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LOGO

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

F O R M   2 0 - F

|o                                           | REGISTRATION
  STATEMENT PURSUANT TO SECTION 12(b) OR 12(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, 2003
|                                           
|OR                                         
|                                           
|o                                           | TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|                                            | For the transition period from _________ to
________                                                

Commission File Number: 0-12332

SCITEX CORPORATION LTD.(Exact name of Registrant as specified in its charter and translation of
Registrants name into English)

Israel(Jurisdiction
of incorporation or organization)

3 Azrieli Center, Triangular Tower, 43RDFloor, Tel Aviv 67023, Israel(Address of
principal executive offices)

Securities registered or to be registered
pursuant to Section 12(b) of the Act:None

Securities registered or to be registered
pursuant to Section 12(g) of the Act:Ordinary Shares, NIS 0.12 nominal (par) value
per share(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 December 31, 2003:                                                                                                                                                                                                                                
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|43,018,413 Ordinary Shares, NIS 0.12
  nominal (par) value per share                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                 
|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.
|                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                 
|Indicate
  by check mark which financial statement item the Registrant has elected to
  follow.                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                 

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TABLE OF CONTENTS

|                                                                    | Page                                                        
|------------------------------------------------------------------- | ------------------------------------------------------------
|                                                                    |                                                             
|INTRODUCTION                                                        | 4                                                           
|                                                                    |                                                             
|PART I                                                              | 5                                                           
|Item
  1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
  AND ADVISERS | 5                                                           
|                                                                    |                                                             
|Item
  2.   OFFER STATISTICS AND EXPECTED TIMETABLE                 | 5                                                           
|                                                                    |                                                             
|Item
  3.   KEY INFORMATION                                         | 5                                                           
|                                                                    | A.
  Selected Financial Data                                
|                                                                    | B.
  Capitalization and Indebtedness                        
|                                                                    | C. Reasons
  for the Offer and Use of Proceeds              
|                                                                    | D. Risk Factors                                             
|                                                                    |                                                             
|Item 4.   INFORMATION
  ON THE COMPANY                              | 19                                                          
|                                                                    | A. History
  and Development of the Company                 
|                                                                    | B.
  Business Overview                                      
|                                                                    | C.
  Organizational Structure                               
|                                                                    | D. Property, Plants and Equipment                           
|                                                                    |                                                             
|Item 5.   OPERATING
  AND FINANCIAL REVIEW AND PROSPECTS            | 34                                                          
|                                                                    | A.
  Operating Results                                      
|                                                                    | B.
  Liquidity and Capital Resources                        
|                                                                    | C.
  Research and Development, Patents and Licenses         
|                                                                    | D. Trend Information                                        
|                                                                    | E. Off-Balance Sheet
  Arrangements                         
|                                                                    | F. Tabular Disclosure of
  Contractual Obligations          
|                                                                    |                                                             
|Item 6.   DIRECTORS,
  SENIOR MANAGEMENT AND EMPLOYEES              | 53                                                          
|                                                                    | A.
  Directors and Senior Management                        
|                                                                    | B.
  Compensation                                           
|                                                                    | C. Board
  Practices                                        
|                                                                    | D.
  Employees                                              
|                                                                    | E. Share
  Ownership                                        
|                                                                    |                                                             
|Item 7.   MAJOR
  SHAREHOLDERS AND RELATED PARTY TRANSACTIONS       | 64                                                          
|                                                                    | A. Major
  Shareholders                                     
|                                                                    | B. Related
  Party Transactions                             
|                                                                    | C.
  Interests of Expert and Counsel                        
|                                                                    |                                                             
|Item 8.   FINANCIAL
  INFORMATION                                   | 73                                                          
|                                                                    | A.
  Consolidated Statements and Other Financial Information
|                                                                    | B. Significant Changes                                      
|                                                                    |                                                             
|Item 9.   THE
  OFFER AND LISTING                                   | 74                                                          
|                                                                    | A. Offer
  and Listing Details                              
|                                                                    | B. Plan of
  Distribution                                   
|                                                                    | C. Markets                                                  
|                                                                    | D. Selling
  Shareholders                                   
|                                                                    | E.
  Dilution                                               
|                                                                    | F.
  Expenses of the Issue                                  

2

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|Item 10.   ADDITIONAL
  INFORMATION                                                       | 76                                         
|----------------------------------------------------------------------------------------- | -------------------------------------------
|                                                                                          | A. Share
  Capital                         
|                                                                                          | B.
  Memorandum and Articles of Association
|                                                                                          | C.
  Material Contracts                    
|                                                                                          | D.
  Exchange Controls                     
|                                                                                          | E.
  Taxation                              
|                                                                                          | F.
  Dividends and Paying Agents           
|                                                                                          | G.
  Statement by Experts                  
|                                                                                          | H.
  Documents on Display                  
|                                                                                          | I.  Subsidiary Information                 
|                                                                                          |                                            
|Item 11.   QUANTITATIVE
  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 93                                         
|                                                                                          |                                            
|Item 12.   DESCRIPTION
  OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 93                                         
|                                                                                          |                                            
|PART II                                                                                   | 93                                         
|                                                                                          |                                            
|Item 13.   DEFAULTS,
  DIVIDEND ARREARAGES AND DELINQUENCIES                              | 93                                         
|                                                                                          |                                            
|Item 14.   MATERIAL
  MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 94                                         
|                                                                                          |                                            
|Item 15.   CONTROLS AND PROCEDURES                                                        | 94                                         
|                                                                                          |                                            
|Item
  16A.   Audit Committee Financial Expert                                            | 94                                         
|Item
  16B.   Code of Ethics                                                              | 95                                         
|Item
  16C.   Principal Accountant Fees and Services                                      | 95                                         
|Item
  16D.   Exemptions From the Listing Standards
  for Audit Committees                | 95                                         
|Item
  16E.   Purchases of Equity Securities by the
  Issuer and Affiliated Purchasers    | 96                                         
|                                                                                          |                                            
|PART III                                                                                  | 96                                         
|                                                                                          |                                            
|Item 17.   FINANCIAL
  STATEMENTS                                                         | 96                                         
|                                                                                          |                                            
|Item 18.   FINANCIAL
  STATEMENTS                                                         | 96                                         
|                                                                                          |                                            
|Item 19.   EXHIBITS                                                                       | 97                                         
|                                                                                          |                                            
|SIGNATURE                                                                                 |                                            

3

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INTRODUCTION

Unless indicated otherwise by the context, all references in
this Annual Report to:

| | we,
  us, our, Scitex, or the Company are to Scitex Corporation Ltd. and
  its wholly owned and/or majority owned subsidiaries;               
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                         
| | dollars
  or $ are to United States dollars;                                                                                                        
|  |                                                                                                                                                         
| | NIS or
  shekel are toNew Israel Shekel;                                                                                                            
|  |                                                                                                                                                         
| | the
  Companies Law or the Israeli Companies Law are to the Israeli Companies
  Law, 5759-1999;                                                     
|  |                                                                                                                                                         
| | the
  SEC are to the United States Securities and Exchange Commission;                                                                                
|  |                                                                                                                                                         
| | Discount
  and CEI are to Discount Investment Corporation Ltd. and Clal Electronics
  Industries Ltd., respectively, our principal shareholders; and
|  |                                                                                                                                                         
| | Clal
  are to Clal Industries and Investments Ltd., the parent of CEI.                                                                                

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Except
for the historical information contained in this Annual Report on Form 20-F,
certain information contained herein, including, without limitation,
information appearing under Item 4. Information on the Company and Item 5.
Operating and Financial Review and Prospects, are forward-looking statements
(within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934). 
Forward-looking statements are based on various assumptions (some of
which are beyond our control) and may be identified by the use of
forward-looking terminology, such as may, can be, will, expects,
anticipates, intends, believes, projects, continues, plans,
seeks, potential, and similar words and phrases.  Actual results could differ materially from those contained in
forward-looking statements due to a variety of factors, including, but not
limited to:

| | risks in product and
  technology development;                                                                                           
|- | -----------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                          
| | market acceptance of new
  products and continuing product demand;                                                                       
|  |                                                                                                                                          
| | the impact of competitive
  products and pricing;                                                                                        
|  |                                                                                                                                          
| | changes in domestic and
  foreign economic and market conditions;                                                                        
|  |                                                                                                                                          
| | timely development and
  release of new products by strategic suppliers;                                                                 
|  |                                                                                                                                          
| | the impact of our
  accounting policies;                                                                                                 
|  |                                                                                                                                          
| | risks relating to the
  integration of new businesses;                                                                                   
|  |                                                                                                                                          
| | uncertainty of outcome of
  shareholders litigation; and                                                                                 
|  |                                                                                                                                          
| | those risks set forth
  under Item 3D. Risk Factors in this Annual Report as well as those
  discussed elsewhere in this Annual Report.

Except
as may be required by law, we do not undertake, and specifically disclaim, any
obligation to release publicly the results of any revisions, which may be
required to any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of such
forward-looking statements.

USE OF TRADE NAMES

Unless
indicated otherwise by the context, trade names, trademarks and/or service
marks appearing throughout this Annual Report are trademarks of Scitex, its
subsidiaries and/or its affiliates and may be registered in certain jurisdictions.  Scitex and the Scitex logo are trademarks
and service marks of Scitex. Scitex Vision, Idanit, Aprion, Shaldag and CORjet
are trademarks of Scitex Vision Ltd. or its subsidiaries.

4

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P A R T   I

ITEM 1.     IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not
applicable.

ITEM 2.     OFFER
STATISTICS AND EXPECTED TIMETABLE

Not
applicable.

ITEM 3.     KEY
INFORMATION

A.                SELECTED
FINANCIAL DATA

The following selected consolidated statements of operations data for
the years ended December 31, 2001, 2002 and 2003 and the selected consolidated
balance sheet data as of December 31, 2002 and 2003 are derived from our
audited consolidated financial statements set forth elsewhere in this Annual
Report, which have been prepared in accordance with generally accepted
accounting principles in the United States (U.S. GAAP).  The selected consolidated statements of
operations data for the years ended December 31, 1999 and 2000 and the selected
consolidated balance sheet data as of December 31, 1999, 2000 and 2001 are
derived from audited consolidated financial statements not appearing in this
Annual Report, which have been prepared in accordance with U.S. GAAP.

Explanatory Notes

| | Our consolidated financial
  statements for the periods ended December 31, 2000 and 2001, were adjusted
  retroactively in order to reflect a change in the method of accounting of an
  investment from the cost method to the equity method.  See
  Note 2w to our consolidated financial statements included in this Annual
  Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | In January 2003, we
  completed a transaction to combine the operations of Scitex Vision
  International Ltd. (formerly, Scitex Vision Ltd.), or Scitex Vision
  International, our then wholly owned subsidiary, and Scitex Vision Ltd.
  (formerly, Aprion Digital Ltd.), or Scitex Vision, in which we held 42.5% of
  its share capital.  As a result,
  Scitex Vision became a majority owned subsidiary of ours and the parent of
  Scitex Vision International.  This
  transaction is described in Item 7B below and we make reference to it in
  other sections of this Annual Report. Since this transaction was effected
  after the end of 2002, our consolidated financial statements for the year
  ended December 31, 2003, included in this Annual Report, consolidate Scitex
  Visions financial statements whereas our consolidated financial statements
  for previous years include only the results of Scitex Vision International. See Note 3a to our consolidated financial statements included in this Annual
  Report.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | In January 2004, we
  completed a transaction to sell the business of Scitex Digital Printing,
  Inc., or SDP, our indirect wholly owned subsidiary, to Eastman Kodak Company,
  or Kodak.  This transaction is
  described under Item 10C. Material
  Contracts  Sale of SDPbelow and we make reference to it in
  other sections of this Annual Report. As a result of this transaction, the
  results of operations of SDP are reported as discontinued operations and the
  consolidated results from continuing operations no longer include revenues
  and expenses directly attributable to SDP. Similarly, assets and liabilities
  relating to SDP are presented in our balance sheet separately as assets and
  liabilities of discontinued operations. Our consolidated financial statements
  for prior periods have been reclassified to reflect these changes. See Note 1b to our consolidated financial statements included in this Annual
  Report.                                                                          

5

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The following selected financial data should
be read in conjunction with Item 5. Operating and Financial Review and
Prospects and the consolidated financial statements and the notes thereto and
the other financial information appearing elsewhere in this Annual Report.

BALANCE SHEET DATA

|                                                                                |  | December
  31,                |        
|------------------------------------------------------------------------------- |  | ----------------------------- | -------
|                                                                                |  |                               |        
|                                                                                |  | 2003                          |        
|                                                                                |  |                               |        
|                                                                                |  | (U.S.
  dollars in thousands) |        
|                                                                                |  |                               |        
|Working
  capital (continued operations)                                        |  | $                             | 30,278 
|Working
  capital (discontinued
     operations)                                |  | $                             | 129,667
|Cash, cash
  equivalents and short term
     investments (continued operations) |  | $                             | 79,358 
|Cash, cash
  equivalents and short term
  investments (discontinued operations) |  | $                             | 16,056 
|Total assets                                                                    |  | $                             | 397,913
|Long term
  liabilities (continued
     operations)                             |  | $                             | 13,268 
|Long term
  liabilities (discontinued
     operations)                          |  | $                             | 5,431  
|Share
  capital                                                                 |  | $                             | 6,205  
|Shareholders
  equity                                                          |  | $                             | 224,698

* Includes a short-term bank credit secured by
a deposit in a bank, of which the balance as of December 31, 2002 was
$20,203,000 and as of December 31, 2003 was $18,262,000, and is presented in
the balance sheet as a restricted deposit. See
Note 14d to our consolidated financial statements included in this Annual
Report.

