards and deductible
  temporary differences, unless it is more likely than not that some or all of
  the deferred tax assets will not be realized. The adjustment is made by a
  valuation allowance.                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Since the
  realization of the net operating loss carryforwards and deductible temporary
  differences is uncertain and not considered more likely than not, a valuation
  allowance has been established to reduce deferred tax assets to their
  estimated realizable value. The net change in the total valuation allowance
  was an increase of $ 2,445 thousand for the year ended December 31, 2007 and a
  decrease of $ 501 thousand, and $ 1,548 thousand for the years ended December
  31, 2006 and 2005, respectively.   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | As of
  December 31, 2007, Camtek has not provided for income taxes on the
  undistributed earnings of approximately US$ 1,500 thousand of one of its
  foreign subsidiaries since these earnings are intended to be indefinitely
  reinvested. A deferred tax liability will be recognized when the Company no
  longer demonstrates that it plans to indefinitely reinvest these
  undistributed earnings. It is not practicable to estimate the amount of
  additional taxes that might be payable on such undistributed earnings.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | As of
  December 31, 2007, the Company and its subsidiary in Israel have NOL
  carryforwards aggregating approximately $7,810 thousand, and NOL available
  for offset from Approved and Beneficiating Enterprises aggregating
  approximately $14,942 thousands.                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | As of
  December 31, 2007, the major foreign subsidiaries have NOL carryforwards
  aggregating approximately $4,842 thousand, of which approximately $2,764
  thousand will expire from 2009 to 2023 and approximately $2,078 thousand can
  be carried forward indefinitely.                                                                                                                                                                                                                                                        

F  30

---

---

CAMTEK LTD. and its subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 17    INCOME TAXES (Contd)

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|G. | Reduction in corporate income tax rate in Israel                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On July 25,
 2005, an amendment to the Israeli tax law was approved by the Israeli
 parliament, which reduces the
 tax rates imposed on Israeli companies to 31% for 2006. This amendment states that the corporate tax rate will
 be further reduced in subsequent tax years as follows: in2007 29%, in 2008 27%, in 2009 26% and
 thereafter 25%. This change does not have a material effect on the Companys financial
 statements.                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|H. | On February
 26, 2008, the Israeli Income Tax Law (Inflationary Adjustments) (Amendment
 No. 20) (Restriction of Period of Application)  2008 (the 2008 Amendment)
 was passed by the Knesset. According to the 2008 Amendment, the Inflationary
 Adjustments Law will no longer be applicable subsequent to the 2007 tax year,
 except for certain transitional provisions. Further, according to the 2008
 Amendment, commencing with the 2008 tax year, the adjustment of income for
 the effects of inflation for tax purposes will no longer be calculated.
 Additionally, depreciation on fixed assets and tax loss carryforwards will no
 longer be linked to future changes in the CPI subsequent to the 2007 tax
 year, and the balances that have been linked to the CPI through the end of
 the 2007 tax year will be used going forward.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|I. | Accounting for uncertainty in income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | FIN 48
 clarifies the accounting for uncertainty in income taxes recognized in an
 enterprises financial statements in accordance with FAS 109. This
 interpretation prescribes a minimum recognition threshold a tax position is
 required to meet before being recognized in the financial statements. FIN 48
 also provides guidance on derecognition of tax positions, classification on
 the balance sheet, interest and penalties, accounting in interim periods,
 disclosure, and transition. FIN 48 requires significant judgment in
 determining what constitutes an individual tax position as well as assessing
 the outcome of each tax position.                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company
 adopted the provisions of FIN 48 as of January 1, 2007, and there was no
 effect on the financial statements. As a result, the Company did not record
 any cumulative effect adjustment related to adopting FIN 48.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | As of
 January 1, 2007, and for the year ended December 31, 2007, the Company did
 not have any unrecognized tax benefits. In addition, the Company does not
 expect that the amount of unrecognized tax benefits will change significantly
 within the next twelve months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company
 accounts for interest and penalties related to unrecognized tax benefits as a
 component of income tax expense. As of January 1, 2007 and for the
 twelve-month period ended December 31, 2007, no interest and penalties
 related to unrecognized tax benefits have been accrued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company
 files its income tax returns in Israel while its principle foreign
 subsidiaries file their income tax returns in Belgium, Hong-Kong and United
 States of America. The Israeli tax returns of the Company and its Israeli
 subsidiary are open to examination by the Israeli Tax Authorities for the tax
 years beginning in 2003 while the tax returns of its principle foreign
 subsidiaries remain subject to examination for the tax years beginning in
 1997 in Belgium, 2001 in Hong-Kong and 2004 in the United States of America.                                                                                                                                                                                                                                                                                                