** Adjusted
retroactively to reflect a change in the method of accounting of an investment
from the cost method to the equity method. See
Note 2w  to our consolidated financial
statements included in this Annual Report.

6

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STATEMENT OFOPERATIONS DATA

|                                                                                                  |  | Year Ended
  December 31,                             |        
|------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------- | -------
|                                                                                                  |  |                                                       |        
|                                                                                                  |  | 2003                                                  |        
|                                                                                                  |  |                                                       |        
|                                                                                                  |  | (US
  dollars in thousands, except per share amounts) |        
|                                                                                                  |  |                                                       |        
|Revenues:                                                                                         |  |                                                       |        
|Sales                                                                                             |  | $                                                     | 60,653 
|Service                                                                                           |  |                                                       | 5,638  
|Supplies                                                                                          |  |                                                       | 36,589 
|                                                                                                  |  |                                                       |        
|Total
  revenues                                                                                  |  |                                                       | 102,880
|                                                                                                  |  |                                                       |        
|Cost of
  revenues:                                                                               |  |                                                       |        
|Cost of sales                                                                                     |  |                                                       | 33,766 
|Cost of service                                                                                   |  |                                                       | 12,438 
|Cost of
  supplies                                                                                |  |                                                       | 12,138 
|                                                                                                  |  |                                                       |        
|Total
  cost of revenues                                                                          |  |                                                       | 58,342 
|                                                                                                  |  |                                                       |        
|Gross
  profit                                                                                    |  |                                                       | 44,538 
|                                                                                                  |  |                                                       |        
|Expenses                                                                                          |  |                                                       |        
|Research and
  development costs - net                                                            |  |                                                       | 11,070 
|Sales and
  marketing                                                                             |  |                                                       | 20,192 
|General and
  administrative                                                                      |  |                                                       | 15,147 
|Amortization of
  intangible assets (in 2001 - including
  goodwill)                              |  |                                                       | 5,871  
|Write-down of
  goodwill and other intangible assets                                              |  |                                                       | 2,967  
|Restructuring
  charges                                                                           |  |                                                       | 1,590  
|Gain from sale
  of operations                                                                    |  |                                                       |       
|                                                                                                  |  |                                                       |        
|Operating
  income (loss)                                                                         |  |                                                       | (12,299
|                                                                                                  |  |                                                       |        
|Financial income (expenses)
  - net                                                               |  |                                                       | (2,651 
|Other income (loss)  net                                                                         |  |                                                       | 787    
|Write-down of investment in
  an associated company                                               |  |                                                       |       
|                                                                                                  |  |                                                       |        
|Income
  (loss) before taxes on income                                                            |  |                                                       | (14,163
|                                                                                                  |  |                                                       |        
|Tax benefit (Taxes on
  income)                                                                   |  |                                                       | (2,402 
|Share in losses of
  associated companies                                                         |  |                                                       | (5,637 
|Minority interests in
  losses of a subsidiary                                                    |  |                                                       | 3,546  
|                                                                                                  |  |                                                       |        
|Net income
  (loss) from continuing operations                                                    |  |                                                       | (18,656
|                                                                                                  |  |                                                       |        
|Net income from
  discontinued operations                                                         |  |                                                       | 20,043 
|Income (loss) from disposal
  of assets                                                           |  |                                                       |       
|                                                                                                  |  |                                                       |        
|Total
  income from discontinued operations                                                       |  |                                                       | 20,043 
|                                                                                                  |  |                                                       |        
|Cumulative
  effect of an accounting change at thebeginning
  of the year                         |  |                                                       |       
|                                                                                                  |  |                                                       |        
|Net income
  (loss)                                                                               |  | $                                                     | 1,387  
|                                                                                                  |  |                                                       |        
|Earnings (loss) per share- basic                                                                  |  |                                                       |        
|Continuing
  operations                                                                           |  | $                                                     | (0.43  
|Discontinued
  operations                                                                         |  | $                                                     | 0.46   
|Cumulative
  effect of an accounting change                                                       |  |                                                       |       
|                                                                                                  |  |                                                       |        
|                                                                                                  |  | $                                                     | 0.03   
|                                                                                                  |  |                                                       |        
|Earnings (loss) per share- diluted                                                                |  |                                                       |        
|Continuing
  operations                                                                           |  | $                                                     | (0.43  
|Discontinued
  operations                                                                         |  | $                                                     | 0.46   
|Cumulative
  effect of an accounting change                                                       |  |                                                       |       
|                                                                                                  |  |                                                       |        
|                                                                                                  |  | $                                                     | 0.03   
|                                                                                                  |  |                                                       |        
|Weighted
  average  number of  shares 
  outstanding(in thousands)-                        -basic |  |                                                       | 43,018 
|-
  diluted                                                                                       |  |                                                       | 43,018 

7

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* Adjusted
retroactively to reflect a change in the method of accounting of an investment
from the cost method to the equity method. See
Note 2w  to our consolidated financial
statements included in this Annual Report.

B.                CAPITALIZATION
AND INDEBTEDNESS.

Not Applicable.

C.                REASONS
FOR THE OFFER AND USE OF PROCEEDS.

Not Applicable.

D.                RISK
FACTORS

The following important factors, together with others that
appear with the forward-looking statements made by, or on behalf of, Scitex in
this Annual Report, or in Scitexs other SEC filings, could affect our actual
results and could cause our actual results to differ materially from those
expressed in any forward-looking statements.

Risks Related to Our Business and Our
Industry

| | If the slow-down in expenditures by commercial printers
  resumes, our business and results of operations may be materially adversely
  affected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  | Commercial printers are
  the customers of a large portion of our products and services. The general
  deterioration of the economy worldwide and the curtailment of advertising
  budgets have resulted in a slow down of capital investment by commercial
  printers beginning late in 2001 through the end of 2002 (and to a lesser
  extent into 2003). Many companies, including current and potential customers
  of ours, postponed or decreased further capital investment and/or employed
  longer evaluation and purchase procedures, thereby lengthening the sales
  cycles and implementation periods of our products and services. During 2003,
  we identified a moderate improvement in the general market for commercial
  printers equipment, including in the wide format printing systems segment, in
  which we operate. However, we are unable to predict the duration of this
  trend or the extent of any impact that it may have on our results of
  operations.  If this trend reverses
  and the slow-down in expenditures by commercial printers resumes, it would
  reduce our sales and could result in pressure on the price of our products,
  each of which would have a material adverse effect on our operating results.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Our future results could be adversely affected by a
  permanent impairment of the carrying amount of our equity and other
  investments, as well as other long-lived assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  | We review long-lived
  assets, certain identifiable intangibles, and goodwill related to those
  assets for impairment whenever events or changes in circumstances indicate
  that the carrying amount of an asset may not be recoverable in accordance with applicable financial accounting
  standards.  We also review our equity
  and other investments in companies for potential impairment, depending on the
  classification of the investment, in accordance with applicable accounting
  principles and/or relevant guidance published from time to time.  As such, we evaluate whether conditions
  may warrant revised estimates of the recoverability of the carrying amount of
  these assets and which, in certain situations, may result in the recognition
  of an impairment loss. Consequently, our future results could be adversely affected by
  changes in events and circumstances that would result in a permanent
  impairment of the carrying amount of our long-lived assets or
  investments.  You should read the
  foregoing discussion with the description of our critical accounting policies
  in Item 5 below under the caption impairment of goodwill, intangible assets
  and other long-lived assets.           

8

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| | We are undergoing, and may in the future undergo, tax
  audits and may have to make material payments to tax authorities at the
  conclusion of these audits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  | We conduct business
  globally and a substantial part of our operations was conducted in various
  countries during the 1990s. 
  Accordingly, not all of the tax returns of our operations during the
  1990s are final and are subject to further audit and assessment by the
  applicable tax authorities. For example, in order to resolve
  a tax audit of our US subsidiaries for the years 1992 through 1996, we paid to the U.S.
  Internal Revenue Service (IRS) an aggregate sum of approximately $20 million
  in 2002, and in 2004 we expect to pay an aggregate sum of up to $14 million
  to the IRS and other U.S. state tax authorities. We cannot assure you that we will not be
  subject to further tax audits or assessments for this period or for recent
  years for which our tax returns are not final. If we become subject to
  further tax audits or assessments, we may be required to pay additional
  taxes, as a result of which, our future results may be adversely affected. For more information about these audits and other
  tax assessments, please see under Item 5.B  Liquidity & Capital
  Resources  Tax Audits.                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | We have incurred substantial net losses in the past, and
  we may incur losses again in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  | Although our net income
  for the year ended December 31, 2003 was approximately $1.4 million, we
  incurred net losses in the years ended December 31, 2001 and December
  31, 2002 of approximately $253.0 million (including $215.9 million associated
  with our holdings in Creo) and $32.0 million (including $22.3 million
  associated with our holdings in Creo), respectively.  We may continue to incur losses in the
  future, which could materially adversely affect our business and financial
  condition, as well as the value and market price of our shares.  Even if we maintain profitability, we
  cannot assure you that future net income will offset our cumulative losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | If our majority owned subsidiary, Scitex Vision, fails to
  satisfy covenants set forth in its revolving credit line facilities and
  long-term loans, the banks may be able to call the loans and Scitex Vision
  may be required to raise additional funds on unfavorable terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  | As of June 16, 2004,
  Scitex Vision owed approximately $50 million to Israeli banks under its
  revolving credit line facilities and long-term loan agreements.  These credit lines are secured by a
  floating charge on Scitex Visions assets, by approximately $18.2 million of
  restricted deposits, and by a loan guarantee of approximately $0.9 million
  issued by us for Scitex Visions benefit. Under these credit lines, Scitex
  Vision is required to adhere to certain financial and other restrictive
  covenants such as equity level, profitability and financial ratios.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  | In the past, Scitex Vision
  failed to meet certain of the requirements of these credit lines but was able
  to cure such default following negotiations with the banks and by raising
  additional funds from us and other shareholders of Scitex Vision. However, we
  cannot assure you that Scitex Vision will be successful in satisfying these
  covenants in the future. Any failure by Scitex Vision to observe covenants or
  satisfy conditions under these credit lines, some of which are not in our or
  Scitex Visions control, may result in the banks accelerating Scitex Visions
  obligations, which would obligate Scitex Vision to immediately repay all
  loans made by the banks plus penalties, and the banks would be entitled to
  exercise the remedies available to them under these credit lines, including
  enforcement of their floating charge. This would have a material adverse
  effect on us. In addition, in such event Scitex Vision may be required to
  enter into another agreement with the banks or to secure financing from other
  sources. If adequate funds are not available on terms favorable to Scitex
  Vision from the banks or other resources, Scitex Visions (and consequently,
  our) operations and financial results will be materially adversely
  affected.

9

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| | We are facing, and may in the future face, litigation in
  connection with our majority stake in Scitex Vision.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | On January 1, 2003, we
  completed the combination, through a share exchange, of Scitex Vision
  International, our then wholly owned subsidiary, and Scitex Vision, a company
  in which we held 42.5% of its share capital. 
  Following this transaction, Scitex Vision became a majority owned
  subsidiary of ours, and the parent of Scitex Vision International.  In connection with this transaction, three
  shareholders of Scitex Vision have sent to us and to Scitex Vision letters in
  which they allege, among other things, that the valuation assigned to Scitex
  Vision in the transaction was below its fair market value and that the
  transaction was conducted in bad faith and prejudiced the rights of Scitex
  Visions minority shareholders. Since October 2003, several lawsuits and
  motions were filed by one of these shareholders, C.D.I. Technologies (1999)
  Ltd, or CDI, against us, Scitex Vision and others, mainly other shareholders
  of Scitex Vision (among them, our two largest shareholders, Clal and
  Discount) regarding the aforesaid transaction and additional corporate
  transactions of Scitex Vision that took place since then, as more fully
  described in Item 8 below under the caption Legal Proceeding.  We and Scitex Vision do not believe that these
  claims have any merit and we intend to vigorously defend our
  position on these issues. However, we cannot assure you at this time as to
  the outcome of any such litigation and whether CDI may initiate further legal
  proceedings against Scitex Vision or us.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Because we have recently sold the business of SDP, our
  business is less diversified, which reduced, and may in the future reduce,
  our earnings and might make us more susceptible to negative conditions in our
  remaining businesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | In January 2004, we
  completed the sale of substantially all of the assets and business of SDP to
  Kodak.  As a result of the said sale
  of the business of SDP to Kodak, we no longer generate revenues from
  these operations and our net income is no longer affected by the results of
  SDP. As a result, without offsetting increases in revenues in our other
  businesses (mainly, Scitex Vision), our overall revenues would decrease,
  which may have a negative affect on our financial condition. Also, our net
  income results may also be adversely affected from this divestiture. In
  addition, as a result of this divestiture, our business is now less
  diversified and thus more dependent on our remaining businesses, mainly the
  business of Scitex Vision. 
  Consequently, we are now more sensitive to conditions and trends in
  the remaining industries in which we operate, mainly in the wide and super-wide format segment
  of the industrial inkjet digital printing market.  Our inability to overcome any negative
  conditions and trends in the industries in which we operate could have a
  negative impact on our financial condition.                                                                                                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Because the digital printing market is characterized by
  technological and other changes, our success depends on our ability to
  predict and respond to market developments or demands, and to continually
  develop new and more technologically advanced products and product
  enhancements that achieve market acceptance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  | The digital
  printing market is characterized by technological changes and improvements
  and frequent new product introductions and enhancements.  Our financial performance and growth is
  dependent upon our ability to continuously develop, introduce and deliver
  commercially viable products and technologies on a timely basis that offer
  customers enhanced performance at competitive prices. The ongoing
  introduction of new technologies and products across our product lines is
  intended to keep pace with rapid market changes and to minimize the effect of
  competitive product offerings and pricing. 
  However, we cannot assure you that we will have the financial
  resources, marketing and distribution capability or the technology to compete
  successfully. We believe that our industry will continue to be characterized
  by technological advances and a relatively short product life cycles
  resulting in continued risk of product obsolescence.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

10

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| | The market for digital printers and printer supplies is
  very competitive.  We may lose market
  share and our results may suffer if we cannot compete effectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  | The digital
  printing and printing supplies markets are very competitive and competition
  may increase in the future. 
  Competition may come from existing vendors and new market entrants,
  including competitors that may have greater research and development,
  management, financial, technical, manufacturing, marketing, sales,
  distribution, name recognition and other resources than those currently
  available to us.For example, we are facing increased competition for the sale of inks
  for use with our printing systems, which caused us to reduce our prices for
  certain products.  Also, in the past
  few years several Asian producers, mostly from China, have entered the
  super-wide format printing market with low cost products emulating Scitex
  Visions entry-level printing systems. Scitex Vision faces strong competition
  in this market, mainly, in China. 
  Scitex Vision is also facing strong competition in the field of
  flatbed industrial UV-curable ink-jet printers. Increased competition could
  have an adverse material effect on our business, financial condition and
  operating results through pricing pressure, loss of market share and other
  factors.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | It may be difficult for us to find replacement suppliers
  for key components of our products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  | There are a limited number
  of potential suppliers of certain key components of our products, including
  components of inkjet printheads, drying systems and inks.  Accordingly, any problems that may occur
  with respect to the delivery, quality or cost of these components could
  result in product shortages or quality assurance problems.  If our current suppliers of such
  components are unable or unwilling to provide these components to us, it may
  be difficult to find qualified suppliers or to replenish inventories of
  components on a timely basis, and this could cause our operating results to
  suffer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Our intellectual property rights are difficult to protect
  and if we are unable to adequately protect such rights, our business may be
  materially adversely affected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  | Our intellectual property
  rights, particularly existing or future patents, may be invalidated,
  circumvented, challenged, infringed, or required to be licensed to others,
  despite efforts to protect them. 
  Furthermore, others may develop similar or superior technologies,
  duplicate or reverse-engineer our technology, or design around our patents,
  or those licensed to us.  If we fail
  to protect our intellectual property rights, we would be less able to
  differentiate our products and revenues will likely decline.  While we are not aware of any infringement
  claims against us, third parties may assert infringement claims against us in
  the future and these claims may require us to enter into license arrangements
  or result in protracted and costly litigation, regardless of the merits of
  these claims.                                                                                                                                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Our operating results may be subject to
  quarterly fluctuations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  | Our
  operating results may be subject to quarterly fluctuations as a result of a
  number of factors.  In particular, we
  do not typically have a significant backlog of orders at the beginning of
  each quarter and, as a result,may experience fluctuations in operating
  results based upon the timing of the receipt of orders and the shipment of
  products. We generally receive orders, ship and record a significant
  portion of our revenue within the same quarter. Thus, we may not learn of
  shortfalls or quarterly fluctuations in sales until late in, or shortly after
  the end of, the reporting periods. 
  Other factors which have contributed, and may in the future
  contribute, to fluctuations in our quarterly results of operations include:                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

11

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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | one-time
  charges;                                                                                                                   
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | mergers or acquisitions;                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | credit risks
  associated with certain customers or certain geographical areas.;                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | the timing
  of our new product introductions or enhancements or that of our competitors
  or providers of complementary products; and
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | disruptions
  in, or changes in the quality of, our sources of supply.                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                       
|  | Accordingly,
  the results of past periods should not be relied upon as an indication of our
  future performance. Our operating results have from time to time been, and
  may in some future periods be, below expectations of public market analysts
  or investors.  This has resulted, and
  if this occurs in the future would likely result, in a decline in our share
  price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Our products may contain undetected defects that could
  harm our reputation, result in the loss of customers and revenues and expose
  us to product liability claims.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  | We typically offer six to
  twelve month warranty programs with respect to our products.  Our warranty generally provides that we
  will repair or replace products with defects in materials or workmanship or
  that fail to meet agreed-upon specifications.  Although we perform comprehensive quality tests before
  delivering our products, our products may contain defects that may not be
  discovered before the products are supplied to customers.  Any defects or errors in the products
  could result in exposure to product liability claims; harm to our reputation;
  diversion of personnel and financial resources; less favorable insurance
  terms; other ancillary expenses; and, consequently, adversely affect our
  financial condition.                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | We may be subject to environmental related liabilities due
  to our use of hazardous materials and solvents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  | We mix ink used in some of
  our printers with solvents and other hazardous materials.  Those materials are subject to various
  governmental regulations relating to their transfer, handling, packaging, use
  and disposal.  We store the ink at
  warehouses worldwide, including Europe, the United States, Mexico Asia
  Pacific and South Africa, and shipping companies ship it at our
  direction.  We face potential
  responsibility for problems that may arise when we ship the ink to
  customers.  We believe that we are in
  compliance with the applicable environmental laws and regulations.  While we customarily obtain insurance
  coverage typical for this kind of risk, if we fail to comply with these laws
  or an accident involving our ink waste or solvents occurs, then our business
  and financial results could be harmed.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | We may be subject to the risk of loss due to fire because
  the materials we use in the manufacturing process of our inks are flammable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  | Scitex Vision uses
  flammable materials in the manufacturing processes of its inks and may
  therefore be subject to the risk of loss arising from fires. The risk of fire
  associated with these materials cannot be completely eliminated. Moreover,
  Scitex Vision has one main facility that manufactures these inks, which
  increases our exposure to such risk in case this facility is destroyed or
  materially damaged as a result of fire or otherwise. Scitex Vision maintains
  insurance policies to reduce losses caused by fire, including business interruption
  insurance. If this facility is damaged or otherwise ceased operations as a
  result of a fire, it would reduce manufacturing capacity and, consequently,
  may reduce revenues and adversely affect our business.                                                       

12

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| | Our business is subject to risks from international
  operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | We conduct business
  globally.  Accordingly, our future
  results could be materially adversely affected by a variety of uncontrollable
  and changing factors including, among others, foreign currency exchange
  rates; regulatory, political, or economic requirements; business and
  government spending patterns; political and economic instability; and natural
  disasters.  While we exert efforts to
  mitigate the risks associated with our international operations, such as by
  operating through local companies in foreign markets and certain hedging
  activities in respect of our currency exchange risks, our business will be
  materially adversely affected if we fail to overcome the challenges we
  encounter in such operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Our results of operations may be harmed by
  currency fluctuations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Because we generate
  revenues and expenses in various currencies, including in U.S. dollars, Euros
  and certain other European currencies, the South African Rand and New Israeli
  Shekels, our financial results are subject to the effects of fluctuations of
  currency exchange rates.  For example,
  we incur a significant portion of our expenses in New Israeli Shekels, or
  NIS.  As a result, we are exposed to
  risk to the extent that the rate of inflation in Israel exceeds the rate of
  devaluation of the NIS in relation to the dollar or if the timing of such
  devaluation lags behind inflation in Israel. 
  If the dollar cost of our operations in Israel increase, then our
  dollar-measured results of operations will be adversely affected.  Accordingly, we may enter into currency
  hedging transactions to decrease the risk of financial exposure from
  fluctuations in the exchange rate of the dollar against other currencies. However,
  we cannot predict whether and when exchange or price controls or other
  restrictions on the conversion of foreign currencies could impact our
  business. In addition, these measures may not adequately protect us from
  material adverse effects due to the impact of inflation in Israel.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Some of our holdings are in companies that may be unable
  to obtain future financing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Some of the companies in
  our group are emerging companies with no substantial operating history and
  have extensive research and development and marketing costs and limited
  revenues, if any.  In order to
  succeed, these companies may require additional capital to fund these costs,
  which may prove to be difficult.  If
  these companies are unable to obtain sufficient financing from their current
  shareholders, which may also include additional investments by us in these
  companies, or from new financing sources, their continued operations may be
  at risk.  This could adversely affect
  our financial performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The loss of the services of our key personnel could
  seriously harm our business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Our future success depends
  to a large degree on the continued services of our senior management and key
  personnel.  In particular, we are
  dependent on the services of a small number of key executives.  The loss of their services, particularly
  to a competitor, could disrupt our operations and harm our business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Our group companies may not be able to enforce covenants
  not to compete.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Some of our group
  companies currently have non-competition agreements with substantial numbers
  of their employees who are involved in research and development. In many
  cases, these employees are located primarily in Israel. These agreements
  prohibit the companys employees, if they cease working for the company, from
  directly competing with the company or working for its competitors. Israeli
  courts have required employers seeking to enforce non-compete undertakings of
  a former employee to demonstrate that the competitive activities of the
  former employee will harm one of a limited number of material interests of
  the employer which have been recognized by the courts, such as the secrecy of
  a companys confidential commercial information or its intellectual property.
  If any of our group companies cannot demonstrate that harm would be caused to
  it, the company may be unable to prevent its competitors from benefiting from
  the expertise of its former employees.                                                                                                                                                                                                                                                  

13

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|                                       | We may be deemed an investment company under the
  Investment Company Act of 1940.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|                                        | We sold the business of
  SDP, one of our two principal operating subsidiaries, to Kodak in January
  2004 and have invested a portion of the cash proceeds from the sale in short
  and long term investments. We currently operate, and intend to continue
  operating, in a manner that would allow us not to be deemed an investment
  company under the Investment Company Act of 1940. This may include investing
  the cash proceeds in a manner that will cause us to have less than 40% of our
  total assets (exclusive of cash and government securities), determined on an
  unconsolidated basis, invested in investment securities (as that term is
  defined in the Investment Company Act). If more than 40% of our total assets were
  invested in investment securities, we may be deemed to be an investment
  company under the Investment Company Act, unless we qualify for an
  exemption. If we were deemed to be an investment company, we would not be
  permitted to register under the Investment Company Act without obtaining
  exemptive relief from the Securities and Exchange Commission because we are
  incorporated outside of the United States and, prior to being permitted to
  register, we would not be permitted to offer or promote our securities in the
  United States.  As a result, we may
  elect to make investments or dispose of certain investments on terms that may
  not be as favorable to us as if we were not potentially subject to regulation
  under the Investment Company Act.  If
  we are deemed to be an investment company, we could be found to be in
  violation of the Investment Company Act. 
  A violation of that law could subject us to material adverse
  consequences.
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                       | We are exposed to potential liabilities in connection with
  the sale of the business of SDP to Kodak.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                        | We have agreed to
  indemnify Kodak for certain breaches of our asset purchase agreement,
  including in the case of breaches of our representations and warranties, up
  to a cap of approximately $50 million. A claim against us could result in
  substantial cost, which would have a negative impact on our financial
  condition. In addition, we have generated a significant amount of gain
  from the SDP transaction. Based on our assessment and that of our tax
  advisors, we believe that we are in compliance with all taxes due in relation
  with this transaction. The various tax authorities may not agree with our
  view. Any such disagreement or a subsequent tax dispute could result in tax
  liabilities in amounts which we currently cannot estimate. For more information, see under Item 10C. Material
  Contracts  Sale of SDP below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                       | We are exposed to decreases in the value of
  our financial investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                        | As of December 31, 2003,
  we held $52.9 million in cash and cash equivalents. We hold part of our cash
  on hand in a variety of financial instruments, including different types of
  investment grade bonds.  If the obligor of any of the bonds we hold
  defaults or undergoes a reorganization in bankruptcy, we may lose all or
  a portion of our investment in such obligor.  We may also be subject to
  loss to the extent that the market value of these bonds decline. This will
  harm our financial condition. For
  information on the types of our investments as of December 31, 2003, see Item
  11  Quantitative and Qualitative Disclosures About Market RiskPresentation
  of Exchange Rate and Interest Rate Risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Risks
  Related to Operations in Israel
|                                       
|                                       | Political, economic and military instability in Israel or
  the Middle East may adversely affect our results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                        | Our corporate headquarters
  and the principal offices, research and development, engineering and manufacturing
  operations of Scitex Vision, the principal facilities of several of our group
  companies, and many of our and their suppliers are located in Israel.  In addition, such companies are heavily
  dependent upon components imported into Israel.  Accordingly, our operations and financial results could be
  adversely affected if political, economic or military events curtailed or
  interrupted trade between Israel and its present trading partners or if major
  hostilities involving Israel should occur in the Middle East.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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|  | Since the establishment of
  the State of Israel in 1948, a number of armed conflicts have taken place
  between Israel and its Arab neighbors. 
  A state of hostility, varying in degree and intensity, has led to
  security and economic problems for Israel. 
  Since October 2000, there has been a high level of violence between
  Israel and the Palestinians. The hostilities between Israel and the
  Palestinians have intensified in mid-2002 and led to a crisis in the entire
  peace process and have strained Israels relationship with its Arab citizens,
  Arab countries and, to some extent, with other countries around the
  world.  Any armed conflicts or
  political instability in the region, including acts of terrorism or
  any other hostilities involving or threatening Israel, would likely negatively affect business
  conditions and harm our results of operations.  Furthermore, several countries restrict business with Israel
  and Israeli companies and additional countries may restrict doing business
  with Israel and Israeli companies as a result of the recent increase in
  hostilities.  These restrictive
  policies have harmed and may continue to harm the expansion of our
  business.  No predictions can be made
  as to whether or when a final resolution of the areas problems will be
  achieved or the nature thereof and to what extent the situation will impact
  Israels economic development or our operations.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Our results of operations may be negatively affected by
  the obligation of personnel to perform military service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  | Some of our
  and our group companies executive officers and employees in Israel are
  obligated to perform military reserve duty annually. They may also be further
  subject to being called to active duty at any time under emergency
  circumstances. Our operations could be disrupted by the absence for a
  significant period of one or more of our executive officers, key employees or
  a high number of other employees due to military service, and any disruption
  in our operations would harm our business. 
  The full impact on our workforce or business if some of our executive
  officers and employees will be called upon to perform military service,
  especially in times of national emergency, is difficult to predict.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The tax benefits that some of our group companies currently
  receive are subject to several conditions and may be terminated or reduced in
  the future, which could increase our or their taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  | Some of our
  Israeli group companies receive tax benefits under Israeli law for capital
  investments that are designated as Approved Enterprises.  To maintain eligibility for these tax
  benefits, a participant must continue to meet conditions stipulated in
  applicable law and in the specific approvals, including making specified
  investments in fixed assets.  If our
  applicable Israeli group companies fail to comply with these conditions, in
  whole or in part, in the future, these companies may be required to pay
  additional taxes for the period in which they benefited from the tax
  exemption or reduced tax rates and would likely be denied these benefits in
  the future.  These tax benefits may
  not continue in the future at their current levels or at any level.  From time to time, some of our Israeli
  group companies may submit requests for expansion of their Approved
  Enterprise programs or for new programs to be designated as Approved
  Enterprises.  These requests might not
  be approved, particularly in light of difficult economic conditions in
  Israel. The termination or reduction of these tax benefits could harm our
  financial condition and results of operations.                                                                                                                                                                                                                                      