F  31

---

---

CAMTEK LTD. and its subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 18    TRANSACTIONS WITH RELATED PARTIES

|                                      |  |                             |       |      |  |       |  |  |     | 
|------------------------------------- |  | --------------------------- | ----- | ---- |  | ----- |  |  | --- | 
|                                      |  | Year Ended December 31,     |      
|                                      |  |                             |      
|                                      |  | 2007                        |       | 2006 |  | 2005  | 
|                                      |  |                             |       |      |  |       | 
|                                      |  | U.S. Dollars (In thousands) |      
|                                      |  |                             |      
|Purchases from Parent and affiliates  |  |                             | 1,876 |      |  | 3,244 |  |  | 597 | 
|Interest income (expense) from Parent |  |                             | (33   | )    |  | 16    |  |  | 19  | 
|Sales to Parent and affiliates        |  |                             | 27    |      |  | 240   |  |  | 1   | 

Registration Rights Agreement with Parent

On March 1,
2004, the Company entered into a registration rights agreement providing for
the Company to register with the SEC certain of its ordinary shares held by
Parent. This registration rights agreement may be used in connection with
future offerings of our ordinary shares, and includes, among others, the
following terms: (a) Parent is entitled to make up to three demands that we
register our ordinary shares held by Parent, subject to delay due to market
conditions; (b) Parent will be entitled to participate and sell the Companys
ordinary shares in any future registration statements initiated by the Company,
subject to delay due to market conditions; (c) the Company will indemnify
Parent in connection with any liabilities incurred in connection with such
registration statements due to any misstatements or omissions other than
information provided by Parent, and Parent will indemnify the Company in
connection with any liabilities incurred in connection with such registration
statements due to any misstatements or omissions in written statements by
Parent made for the purpose of their inclusion in such registration statements;
and (d) the Company will pay all expenses related to registrations which the
Company has initiated, except for certain underwriting discounts or commissions
or legal fees, and Parent will pay all expenses related to a registration
initiated at its demand in which the Company is not participating.

On December
30, 2004, the Registration Rights Agreement with Parent was amended. The
amendment concerns primarily the grant of unlimited shelf registration rights
thereunder to Parent with respect to its holdings in us, and the assignability
of those shelf registration rights to its transferees.

Employment Agreements with the CEO and the
COO

Effective
January 1, 1998, the Company entered into an employment agreement with its
Chief Executive Officer (CEO). Pursuant to his employment agreement, the CEO
may dedicate up to 20% of his time to work for Parent or any of the Parents
entities.

Also effective
January 1, 1998, the Company entered into an employment agreement with its
Executive Vice President, Business & Strategy (EVP). Pursuant to his
employment agreement, the EVP may dedicate up to 40% of his time to work for
Parent or any of the Parents entities.

The CEO works
on a full time basis for the Company and therefore receives a full time salary,
while the EVP receives from the Company 60% of a full time salary. The EVP is
compensated directly by each of the Parent entities for which he works. The CEO
also serves as the Chairman of Parent, and the EVP also serves as the Chief
Executive Officer and as a director of Parent.

The CEO and
EVP do not receive any additional compensation for their service as the
Companys directors.

F  32

---

---

CAMTEK LTD. and its subsidiaries

|                                                                  
|------------------------------------------------------------------
|Notes to Consolidated Financial Statements As of December 31, 2007
|                                                                  

NOTE 19    SUBSEQUENT EVENTS

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A. | On January
 1, 2008 132,800 RSU were granted to employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | B. | On March 7, 2008, a purported class
action complaint (the Class Action Complaint), Yuval Lapiner v. Camtek, Ltd.
et al., Case No. 08-01327-MMC, was filed in the United States District Court for the
Northern District of California on behalf of purchasers of our common stock between
November 22, 2005 and December 20, 2006. The Class Action Complaint names the Company and
certain of our directors and officers as defendants. It alleges that the defendants
violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated
thereunder, and breached fiduciary duties by making false and misleading statements in the
Companys SEC filings and press releases. The plaintiffs seek unspecified
compensatory damages against the defendants, as well as attorneys fees and costs. At
this preliminary stage, before the Company has submitted its response, management does not
believe that the Class Action Complaint has merit and intends to defend itself vigorously.
Accordingly, no provision has been made in the financial statements in respect of this
claim.

F  33

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|Item 19. |  | Exhibits.
|-------- |  | ---------