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| | Because some of our group companies receive grants from
  the Israeli Office of the Chief Scientist, they are subject to ongoing
  restrictions, and such companies grant programs may be terminated or reduced
  in the future, which would increase our costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|  | Some of our
  group companies receive
  royalty-bearing grants from the Office of the Chief Scientist of the Israeli
  Ministry of Industry, Trade and Labor for research and development programs
  that meet specified criteria. According to Israeli law, any products
  developed with grants from the Office of the Chief Scientist are required to
  be manufactured in Israel, unless the participant obtains prior approval of a
  governmental committee.  As a
  condition to obtaining this approval, a participant may be required to pay
  the Office of the Chief Scientist up to 300% of the grants received and to
  repay such grants at a quicker rate. 
  In addition, a participant is prohibited from transferring to third
  parties in Israel the technology developed with these grants without the
  prior approval of a governmental committee and is prohibited from
  transferring such technology to third parties outside Israel.  Any non-Israeli who becomes a holder of 5%
  or more of the participants share capital is generally required to notify
  the Office of the Chief Scientist and to undertake to observe the law
  governing the grant programs of the Office of the Chief Scientist, the
  principal restrictions of which are the transferability limits described above
  in this paragraph. Since Scitex currently participates in these programs
  solely through its subsidiaries and some of its group companies, we do not
  believe that any non-Israeli who becomes a holder of 5% or more of our
  outstanding shares is required to comply with the aforesaid notification and
  undertaking requirements.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | We recorded
  grant participations of approximately $0.7 million in 2003 and approximately
  $0.7 million in 2002.  As of December
  31, 2003, our contingent liability to the Office of the Chief Scientist with
  respect to grants received was approximately $3.6 million. The Israeli
  government has reduced the benefits available under these programs in recent
  years and has indicated that it may reduce or eliminate these benefits in the
  future.  These programs may not
  continue in the future at their current levels or at any level.  From time to time, we and some of our
  group companies may submit requests
  for new grants from the Office of the Chief Scientist.  These requests might not be approved,
  particularly in light of the reduction in government spending in Israel.  The termination or reduction of these
  grants could harm our financial condition and results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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| | Israeli banking laws may impose restrictions on the total
  debt that we may borrow from Israeli banks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Pursuant to a recent
  amendment to a directive published by the Israeli Supervisor of Banks, which
  became effective on March 31, 2004, we may be deemed part of a group of
  affiliated borrowers comprised of IDB Holding Corporation Ltd., the ultimate
  parent of Discount and Clal, our principal shareholders, and other companies
  which may be included in such group of borrowers pursuant to the directive.
  The directive generally provides that an entity will be subject to limitations
  on the amount of financing available to it from an Israeli bank if such
  entity is included within a group of borrowers, to which the amount of debt
  financing that has been extended from such Israeli bank exceeds certain
  limits as specified in the directive. As we are part of the IDB affiliated
  group of companies which includes many companies that require, or may in the
  future require, extensive credit facilities from Israeli banks for the
  operation of their businesses, we cannot assure you that our banks will not
  exceed these limits (if applicable to us) in the future. Should our
  banks exceed these limits, they may limit our ability to draw funds and may
  require us to return some or all of our outstanding borrowings (which were
  $53.9 million as of December 31, 2003), each of which may have a material
  adverse effect on our business, financial condition and results of
  operations. For additional information,
  see in Item 4B below under the caption Government Regulations.                                                                                                        
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| | A litigant may have difficulty enforcing US judgments
  against us, our officers and directors, our Israeli subsidiaries and
  affiliates or to assert U.S. securities law claims in Israel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|  | Service of process upon
  us, our Israeli subsidiaries and affiliates, and our directors and officers,
  substantially all of whom reside outside the United States, may be difficult
  to obtain within the United States. 
  Furthermore, because the majority of our assets and investments, and
  substantially all of our directors and officers are located outside the
  United States, any judgment obtained in the United States against us or any
  of them may not be collectible within the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|  | There is doubt as to the
  enforceability of civil liabilities under the Securities Act of 1933 and the
  Securities Exchange Act of 1934 in original actions instituted in
  Israel.  However, subject to specified
  time limitations, Israeli courts may enforce a U.S. final executory judgment
  in a civil matter, provided that:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|  | If a foreign judgment is
  enforced by an Israeli court, it generally will be payable in NIS, which can
  then be converted into non-Israeli currency and transferred out of
  Israel.  The usual practice in an
  action to recover an amount in non-Israeli currency is for the Israeli court
  to render judgment for the equivalent amount in NIS at the rate of exchange
  on the date of payment, but the judgment debtor also may make payment in
  non-Israeli currency.  Pending
  collection, the amount of the judgment of an Israeli court stated in NIS
  ordinarily will be linked to the Israel Consumer Price Index plus interest at
  the annual rate (set by Israeli law) prevailing at that time.  Judgment creditors bear the risk of
  unfavorable exchange rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Provisions of Israeli law may delay, prevent or make more
  difficult an acquisition of Scitex, which could depress our share price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|  | The Israeli
  Companies Law generally requires that a merger be approved by the board of
  directors and a majority of the shares voting on the proposed merger.  Unless a court rules otherwise, the
  statutory merger will not be deemed approved if a majority of the shares
  present that are held by parties other than the other party to the merger (or
  by any person who holds 25% or more of the shares or the right to appoint 25%
  or more of the directors of the other party or its general manager) vote
  against the merger.  Upon the request
  of any creditor of a party to the proposed merger, a court may delay or
  prevent the merger if it concludes that there is a reasonable concern that,
  as a result of the merger, the surviving company will be unable to satisfy
  its obligations.  In addition, a
  merger may not be completed unless at least 70 days have passed since the
  filing of the merger proposal with the Israeli Registrar of Companies. Also,
  in certain circumstances an acquisition of shares in a public company must be
  made by means of a tender offer. 
  Lastly, Israeli tax law treats some acquisitions, such as
  stock-for-stock exchanges between an Israeli company and a foreign company,
  less favorable than U.S. tax laws. These provisions of Israeli corporate and
  tax law may have the effect of delaying, preventing or make more difficult an
  acquisition of or merger with Scitex, which could depress our share price.  For
  more information about provisions of Israeli law with respect to
  acquisitions, please see under Item 10B. Memorandum and Articles of
  Association  Change of Control.

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|Risks
  Related to the Market for Our Ordinary Shares
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| | Our ordinary shares are listed for trading
  in more than one market and this may result in price variations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  | Our ordinary
  shares are listed for trading on Nasdaq and the TASE. Trading in our ordinary
  shares on these markets is made in different currencies (U.S. dollars on
  Nasdaq and New Israeli Shekels on TASE), and at different times (resulting
  from different time zones, different trading days and different public
  holidays in the United States and Israel). The trading prices of our ordinary
  shares on these two markets often differ, resulting from the factors
  described above, as well as differences in exchange rates. Any decrease in
  the trading price of our ordinary shares on one of these markets could cause
  a decrease in the trading price of our ordinary shares on the other
  market.

ITEM
4.     INFORMATION ON THE COMPANY

A.                HISTORY
AND DEVELOPMENT OF THE COMPANY

CORPORATE HISTORY& DETAILS

Our
legal and commercial name is Scitex Corporation Ltd. and our legal form is a
company limited by shares.  We were incorporated
under the laws of the State of Israel on November 2, 1971, succeeding a
predecessor corporation, Scientific Technology Ltd. that was founded on
September 5, 1968.  Our corporate
headquarters and principal executive offices are located at 3 Azrieli Center,
Triangular Tower, 43RD Floor, Tel Aviv, 67023, Israel.  Our telephone number in Israel is
(972) 3 - 6075855.  Our Website address is www.scitex.com.  Information
contained on our website does not constitute a part of this Annual Report.

We
initially focused in imaging competencies in systems for the textile design
market.  In 1979 we launched the world's
first computerized, color prepress system. 
In the 1990s we identified the evolving digital printing market and
focused on commercializing innovative solutions for the graphic publishing
industry in its transition from analog to digital printing, and made several
key acquisitions of digital printing operations.  In April 2000 we sold our digital preprint operations and our
print-on-demand systems business to Creo Inc. (Nasdaq: CREO, TSE: CRE).  We, through our subsidiaries, now design,
develop, manufacture, market and support primarily industrial inkjet digital
printing solutions.  In addition, we are
engaged, through our affiliated companies and investments, in the field of
Internet imagery.

MAJORBUSINESS DEVELOPMENTS SINCE JANUARY 1,
2003

We
are currently focusing, through Scitex Vision, on the wide format segment of
the industrial inkjet digital printing market and, during 2003 and early 2004,
we gradually eliminated our involvement in the digital preprint business
(through our equity interest in Creo) and in the high-speed digital printing
business (through SDP), mainly through:

| | the sale of the business
  of SDP to Kodak in January 2004;                                                                                                                                                                                                                                                                                                                                                                  | 
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                              | 
| | the combination of the
  operations of Scitex Vision (formerly, Aprion Digital), a developer of
  drop-on demand inkjet technologies, in which we held 42.5% of the share
  capital, and Scitex Vision International (formerly, Scitex Vision), our
  wholly owned subsidiary until the consummation of such transaction in January
  2003, and subsequent investments by us in Scitex Vision in July 2003 and May
  2004; | 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                              | 
| | the sale of the remainder
  of our shareholdings in Creo, a provider of solutions for the graphic arts
  industry;                                                                                                                                                                                                                                                                                                           | 

19

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|                                                                                                                                                                                | the investment of $1.5
  million in Jemtex InkJet Printing Ltd., or Jemtex, which increased our
  interest in Jemtex from 49.8% to 72.9%; and                                                                                                                                                              | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                            | 
|                                                                                                                                                                                | on-going investments by
  Scitex Vision Ltd. in new products and markets.                                                                                                                                                                                                                                  | 
|                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                            | 
|In early 2004, we approved
  a plan to distribute approximately $118 million to our shareholders through a
  repurchase of shares from our shareholders and a cash distribution: |                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                | On May 14, 2004, we
  commenced a self tender offer to purchase up to 5,643,739 of our shares for
  $5.67 per share (up to $32 million in the aggregate) in cash. On June 18,
  2004, we completed the tender offer and purchased 4,952,050 shares for an
  aggregate amount of approximately $28 million. | 
|                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                            | 
|                                                                                                                                                                                | On June 22, 2004, we
  announced a distribution of $2.36 per ordinary share, or approximately $90
  million in the aggregate, payable on July 12, 2004 to our shareholders of
  record as of June 30, 2004.                                                                                                | 

From
mid-2003, we also underwent several key changes to our management team, as
described in Item 6A below.

PRINCIPALCAPITAL EXPENDITURE & DIVESTITURES

Since
January 1, 2001, except for the self tender offer and the cash distribution
described above, most of our principal capital expenditures have been for the
acquisition of interests in other companies, as follows:

       Since
May 2001, we invested an aggregate of approximately $9.1 million in Objet
Geometries Ltd., including $0.5 million that was invested in December 2003 in
connection with Objets rights offering. We now hold an approximate 23.5%
interest of Objet;

       Between
July 2000 and February 2002, we invested an aggregate of approximately
$5.5 million in Jemtex and in the acquisition of Jemtex shares from third
parties.  In December 2002, we invested
$2.4 million in consideration for convertible notes coupled with warrants to
invest an additional $1.6 million, of which we exercised and invested $0.8
million. In February 2004, we have completed an investment of $1.5 million in
consideration for convertible debentures of Jemtex. We now hold an approximate
72.9% interest (80.5% assuming conversions of the debentures) in Jemtex;

       In
March 2001, Scitex Vision International acquired the ink manufacturing business
of Techno Ink Manufacturing (PTY) Ltd., or TechInk, for a downpayment of $2.9
million and additional payments to TechInk of up to a maximum of approximately
$5.5 million (approximately $1.9 million were paid to TechInk as of December
31, 2003), contingent upon the achievement of specified financial targets
related to production and sales of inks by Scitex Vision International;

       During
2001, we increased our holdings in Scitex Vision from 17% to 42.5% through the exercise of
warrants in consideration for approximately $2.5 million, and the conversion of a convertible note in that company for no
additional consideration.  In the fourth
quarter of 2002, we signed an agreement to combine the operations of Scitex
Vision and Scitex Vision International, our then wholly owned subsidiary, and
in January 2003 we completed this transaction, as a result of which Scitex
Vision became a majority owned subsidiary of ours and the parent of Scitex
Vision International. In July 2003 and May 2004, Scitex Vision concluded rights
offerings in which we invested approximately $5.0 million and $4.2 million,
respectively, in accordance with our pro rata share of such offering. For more information about the Scitex Vision-Scitex
Vision International transaction and the Rights Offerings, see in Item 7B below
under the captions Combination of Scitex Vision and Scitex Vision
International and Rights Offerings by Scitex Vision, respectively; and

20

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       In
April 2002, Scitex Vision International acquired advanced digital printing
technologies from Siantec SARL, or Siantec,
by way of an asset purchase agreement for $2 million and additional payments of
up to a maximum of $10 million, based on the achievement of specified
financial targets, such as revenues and operating income from Scitex Vision
Internationals sales of systems
and ink based on Siantecs technology during a period of up to five years. $2
million of the consideration paid to Siantec was placed in an escrow account to
cover possible indemnification claims by Scitex Vision International. Furthermore, we issued guarantees in favor
of Siantec to secure Scitex Vision Internationals obligations and payments
under the agreement, and in favor of Bank Hapoalim, in the amount of $2
million, to secure a loan provided by the bank for the initial payment by
Scitex Vision International. The outstanding principal amount (and interest
accrued thereon) under such loan was approximately $0.9 million as of June 30,
2004. In February 2004, Siantec agreed to pay Scitex Vision International $1
million out of the escrow account and to waive its rights to the said
contingent payments of up to $10 million in settlement of alleged breaches of
representations and warranties made by Siantec in the asset purchase agreement.

Principal
capital divestitures since January 1, 2001, are as follows:

       In
April 2000, we sold our digital preprint operations and our print-on-demand
systems business to Creo, in return for 13.25 million of Creo shares, and
became the largest shareholder in Creo, initially with approximately 28.7% of
the outstanding Creo shares. Creo, headquartered in Burnaby, Canada, is a
high-technology company focused on the application of imaging and information
technology, whose shares are publicly traded on the Nasdaq National Market and
the Toronto Stock Exchange.  As part of the transaction, we issued to Creo an
unsecured, non-interest bearing note due April 4, 2003, in the principal amount
of $18,760,000, which was fully repaid in April 2003.  In November 2001, we sold 7.0 million shares
of Creo for gross proceeds of approximately $78 million as part of a private
placement to Canadian institutional investors. In June and August 2003, we sold
3.0 million shares of Creo for gross proceeds of approximately $24 million and
3.25 million shares of Creo for gross proceeds of approximately $31 million, respectively,
as part of an arranged sale to various financial institutions in Canada and we
no longer hold any Creo shares;

       Vio
Worldwide Limited, or Vio, a Scitex joint venture with British
Telecommunications plc, was an application service provider, or ASP, to the
print and publishing industry.  Launched
in 1998, Vio was to provide a secure and reliable global graphic arts
communication network combined with industry leading on-line software
applications.   In early 2001, Vios
shareholders resolved to gradually wind-down Vios operations, due to the joint
venture's inability to reach financial profitability or to raise third party
financing. Eventually it was sold to Citizen Ltd. in June 2001 for no
consideration other than Citizens assumption of Vios ongoing liabilities;

       In
April 2002, we completed the sale of our shares in the Karat Digital Press
joint venture, a developer of color digital offset press, to Koenig & Bauer
A.G., or KBA, our joint venture partner, for approximately $14.4 million and
for additional contingent future performance related
payments.  Other terms of this
transaction, announced in early 2001, include, among other things, the
assumption by KBA of full responsibility for manufacturing, sales and customer
support operations of Karat Digital Press machines worldwide; and

       
In January 2004, we completed a transaction to sell the business of SDP, our
indirect wholly owned subsidiary, to Kodak. 
This transaction is described under Item
10C. Material Contracts  Sale of SDPbelow

21

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B.                BUSINESS
OVERVIEW

OVERVIEW

We
are leaders, through Scitex Vision, in the wide and super-wide format segment
of the industrial inkjet digital printing market.  Our current operations,
carried out by our operating subsidiaries, Scitex Vision and Jemtex, consist of
the design, development, manufacture, marketing and support of products for the
industrial inkjet digital printing market. In addition, we hold interests in a
number of companies whose operations comprise related businesses operating
within a single industry, including in the rapid prototyping market (through
our equity interest in Objet) and in the Internet-related imaging market
(through our equity interests in RealTimeImage and XMPiE). Until the second half
of 2003, we also operated in the digital preprint business through our equity
interest in Creo, and, through the end of 2003, we operated in the high-speed
segment of the industrial inkjet digital printing market through our wholly
owned subsidiary, SDP.

SCITEXVISION- WIDE FORMAT& SUPER-WIDEFORMATPRINTERS

General

Scitex
Vision Ltd. (formerly, Aprion Digital Ltd.), or Scitex Vision, is our majority
owned subsidiary, based in Netanya, Israel. It is a leading developer,
manufacturer and distributor of wide-format and super-wide format, color inkjet
digital printing systems used for point-of-purchase displays, banners and
indoor and outdoor advertising posters. It is also engaged in the design,
development, manufacturing and marketing of advanced digital printing presses
and specialized water-based inks for the packaging and textile markets based on
its patented drop-on-demand inkjet technology. As of December 31, 2003, Scitex
Vision employed approximately 450 employees (including employees of its sales,
marketing and support subsidiaries and part-time and temporary employees).

Scitex
Vision was formed out of several acquisitions and transactions. The following
is a brief outline of some of the key dates in Scitex Visions corporate
history:

|1994: | Idanit Technologies Ltd.
  was founded as an Israeli company.                                                                                                                                                                                                                               
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                             
|1998: | Scitex acquired the
  operations of Idanit in February 1998 and, in October 1998, expanded its
  operations with the purchase of the super-wide format product line from the
  Israeli Matan group of companies.                                                                            
|      |                                                                                                                                                                                                                                                                                             
|1999: | Idanits name was changed
  to Scitex Wide Format Printing Ltd. on February 24, 1999.  In September 1999, Scitex formed Scitex
  Vision (under the name of Aprion Digital) out of its Advanced Printing
  Products division, together with several investors, including Clal and
  Discount.
|      |                                                                                                                                                                                                                                                                                             
|2000: | The name of Scitex Wide
  Format Printing Ltd. was changed to Scitex Vision Ltd. (currently, Scitex
  Vision International Ltd.) on August 21, 2000.                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                             
|2001: | Scitex Vision Ltd.
  (currently, Scitex Vision International Ltd.) acquired the ink manufacturing
  business of Techno Ink Manufacturing (PTY) Ltd., a company based in Capetown,
  South Africa.                                                                                           
|      |                                                                                                                                                                                                                                                                                             
|2003: | In January 2003, the
  operations of Scitex Vision International (formerly, Scitex Vision Ltd.) were
  combined with those of Scitex Vision (formerly, Aprion Digital Ltd.), as a
  result of which, Scitex Vision International became a wholly owned subsidiary
  of Scitex Vision.       
|      |                                                                                                                                                                                                                                                                                             
|2004: | The name of Aprion Digital
  Ltd. was changed to its present name, Scitex Vision Ltd., on February 16,
  2004.                                                                                                                                                                              

Product Overview

Scitex Vision printers are dedicated to a wide array of applications
including billboards, fleet marking, banners, street advertising,
point-of-purchase displays and floor and window graphics, and applications for
the packaging display market and, through strategic partners, for the textile
market. Its printing systems are aimed at providing high-quality and
cost-effective solutions to digital printing houses worldwide.  Scitex Vision operates principally in the following
fields: wide format systems, super-wide format systems, and flatbed printing
systems for the graphic arts, packaging, displays and textile printing
applications.

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Wide Format Printing Systems.

Scitex Visions wide format systems utilize piezoelectric
drop-on-demand inkjet technology and the companys proprietary multi-array
technology. These wide format systems are especially designed for short and
medium print run applications and a broad range of applications, such as
point-of-purchase displays, outdoor billboards, fleet marking, street
advertising and bus shelters.  Scitex
Vision wide format systems have become an industry standard among paper
billboard printers in Europe and the United States . Representative products in
this category are:

| | TURBOjet. 
  With printing speed of over 400 square meters per hour and a high
  printing resolution (of up to 440 dpi (dots-per-inch)), the TURBOjet is
  designed to provide a high-quality, high-speed and low-cost industrial digital
  printing solution for the screen printing and offset industry.                              
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                         
| | Superjet. The Superjet is an industrial
  roll-to-roll printing system that prints with environmentally friendly
  water-based inks, at a high printing resolution (600 dpi). It is designed to
  provide high image and text quality at high printing speeds for unique
  applications, such as point-of-purchase displays and banners.

Super-Wide Format Printing Systems.

Scitex Visions super-wide format systems are especially designed for
short print run applications on formats of between two to five meters wide for
a broad range of applications, including billboards, point-of-purchase,
truck-side curtains, vehicle wraps, textile and carpet printing, floor and
window graphics, wall coverings, exhibition graphics and banners, and theater
and television backdrops. Representative products in this category include the
Scitex Grandjet S+ and the Scitex XLjet+ line of systems that print on formats
of up to two, three and five meters wide, the only limitation on length of the
print being the size of the roll.  If
wider print widths are required, the Grandjet S+ and XLjet systems create a
print layout in sections that, when seamed and placed together, create a
continuous and seamless-looking image in super-wide formats such as mega
posters.  These systems differ mainly in
their image quality, number of colors, throughput capability and price. Like
Scitex Visions wide format digital printing systems, the Scitex Grandjet S+
and Scitex XLjet+ systems utilize piezoelectric drop-on-demand inkjet
technology.  However, unlike the wide
format systems, which are drum-based (except for the Superjet), they are based
on a roll-to-roll technology, using a print process in which the substrate is
placed on two long cylindrical shafts at the base of the printer. Scitex Vision
    recently introduced Grandjet Classic,
which is designed to allow a combination of a cost-effective and reliable
printing solution with high productivity and versatility (in terms of
applications and substrates), primarily for new entrants to the super-wide
format market.

Flatbed Printing Systems.

Following the acquisition of flatbed and UV curable ink technologies in
April 2002 from Siantec SARL, Scitex Vision has developed, and in 2003
launched, the Scitex VEEjet, an advanced versatile flatbed wide format digital
system designed to print on a wide range of rigid and flexible substrates for
the graphic arts market using environmentally friendly UV curable inks.  Several VEEjet systems have been sold and
installed at customer sites.

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Industrial Inkjet Presses.