|Exhibit No. |  | Exhibit
|----------- |  | -------

|1.1 |  | Memorandum
of Association of Registrant (incorporated herein by reference to Exhibit 3.1 to
Amendment No. 1 to the Registrants Registration Statement on Form F-1, File No. 333-12292,
filed with the Securities and Exchange Commission on July 21, 2000).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|1.2 |  | Articles
of Registrant (incorporated herein by reference to Exhibit 3.2 to Amendment No. 1 to the
Registrants Registration Statement on Form F-1, File No. 333-113208, filed with the
Securities and Exchange Commission on April 5, 2004).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.1 |  | Amended
and Restated Employee Share Option Plan (incorporated herein by reference to Exhibit 10.1
to the Registrants Registration Statement on Form S-8, File No. 333-84476, filed
with the Securities and Exchange Commission on March 18, 2002).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 |  | Amended
and Restated Subsidiary Employee Option Plan (incorporated herein by reference to Exhibit
10.2 to the Registrants Registration Statement on Form S-8, File No. 333-84476,
filed with the Securities and Exchange Commission on March 18, 2002).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 |  | Employee
Share Option Plan  Europe (incorporated herein by reference to Exhibit 10.3 to the
Registrants Registration Statement on Form S-8, File No. 333-49982, filed with the
Securities and Exchange Commission on November 15, 2000).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 |  | Executive
Share Option Plan (incorporated herein by reference to Exhibit 10.4 to the Registrants
Registration Statement on Form S-8, File No. 333-60704, filed with the Securities and
Exchange Commission on May 11, 2001).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.5 |  | 2003
Share Option Plan (incorporated herein by reference to Exhibit 10.1 to the Registrants
Registration Statement on Form S-8, File No. 333- 113139, filed with the Securities and
Exchange Commission on February 27, 2004).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.6 |  | Sub-Plan
for Grantees Subject to United States Taxation (incorporated herein by reference to
Exhibit 10.2 to the Registrants Registration Statement on Form S-8, File No.
333-113139, filed with the Securities and Exchange Commission on February 27, 2004).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.7 |  | Sub-Plan
for Grantees Subject to Israeli Taxation (incorporated herein by reference to Exhibit
10.3 to the Registrants Registration Statement on Form S- 8, File No. 333-113139,
filed with the Securities and Exchange Commission on February 27, 2004).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.8 |  | 2007
Restricted Share Unit Plan (attached to the original filing).
|--- |  | ------------------------------------------------------------------

|4.9 |  | Form
of Indemnification Agreement (incorporated herein by reference to Exhibit 10.10 to
Amendment               No. 1 to the Registrants Registration Statement on Form F-1,
File No. 333-12292, filed with the               Securities and Exchange Commission on
July 21, 2000).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.10 |  | Registration
Rights Agreement, by and between the Registrant and Priortech Ltd., dated March 1,
              2004 (incorporated herein by reference to Exhibit 10.9 to Amendment No. 1
to the Registrants               Registration Statement on Form F-1, File No.
333-113208, filed with the Securities and Exchange               Commission on April 5,
2004).
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.11 |  | Registration
Rights Amended and Restated Agreement by and between the Registrant and Priortech
              Ltd., dated December 30, 2004. (incorporated herein by reference to Exhibit
4.10 to the               Registrants Registration Statement on Form 20-F File
No.000-30664 filed with the Securities and               Exchange Commission on June 30,
2005).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.12 |  | Convertible
Loan Agreement, by and between the Registrant and FIMI Opportunity Fund, L.P., and FIMI
Israel Opportunity Fund, dated August 8, 2005 (incorporated herein by reference to
Exhibit 4.11 to the Registrants Registration Statement on Form 20-F File
No.000-30664 filed with the Securities and Exchange Commission on June 29, 2006).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.13 |  | Press
Release announcing the Companys completion of $15,000,000 Private Placement dated
April 28, 2006; Press Release announcing Priortech Ltd. Sale of Camtek shares to Israeli
Institutional Investors dated June 21, 2006 (incorporated herein by reference to Exhibit
4.12 to the Registrants Registration Statement on Form 20-F File No.000-30664 filed
with the Securities and Exchange Commission on June 29, 2006).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|8.1 |  | Subsidiaries
of the Registrant (attached to the original filing).
|--- |  | -----------------------------------------------------------------

|12.1 |  | Certification
of Chief Executive Officer required by Rules 13a-14(a) and Rule 15d-14(a) under the
Securities Exchange Act of 1934, as amended.*
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

|12.2 |  | Certification
of Chief Financial Officer required by Rules 13a-14(a) and Rule 15d-14(a) under the
Securities Exchange Act of 1934, as amended.*
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

|13.1 |  | Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15.1 |  | Consent
of Somekh Chaikin, a member firm of KPMG International (attached to the original filing).
|---- |  | -------------------------------------------------------------------------------------------------

|15.2 |  | Consent
of Brightman Almagor & Co., a member firm of Deliotte, Touche Tohmatsu, and Goldstein
Sabo               Tevet (attached to the original filing).
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

| | English
translations from Hebrew original.
|- | ------------------------------------------

|* | Filed
herewith.
|- | ---------------



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# SIGNATURES

The
Company hereby certifies that it meets all of the requirements for filing on Form 20-F/A
and that it has duly caused and authorized the undersigned to sign this Annual Report on
its behalf.

| |  | CAMTEK LTD.By: /s/ Rafi Amit
Rafi AmitChief Executive Officer
| |  | ---------------------------------------------------------------------------

Date: November 9, 2009



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