Scitex Vision designs, develops, manufactures and markets advanced
digital printing presses and specialized water-based inks for industrial
applications based on its patented drop-on-demand inkjet technology.  This technology, initially developed under
Scitexs former Advanced Printing Products division, is based on piezo inkjet
heads with a patented multi-layer construction designed to provide high
printing speed, flexibility of media choice and high reliability.  Applications include packaging and displays,
graphic arts and textile. The industrial inkjet press system exists in
roll-to-roll and sheet-fed versions.  It
is a cost-effective, piezo-driven, drop-on-demand inkjet system with a
traversing print array.  The press can handle
short runs printed on materials up to 63 inches in width and is designed for
industrial applications. Representative products include:

|             |  | CORJet.The CORJet is designed to provide a flexible, high-quality and high-printing
  speed product for  short and medium
  run prints on corrugated displays and packaging applications. It is a fully
  automated system that prints with environment-friendly industrial digital inkjet press for
  cost-effective short runs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------------ | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|             |  | DreAM. The DreAM is an industrial digital printer
  for textile applications for short and medium fabric print runs for
  specialized clothing, home furnishings, automotive and other technical
  textiles, flags and banners, and emerging applications. It prints with
  printing speed of up to 150 square meters per hour and at a high printing
  resolution (600 dpi) directly on woven, knitted and non-woven fabrics. The
  DreAM was introduced in December 2002 by Reggiani Macchine S.p.A. of Italy,
  and combines Reggianis proprietary substrate-conveying system with Scitex
  Visions inkjet heads and uses completely novel printing inks, developed
  especially by Ciba Specialty Chemicals of Switzerland. Pursuant to Scitex
  Visions agreement with Reggiani and Ciba, Reggiani is responsible for the
  integration, marketing and service of the DreAM while the inks are developed
  and marketed by Ciba.                                                                                                                                                                                    
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Consumables.
|            
|             |  | Inks.The inks used with Scitex Visions
  printing systems are an important element of the printing process.  The quality of the prints depends in part
  on a number of factors relating to the inks, including the compatibility of
  the inks with the printheads, the color gamut achievable with the inks, the
  ink gloss and the color density.  In
  addition, outdoor applications require additional characteristics in the ink
  such as durability and abrasion resistance to protect against the
  elements.  Scitex Vision sells inks
  that are specially formulated to work with its systems.  Most of the inks sold are solvent-based
  pigmented inks.  In March 2001,
  following the acquisition by Scitex Vision of Tech-Ink, one of the leading
  state-of the-art ink manufacturers, located in Cape-Town, South Africa, the
  inks are manufactured by Tech-Ink.  In
  April 2001, Scitex Vision introduced the innovative VisionInk program to the
  market, whereby customers are able to select inks that have been specially
  developed for both their printing systems and their applications.
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|             |  | Substrates. 
  Scitex vision offers its customers in certain regions specialized
  media substrates for its super-wide format and wide format systems. Those
  substrates are formulated by third party suppliers according to Scitex
  Visions specifications and are designed to be particularly compatible to
  those printing systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Manufacturing

Scitex Vision outsources the manufacturing of many of the components
for its systems to its own specifications and purchases off-the shelf
components for its systems from third party vendors.  The most important third party vendors for its printing systems
are the suppliers of the printheads used in such systems, and the
subcontractors for assembly of its wide format systems.

24

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Final integration and quality control testing of Scitex Visions wide
and super wide format systems is conducted at its facilities in Netanya,
Israel, where it also assembles its wide and super-wide format systems and
conducts full system integration and quality assurance testing.

Most of the parts, components and commodities used by Scitex Vision in
the manufacture and assembly of its products are available from several
sources, although it currently purchases a substantial number of items from
single suppliers.  In some cases, there
is only one source of supply for a component or commodity used by it.  In particular, Scitex Vision currently has
only single sources for the supply of the printheads for its wide format
printers and for its super-wide format printers.  While Scitex Vision conducts a continuous process of evaluation
of the main printheads available in the market, if either of these printhead
suppliers were to discontinue the manufacture or supply of printheads, Scitex
Vision believes it would have difficulties in locating alternative suppliers or
manufacturing these products itself within a reasonable time frame.

Scitex Vision generally purchases certain major components and
commodities used in its products under annually renewable supply agreements
with principal suppliers.  To date, it
has managed to overcome any difficulties experienced in obtaining timely
deliveries.  However, increased demand
for these components and commodities or future unavailability could result in
production delays that might adversely affect our business.

In the field of industrial inkjet press system for the textile market,
Scitex Vision also operates through original equipment manufacturers (OEMs) and
cooperation agreements, whereby a family of print modules incorporating its
unique printhead technology for this field is used by its business partners in
a variety of configurations and applications.

Sales & Marketing

Scitex
Vision has a large customer base with over 1,300 systems installed globally to
date. It sells its products through its direct sales force, indirect
distribution channels and third party joint sales arrangements:

| | Direct sales.Scitex
  Vision formed regional subsidiaries that operate as distribution units
  principally in North America and Europe, and, since early 2003, also in the
  Asia Pacific region. These subsidiaries carry out direct sales and marketing
  as well as service and logistics for its products in their respective
  regions.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                             
| | Distribution channels.Scitex
  Vision relies on third party distributors and dealers to conduct sales and
  marketing in Latin America and in certain countries in Europe, Asia Pacific,
  Africa and the Middle East.                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                             
| | Joint sales arrangements.Scitex
  Vision sells and distributes products in conjunction with certain third party
  products.                                                                                                                                                                                                                 

Equipment sales are typically made on terms requiring an advance
payment, with the balance of the purchase price payable in stages, generally on
delivery and on or shortly after acceptance of installation.  Scitex Vision has agreements with third
party financing companies for long-term financing of purchases of its equipment
by certain customers.

Customer Support

Scitex Vision believes that a high level of customer service, technical
support and training is important in achieving customer satisfaction and market
acceptance of its products.  It has a
dedicated customer service and support team, consisting of over 100 engineers,
technical and application specialists, and logistics and management
personnel.  These personnel are located
in the United States, Europe and Asia as well as at the company's headquarters
in Israel.  The customer support team is
responsible for providing installation services; post-sales support, and
warranty services.  Scitex Vision
maintains a training facility at its headquarters in Israel for its customer
support team and customers.  In addition,
its sales demonstration facilities in Brussels, Belgium and Atlanta, U.S.A.,
are also used for training purposes.

25

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Scitex Vision offers an equipment warranty to its customers and
distributors that, in most cases, cover defects in the systems for a period of
six to twelve months following installation. 
At the end of the warranty period, the customer may enter into a service
agreement with Scitex Vision, which includes equipment and software
maintenance.  If a customer does not
enter into a service agreement, service is provided and charged on a per-call
basis.

In 2003, Scitex Vision generated approximately $42 million of
revenue from the supply of consumables and service operations, representing
approximately 41% of its total revenues compared to approximately $33 million,
or 38% of its total revenues, in 2002.

Competition

The primary competitive factors affecting sales of Scitex Visions
products are price, productivity, product features, application versatility,
reliability, support, print quality, durability and cost of inks and
substrates.  Other competitive factors
include the reputation of the manufacturer and access to product
financing.

We believe that the Scitex TURBOjet wide format systems, the Scitex
Grandjet and Scitex XLjet super-wide format systems, as well as the VEEjet
flatbed and CORjet packaging systems, are generally competitive on price and
features and have certain advantages and disadvantages as compared to
competitors' products.  While certain of
the systems may be slightly more expensive than the printing systems offered by
Scitex Visions competitors, we believe they are competitive based on other
factors, such as superior performance regarding quality of prints and speed of
output and certain other competitive criteria and unique solutions.

Scitex Visions principal competition is as follows:

| | Super-wide format.Scitex
  Vision has two main competitors in the super-wide format market: NUR
  Macroprinters Ltd. of Israel and Vutek, Inc. of the United States.  Recently, several additional producers,
  mostly from China, have entered the super-wide format printing market with
  low cost products emulating Scitex Visions entry-level printing systems.
  Scitex Vision faces strong competition in this market, mainly in the Asia
  Pacific region.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Wide format.  Scitex Vision also competes in the wide format market with
  traditional, analog printing methods, particularly screen and offset
  printing, which continue to be the main methods used in wide format printing.
  The main competitors in this market are the screen printing manufacturers,
  such asThieme GMBH & Co. KG of Germany and M&R Sales and Service,
  Inc. of the U.S.                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Flatbed.Scitex
  Vision has several competitors in the digital flatbed market, including Vutek
  with its PressVu flatbed versions; Nur Macroprinters with its Tempo line of
  products; Inca Digital Printers of the U.K. with its Spyder, Eagle and
  Columbia printers; and Durst Phototechnik AG of Italy with its Rho 160 and
  Rho 205 printers.                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Industrial Inkjet Presses. Our main competitor in this market, mainly in
  the packaging and display segments, is Inca with its Columbia line of
  printers.                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The textile digital printing market. This market is in the early stages of
  development and we are currently not aware of any specific competitors or
  competitive patterns.                                                                                                                                                                                                                                                                                      

26

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| | Consumables.  Certain ink manufacturers, including Sericol Limited of the
  U.K. and Triangle Digital LLC of the U.S., are developing or have developed
  inks that are compatible with Scitex Visions systems.  Scitex Vision is facing increased competition
  for the sale of inks for use with these systems, which could materially
  adversely affect future revenues from the sale of inks.  Scitex Visions approach to this market is
  to compete based on its VisionInk concept, which allow customization of the
  inks which it supplies for use on its printing systems and the provision of a
  single source for most of a printers digital printing requirements,
  including after-sales service and consulting, inks and media.  In the field of substrates, there is a
  large number of suppliers who currently supply, or could supply, Scitex
  Visions customers with substrates, many of whom are companies with very
  substantial resources, sales and marketing infrastructure and know-how.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

GROUPCOMPANIES

Below
is a brief description of our principal group companies.

Jemtex Ink Jet
Printing Ltd.

Jemtex,
located in Lod, Israel, was established in 1995.  It employed, as of December 31, 2003, approximately 30
people.  We currently hold an
approximate 72.9% interest in Jemtex.

Jemtex is a developer and manufacturer of inkjet based digital systems,
printheads and engines for the industrial printing markets, primarily ceramic
tiles and textile printing.  Jemtexs
Continuous Ink Jet technology is designed to allow for customization, higher
flexibility in design, file changes during print runs, smaller production runs,
and faster turnaround time from print order to delivery of printed
material.  For example, it allows for
the use of an expanded variety of inks and increased flexibility in applying
color techniques to a variety of different types of fabrics.  Jemtex has developed solutions for nozzle
design, drop assignment and image processing algorithms for multi-nozzle
alignment, calibration and on-line video process control.  The design of its printheads and modular
implementation are aimed to assure fast assembly and up time, as well as smooth
operation with higher viscosity inks and colorant concentrations. Jemtexs
current strategy is operating through strategic alliances with leading printing
houses and major original equipment manufacturers.

Jemtex has recently introduced a new digital printing decoration system
for ceramics named Gema II. The Gema II is designed to operate at productivity
levels comparable to conventional printing while providing the advantages of
digital printing. Due to the expected savings in color stocks, printing drums
and set-up times associated with analog printing, this system is expected to be
highly cost effective compared to current competing solutions.  Jemtex is also developing a static inkjet printhead,
which is expected to be the widest static inkjet printhead in operation, for
use in quality printing of textiles. This printhead is currently in advanced
trial phases.

Objet Geometries Ltd.

Objet,
located in Rehovot, Israel,was
founded in 1998.  It employed, as of
December 31, 2003, nearly 70 people.  We
currently hold an approximate 23.5% interest in Objet.

Objet
is a leading developer and manufacturer of three-dimensional (3D) inkjet
printing systems and it operates in the rapid prototyping market.  Objets systems enable designers and
mechanical engineers to create 3D models directly from CAD (computer aided
design) files.  Objet developed the
Objet Studio software that interfaces between the CAD files and the Objet 3-D
printers. The Objets printers use photopolymer-jet technology to produce the
model out of digital files created in the mechanical design process in a wide
variety of industries that need to physically verify, model or prototype their
designs early in the product development process.

During
2002, Objet began commercial deliveries of the Objet Quadra Tempo, an advanced
version of the Objet Quadra with higher speeds, reducing overall printing time
over the earlier version. During 2003, Objet began commercial shipments of the
Eden 330 and the Eden 260 Rapid Prototyping systems using Objets newly
developed Single Head Replacement (SHR) technology.

27

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RealTimeImage
Ltd.

RealTimeImage
(formerly RTimage Ltd.), or RTI, was formed in 1996.  It is headquartered in San Bruno, California, with research and
development operations in Or-Yehuda, Israel, and employed, as of December 31,
2003, about 60 employees.  We currently
hold an approximate 14.9% interest in RTI.

RTI is a leading innovator and developer of
Internet-based imaging products and services for healthcare professionals and,
until May 2004, for the graphic arts market. 
It provides high
quality, real time, Internet imaging platforms, allowing users to transform
image-based workflows into online workflows. 
RTI currently offers one principal line of products:

| | iPACSis a family of digital
  imaging workflow solutions designed for use by healthcare professionals in
  hospitals and imaging centers.  It is
  designed to allow a user to share medical images instantaneously and without
  loss in quality over any Web connection. iPACS products are currently
  deployed at more than 500 hospitals and imaging centers around the world.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
May 2004, the RealTimeProof business of RTI, a family of online proofing and
collaboration products designed for the graphic arts market was sold to Kodak
Polychrome Graphics (KPG).

XMPiE Inc.

XMPiE is a spin-off from Scitex, formed in
2000, that develops and markets software solutions for publishing, using
personalized marketing.  The XMPie
software platform is designed to allow organizations and marketing service
providers, such as digital commercial printers and direct marketing agencies,
to efficiently conduct direct marketing campaigns with one-to-one customer
communication and graphically rich personalized messages.  XMPie is headquartered in New York, New York
and, as of December 31, 2003, employed approximately 30 people.  We currently hold an approximate 5.4%
interest in XMPiE.

DISCONTINUEDOPERATIONS(SDP)

In
January 2004, we completed a transaction to sell the business of Scitex Digital
Printing, Inc., or SDP, our indirect wholly owned subsidiary, to Eastman Kodak
Company, or Kodak.  This transaction is
described under Item 10C. Material
Contracts  Sale of SDPbelow. As a result of this transaction, the
results of operations of SDP are reported as discontinued operations and the
consolidated results from continuing operations no longer include revenues and
expenses directly attributable to SDP. Nevertheless, since the operations of
SDP comprised one of our principal activities in the past 10 years, the
following is a brief description of SDPs business as of December 31, 2003.
Accordingly, the following description of SDPs business, to the extent it uses
the current tense, is not purported to describe the current operations of SDP.
For example, SDPs products have been renamed by Kodak and SDPs business is
now conducted under the name of Kodak Versamark, Inc., a wholly owned
subsidiary of Kodak.

General

SDP
is a wholly-owned subsidiary of Scitex, based in Dayton, Ohio.  It develops and manufactures high speed,
computer-driven, variable-data inkjet printers, which it also markets, sells
and supports.  Ancillary operations in
Europe and the Far East provide sale, marketing and support services of SDPs products
outside the United States.  SDP,
together with such ancillary operations, had, as of December 31, 2003, a total
workforce of approximately 730 employees (including part-time and temporary
employees).

28

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Product Overview

SDPs systems produce hardcopy output of
digital data files generated entirely on a computer or originating from a
computer.  SDP focuses on long-run,
high-volume, printing in monochrome, spot color and full process color.  Among the applications included are
personalization of promotional mailings, billings, statements, books, bar codes
and lottery tickets.

The technology in these systems involves a
proprietary continuous inkjet printing technology developed by SDP. It utilizes
a nearly microscopic stream of ink that is separated into droplets of
predictable size.  Selected droplets
then are deflected by an electrostatic charge directly onto the paper or other
substrates to create an image. These systems primarily serve commercial and
in-plant printers in digital printing of variable information, in page-wide,
partial-page and narrow formats, in monochrome, spot or process color.

Page-Wide Format Products.

SDPs page-wide format systems are used for
full-page, variable printing up to 18 inches wide on one or two
sides.  These systems are designed to
provide good quality at ultra-high production speeds and at low operating
cost-per-page for direct mail, billings, statements, book printing, or any
variable printing application. Representative products include:

| | Scitex VersaMark 
  high speed printing system, introduced in early 1999, combines high
  speed, and low cost per page in a turnkey solution that is neatly set into a
  modular, and entirely upgradeable package.                                                                                                                                                                                                                        
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Scitex
  VersaMark Business Color Press, or BCP, a high speed digital full color press, was introduced in
  May 2000.  It is aimed towards a broad
  range of applications, including direct mail, coupon and catalog printing,
  book publishing, and statement printing.                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Scitex
  VersaMark Vantage
  was introduced in April 2002.  The
  VersaMark  Vantage, part of the BCP
  products portfolio, targets commercial printers who seek an affordable
  solution to combining the benefits of digital color printing and the
  flexibility of variable data for one-to-one direct mailings, personalized
  billing and transaction statements, and individualized, on-demand printing
  for books and catalogs.

Partial-Page Format Products.

Partial-page format systems, with multiple
arrays of 3.4 or 4.25-inch printheads, are used for monochrome, spot color, or
highlight variable printing on documents. 
Flexible configurations of up to 16 printheads can be used to handle the
widest variations of applications in-line on webs, both offset and flexo,
folders, collators, and document tables. The Scitex 6240 inkjet printing
system prints business forms, tags and labels, direct mail, booklets and
billing statements.  It is used for bar
coding, numbering, addressing, personalization, and spot color or highlighting.

29

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Narrow Format Products.

Narrow format systems, with a variety of
printheads, are used in applications such as personalization, direct
addressing, bar coding and numbering, applied as single, spot or highlight
color. The Scitex Dijit printing system prints variable information for
automatic direct addressing, personalization, messaging, numbering and dating
at speeds up to 1,000 fpm.  The
compact and modular system can be used with a variety of third party equipment
such as web presses, bindery lines, folders or mailing bases.  In September 2002, SDP introduced two new
products to the Scitex Dijit family of printing systems, the Dijit® Passport
and the Dijit® Liberty.

Workflow Products.

SDP provides its customers with a range of
workflow products supporting the preparation of data for high-speed digital
printing and, in particular, for merging variable content into the printed
document in an optimized manner. For example, the Scitex Composer is a suite of
application software that includes four modules - Web Layout, PageComp, Data
Merge, and IJPDS Proofer.  This
combination provides users all the tools required to easily design, lay out,
define, and proof variable content jobs and is compatible with
industry-standard software used in a broad-range of applications.

Inks.

SDP develops and manufactures a range of
black, selected spot color and process color inks that are sold for use with
all of the printing systems.  Different
inks are available for optimal use with different media and applications. SDP
also partners with other ink manufacturers to provide a wider variety of inks
for its customers.

Manufacturing

SDPs manufacturing facilities are based in
Dayton, Ohio, although it also uses subcontractors in connection with certain
types of work and activities. Product quality control tests and inspections are
performed at various steps throughout the manufacturing process. Most of the
parts, components and commodities used by SDP in the manufacture and assembly
of its products are available from several sources.

Sales &
Marketing

SDP has a large customer base with over 9,000
units installed worldwide. It
generally markets and sells its own products through a global direct sales
force.  Sales organizations are
strategically located throughout the United States, with several subsidiaries
dedicated to SDPs products in Europe, Japan and Asia, providing sales and
support.  In certain areas, SDP also
utilizes dealers and value added resellers (VARs).

The
traditional customers of SDP include professional mailers, commercial printers,
publication printers (such as magazines and catalogs), and form printers
utilizing our equipment for applications such as direct mail, lottery and
addressing.  Emerging applications
include billing, data center printing, and high volume on-demand book printing.

SDPs
equipment sales are typically made on terms requiring an advance payment, with
the balance of the purchase price payable in stages, generally shortly after
delivery.

Customer Support

Technical
support, training and customer service are important factors in SDPs system
sales and the achievement of high levels of customer satisfaction.

30

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SDP
provides an equipment warranty for an agreed period following completion of
installation, typically ranging from three to six months.  At the end of the warranty period, the
customer may enter into a service agreement with SDP, which includes equipment
and software maintenance as well as printhead refurbishment.  If a customer does not enter into a service
agreement, service is provided and charged on a time and materials basis.  In some instances, mainly in the data center
market, SDP provides service to customers based on the usage of the system,
also known as click charges.

As
of December 31, 2003, the customer support operations worldwide of SDP engage
over 170 employees, comprising engineers, technical and application specialists
as well as logistics and management personnel. 
In certain areas, services are provided through distributors and
resellers, who provide technical and applications support through locally trained
engineers.

CUSTOMERS& SALES

The
following table sets forth the amounts and relative percentages of our revenues
from continuing operations (i.e., excluding revenues from the operations of
SDP) by geographical markets, for the years indicated:

|                                         |  | Year Ended December 31,*  |        
|---------------------------------------- |  | ------------------------- | -------
|                                         |  |                           |        
|                                         |  | 2003                      |        
|                                         |  |                           |        
|                                         |  | (US dollars in thousands) |        
|                                         |  |                           |        
|North
  America (mostly
  United States) |  | $                         | 19,650 
|Mexico                                   |  |                           | 15,178 
|Europe
  (West)                          |  |                           | 25,313 
|Europe
  (East)                          |  |                           | 11,580 
|Far East                                 |  |                           | 12,460 
|Other
  countries                        |  |                           | 18,699 
|                                         |  |                           |        
|Total                                    |  | $                         | 102,880
|                                         |  |                           |        

*  Please see Note 15b to our consolidated
financial statements included in this Annual Report. For revenues from
discontinued operations, see Note 1b.

In each of the years 2003, 2002 and 2001, no end-user customer or
distributor accounted for more than 10% of our revenues.

The
following table sets forth our revenues from continuing operations (i.e.,
excluding revenues from the operations of SDP) for the years 2001 through 2003
attributable to our principal sources of revenue/business activities:

|                 |  | Year Ended
  December 31,*  |        
|---------------- |  | --------------------------- | -------
|                 |  |                             |        
|                 |  | 2003                        |        
|                 |  |                             |        
|                 |  | (US
  dollars in thousands) |        
|                 |  |                             |        
|Sales            |  | $                           | 60,653 
|Services         |  |                             | 5,638  
|Supplies         |  |                             | 36,589 
|                 |  |                             |        
|Total
  Revenues |  | $                           | 102,880
|                 |  |                             |        

*    As a result of the sale of SDP
business to Kodak in January 2004, our consolidated financial statements for
the periods ended December 31, 2001, 2002, and 2003, were reclassified and we
now report in one segment, wide format digital printing.  Please see Note 15a to our consolidated
financial statements included in this Annual Report. For revenues from
discontinued operations, see Note 1b.

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INTELLECTUALPROPERTY ANDPROPRIETARYRIGHTS

The digital printing industry is characterized to a great extent by its
reliance on proprietary technology.  We
believe that we own or have the license to use the technologies used in our
products.  We currently rely on a
combination of trade secrets, licenses and patents, together with
non-disclosure and confidentiality agreements, to establish and protect our
proprietary rights in our products. However, no assurance can be given that our
existing patents or any future patents will not be challenged, invalidated, or
circumvented, or that our competitors will not independently develop or patent
technologies that are substantially equivalent or superior to our
technology.  There can be no assurance
that further patent protection will be obtained in Israel, the United States,
or elsewhere, for existing or new products or applications, or that such
further protection, if obtained, will be effective.  Moreover, the laws of some foreign countries in which we sell or
may sell our products may not fully protect, or may not protect at all, our
proprietary rights in products.  We take
precautionary measures to maintain our trade secrets such as requesting our
employees and selected parties, including key dealers, subcontractors and
distributors, to sign confidentiality agreements, non-competition agreements or
non-disclosure agreements, as applicable. 
However, no assurance can be given that others will not acquire
equivalent trade secrets or otherwise gain access to or disclose our
proprietary technology, or that we can meaningfully protect our rights to such
proprietary technology not subject to patent protection.

We are not aware of any material claim that our products infringe upon
the proprietary rights of third parties. 
However, there can be no assurance that third parties will not assert
infringement claims against us in the future, and the cost of responding to
such assertions, regardless of their validity, could be significant.  In addition, such claims may be found to be
valid and could result in awards against us, which could have a material effect
on our business.

GOVERNMENTREGULATIONS

Israel has the benefit of a free trade agreement with the United States
which, generally, permits tariff-free access into the United States for
products produced in Israel by Scitexs Israeli subsidiaries, joint ventures
and group companies.  In addition, as a
result of an agreement entered into by Israel with the European Union, or the
EU, and countries remaining in the European Free Trade Association, or EFTA,
the EU and EFTA have abolished customs duties on Israeli industrial
products.  However, there can be no
assurance that these agreements will not be terminated, changed, amended or
otherwise declared non-applicable to all or some of our Israeli subsidiaries,
joint ventures and group companies, thereby materially harming our and their
businesses.

Scitex Vision and some of our group companies receive grants from the
Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and
Labor for research and development programs. 
Some of our group companies also receive tax benefits under Israeli law
for capital investments that are designated as Approved Enterprises.  The participation in these programs is
subject to compliance with certain conditions and imposes certain restrictions
upon these companies.  For more information about the Office of the Chief
Scientist, tax benefits for Approved Enterprises and export controls, see Item
5B  Liquidity and Capital Resources  Grants from the Office of the Chief
Scientist and Item 10E  Taxation  Israeli Taxation  Tax Benefits under the
Law for the Encouragement of Capital Investments, 1959, respectively.

32

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Pursuant
to a recent amendment to a directive published by the Israeli Supervisor of
Banks, which became effective on March 31, 2004, we may be deemed part of a
group of affiliated borrowers comprised of IDB Holding Corporation Ltd., the
ultimate parent of Discount and Clal, our principal shareholders, and other
companies which may be included in such group of borrowers pursuant to the
directive. The directive generally provides that an entity will be subject to
limitations on the amount of financing available to it from an Israeli bank if
such entity is included within a group of borrowers, to which the amount of
debt financing that has been extended from such Israeli bank amounts to 30% of
such banks capital, or is a member of one of the banks six largest borrowers
or groups of borrowers to which, collectively, the amount of debt financing
that has been extended from the bank amounts to 150% of such banks capital
(gradually reduced to 135% between April 2005 and June 2006). As we are part of
the IDB affiliated group of companies which includes many companies that
require, or may in the future require, extensive credit facilities from
Israeli banks for the operation of their businesses, we cannot assure you that
our banks will not exceed these limits (if applicable to us) in the
future. Should our banks exceed these limits, they may limit our ability
to draw funds and may require us to return some or all of our outstanding
borrowings (which were $53.9 million as of December 31, 2003), each of which
may have a material adverse effect on our business, financial condition and
results of operations. The directive also provides that a bank may request that
the Israeli Supervisor of Banks exempt certain entities from the scope of the
definition of a group of borrowers. Since we currently do not believe that the
directive will impact us, we do not currently intend to request that our banks
seek an exemption on our behalf from the Israel Supervisor of Banks. Should we
decide to make such a request of our banks, there can be no assurance that our
banks would agree to request an exemption from the Israel Supervisor of Banks
on our behalf or that the Israel Supervisor of Banks would grant an exemption,
if requested.

We are also governed by foreign and domestic federal, state and local
laws of general applicability, such as laws regulating working conditions. In
addition, we are subject, as are manufacturers generally, to various foreign
and domestic federal, state and local environmental protection laws and
regulations, including those governing the discharge of material into the
environment.  Compliance with such
environmental provisions is not expected to have a material adverse effect on
our operations in the foreseeable future.

C.                ORGANIZATIONAL
STRUCTURE

Scitex
is part of a group of which it is the parent company.  The following table sets forth the name, jurisdiction and
ownership and voting interest of our principal operating subsidiaries, as of
the date hereof:

|Name                               | Jurisdiction | Ownership and Voting Interest
|---------------------------------- | ------------ | -----------------------------
|Scitex Vision Ltd.                 | Israel       | 75.5% (1)                    
|Scitex
  Vision International Ltd. | Israel       | 75.5% (1)                    
|Jemtex Ink
  Jet Ltd.              | Israel       | 72.9% (2)                    

(1)  In January 2003, Scitex Vision International
became a wholly owned subsidiary of Scitex Vision and an indirect majority
owned subsidiary of ours due to our interest in Scitex Vision.   See Item 6E  Share Ownership 
Subsidiaries Stock Option Plans with respect to options to acquire shares in
these companies.
(2)  On an as-converted basis.

We
also have a number of direct and indirect wholly owned subsidiaries, mainly
regional, that carry out ancillary operations for Scitex Vision and Scitex
Vision International, primarily sales, marketing and customer support.  A full
list of our significant subsidiaries, including name and country of
incorporation  is appended as Exhibit 8
to this Annual Report.

D.                PROPERTY,
PLANT AND EQUIPMENT

In
January 2004, we relocated to new corporate administrative offices in Tel Aviv,
Israel, consisting of approximately 1,780 square feet of floor space pursuant
to a Services Agreement between us and Discount Investment Corporation Ltd.,
one of our major shareholders.  For more information about the Services Agreement,
please see under Item 7B. Related Party Transactions.

33

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Scitex
Vision rents nearly 124,000 square feet in Netanya, Israel, for use as its
principal administrative, manufacturing and research and development
facility.  The term of this lease is
through 2010, with an option to terminate in 2005. Elsewhere in the United
States, Scitex Vision leases a number of other facilities, aggregating
approximately 19,200 square feet, used primarily for sales, marketing and
customer support.  Outside Israel and
the United States, Scitex Vision leases additional office space, primarily in
Brussels, Belgium; Hong Kong; Mexico City and Capetown, South Africa and
various other European centers.  These
facilities currently comprise approximately 67,600 square feet of floor space.

Jemtex
leases nearly 15,500 square feet in Lod, Israel, for use as its administrative,
manufacturing and research and development facility.  The term of this lease is through 2010, with an option to
terminate in 2005.

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

ITEM 5.     OPERATING
AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements
included elsewhere in this Annual Report, which have been prepared in
accordance with U.S. GAAP.  The
preparation of these financial statements requires us to make estimates,
judgments and assumptions, which may affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. Accordingly, actual results may differ from these estimates or
judgments under different assumptions or conditions.  In this respect, we urge you to read the discussion under the
caption Critical Accounting Policies
below.

The discussion below contains forward-looking statements that involve
risks and uncertainties.  Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
set forth in Item 3Key InformationRisk Factors.

You should read the following discussion with
the consolidated financial statements and other financial information included
elsewhere in this Annual Report.

OVERVIEW

Scitex, through Scitex Vision, is a leader in the wide format segment
of the industrial inkjet digital printing market.  Our operations, carried
out by our operating subsidiaries, Scitex Vision and Jemtex, consist of the
design, development, manufacture, marketing and support of products for the
industrial inkjet digital printing market. 
In addition, we hold interests in a number of companies whose operations
comprise related businesses operating within a single industry, including in
the rapid prototyping market (through our equity interest in Objet) and in the
Internet-related imaging market (through our equity interests in RealTimeImage
and XMPiE). Until the second half of 2003, we also operated in the digital
preprint business through our equity interest in Creo, and, through the end of
2003, we operated in the high-speed segment of the industrial inkjet digital
printing market through our wholly owned subsidiary, SDP.

During
2003 and early 2004, we underwent substantial changes, including:

| | the sale of the business
  of SDP to Kodak in January 2004;                                                                                                                                                                                                                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | the combination of the
  operations of Scitex Vision Ltd. (formerly, Aprion Digital), a developer of
  drop-on demand inkjet technologies, in which we held 42.5% of the share
  capital, and Scitex Vision International Ltd. (formerly, Scitex Vision), our
  wholly owned subsidiary until the consummation of such transaction in January
  2003,  and subsequent investments by
  us in Scitex Vision in July 2003 and May 2004;

34

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|                                                                                                                                                                                                 | the sale of the remainder
  of our shareholdings in Creo, a provider of solutions for the graphic arts
  industry;                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                 | the investment of $1.5
  million in Jemtex, which increased our interest in Jemtex from 49.8% to
  72.9%. As a result, commencing with the first quarter of 2004, we are
  consolidating the results of Jemtex with ours, which have been previously
  treated by us as an investment accounted for under the equity method; and
|                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                 | key changes to our
  management team, including the appointment of Mr. Raanan Cohen as our Interim
  President and Chief Executive Officer in January 2004 and the changes to our
  board of directors.                                                                                                                           
|                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                   
|In addition, in January
  2004, we approved a plan to distribute approximately $118 million to our
  shareholders through a repurchase of shares from our shareholders and a cash
  distribution:
|                                                                                                                                                                                                 
|                                                                                                                                                                                                 | On May 14, 2004, we
  commenced a self tender offer to purchase up to 5,643,739 of our shares for
  $5.67 per share (up to $32 million in the aggregate) in cash. On June 18,
  2004, we completed the tender offer and purchased 4,952,050 shares for an
  aggregate amount of approximately $28 million.                        
|                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                 | On June 22, 2004, we
  announced a distribution of $2.36 per ordinary share, or approximately $90
  million in the aggregate, payable on July 12, 2004 to our shareholders of
  record as of June 30, 2004.                                                                                                                       

In 2001 and 2002, we recorded net losses in the respective amounts of
approximately $253 million and $32 million, respectively, primarily as a result
of write-downs and losses of $215.9 million (in 2001) and write-downs of $22.3
million (in 2002) associated with our holdings in Creo.  In 2003, we recorded net income of
approximately $1.4 million, as a result of an improvement in the general market
for commercial printers equipment and consumables and $8 million that was
recognized as a tax benefit related to the sale of the business of SDP to
Kodak.  The $1.4 million of net income
resulted from offsetting approximately $20 million of net income from
discontinued operation (namely, SDP) with a net loss of approximately $18.6
million from continuing operations (mainly, Scitex Vision).

Key
Factors Affecting our Results

Our
operating results may be affected as a result of a number of factors,
including:

| | Global
  or regional economic conditions;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Our
  revenues are directly related to our ability to identify high potential
  products while they are still in development and to bring them to market
  quickly and effectively.  Efficient
  and productive research and development is essential in this environment as
  we, like our competitors, search to introduce cost-efficient printing
  solutions to the digital printing market. The need for increased resources in
  order to take advantage of the full range of new research and development
  technologies has been among the reasons for the consolidation which has taken
  place across the industry, and for the increase in collaborations between
  leading companies and niche players at the forefront of their particular
  technology areas. The growth in new technology, particularly of industrial
  inkjet digital printing technologies, if at all, is likely to have a
  fundamental impact on the digital printing industry as a whole, and upon our
  future development;
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Exchange
  rate exposure also affects our results as we have both sales and costs in
  many currencies other than the U.S. dollar (mainly in Euro).  In 2003, the European currencies increased
  in value relative to the U.S. dollar, with the Euro increasing in value
  relative to the dollar by 20% during the year.  In Israel, the New Israel Shekel increased in value relative to
  the dollar by 8% during 2003.  Our
  results have not been significantly affected by inflation. See Impact of Inflation and Exchange Risks below;                                                                                                                                                                                                                                                                                                                                                                                                                                                               

35

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| | Our
  operating results may also be affected as a result of various other factors,
  such as general economic conditions; the capital spending patterns of our
  customers; the level of competition that we encounter; the size and timing of
  orders, including order deferrals, and subsequent shipments; software and
  hardware development problems; one-time charges; mergers or acquisitions; and
  other factors which are more fully described under Item 3Key
  InformationRisk Factors.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A.                OPERATING
RESULTS

The following table sets forth the percentage relationships of certain
items from our consolidated statements of operations, as a percentage of
revenues from continuing operations for the periods indicated:

|                                                        |  | Year ended December 31, |  
|------------------------------------------------------- |  | ----------------------- | -
|                                                        |  |                         |  
|                                                        |  | 2003                    |  
|                                                        |  |                         |  
|Revenues                                                |  | 100.0                   | %
|Cost of revenues                                        |  | 56.7                    |  
|                                                        |  |                         |  
|Gross profit                                            |  | 43.3                    |  
|Selling and marketing expenses                          |  | 19.6                    |  
|General and administrative expenses                     |  | 14.7                    |  
|Research and development costs, net                     |  | 10.8                    |  
|Restructuring charges                                   |  | 1.6                     |  
|Amortization of intangibles                             |  | 5.7                     |  
|Write-down of intangible assets                         |  | 2.9                     |  
|Total
  operating expenses                              |  | 55.3                    |  
|                                                        |  |                         |  
|Operating income (loss)                                 |  | (12.0                   | )
|Financial income (expense), net                         |  | (2.6                    | )
|Other income (expense)  net                            |  | 0.8                     |  
|Write-down of investment in
      an associated company |  | -                       |  
|                                                        |  |                         |  
|Income before taxes on income                           |  | (13.8                   | )
|Taxes on income                                         |  | (2.3                    | )
|Share in losses of associated companies                 |  | (5.5                    | )
|Minority interests in losses of a
  subsidiary          |  | 3.4                     |  
|Net income from discontinued operations                 |  | 19.5                    |  
|                                                        |  |                         |  
|Net income (loss)                                       |  | 1.3                     | %
|                                                        |  |                         |  

EXPLANATORYNOTES

| | Adjustment to the Equity Method:Our consolidated financial statements
  for the period ended December 31, 2001 were adjusted retroactively, in order
  to reflect, the change in the method of accounting of our investment in Objet
  Geometries Ltd. from the cost method to the equity method. See Note 2w to our consolidated financial
  statements included in this Annual Report.                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Consolidation of Scitex Vision:As
  a result of the transaction to combine the operations of Scitex Vision and
  Scitex Vision International that was completed in January 2003, Scitex Vision
  became a majority owned subsidiary of ours and the parent of Scitex Vision
  International.  Our financial results
  for the periods ended December 31, 2001 and 2002, included in this Annual
  Report, did not consolidate Scitex Visions financial statements (other than
  as an investment accounted for under the equity method, as applicable),
  whereas our financial results for the period ended December 31, 2003,
  included in this Annual Report, consolidate Scitex Visions financial
  statements. See Note 3a to our
  consolidated financial statements included in this Annual Report.

36

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| | Discontinued Operations (SDP):In
  January 2004, we completed the sale of substantially all of the assets and
  business of SDP to Kodak.  As a result
  of the said sale of the business of SDP to Kodak, the results of operations
  of SDP are reported as discontinued operations and the consolidated results
  from continuing operations no longer include revenues and expenses directly
  attributable to SDP. Similarly, assets and liabilities relating to SDP are
  presented in our balance sheet separately as assets and liabilities of
  discontinued operations. Our consolidated financial statements for prior
  periods have been reclassified to reflect these changes.  See
  Note 1b to our consolidated
  financial statements included in this Annual Report.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Definition of Segments:Prior to the sale of SDPs business,
  the Company had been reporting in two segments: high speed digital printing
  (SDP) and wide format digital printing (Scitex Vision).  In conjunction with the commencement of
  reporting the results of operations of SDP as a discontinued operation, the
  Company has modified the definition of its business segments and the
  Companys results of operations are now reported in one segment - wide format
  digital printing. See Notes 1a and 15a to
  our consolidated financial statements included in this Annual Report.                                                                                                                                                                                 

FINANCIALHIGHLIGHTS OF2003

Despite the challenging market environment in 2003, especially in the
capital equipment market, we were able to obtain a significant increase in our
annual revenue level from continuing operations compared to 2002, maintain
positive operating income and, following two years in which we recorded net
losses, achieve net income of approximately $1.4 million.  Some of the key aspects of our operating
results in 2003 are as follows:

| | Total
  revenues from continuing operations for the year 2003 were $102.9 million
  compared to $85.7 million in 2002, the increase being primarily due to an
  improvement
  of capital investments in the digital printing market in general, and
  higher demands for our wide and super-wide format products and consumables;                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                          
| | Net income
  was $1.4 million, comprised of $20 million of net income from discontinued
  operations (SDP) and $18.6 million of net loss from continuing operations
  (mainly, Scitex Vision);                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                          
| | Significant
  improvement in our cash balance (comprised of cash, cash equivalents and
  short term investments) from approximately $38 million at December 31, 2002
  to $79 million at December 31, 2003 primarily due to the sale of our
  remainder of our shareholdings in Creo during 2003 for an aggregate sum of
  approximately $54 million; and
|  |                                                                                                                                                                                                                                                                                                                                                          
| | From a
  geographical standpoint, we achieved growth in most markets, although our
  revenues from sales in the Far East suffered a decline of $4.2 million
  (decrease of 25%), mainly due to continuing economic difficulties in Japan
  and increased competition in China.                                                                           

COMPARISON OF2001, 2002AND2003

Revenues

Revenues
are derived primarily from sales of our digital printing systems, inks,
substrates and services in connection with our printing systems.  We generally recognize product revenue when
persuasive evidence of an arrangement exists, delivery has occurred, the fee is
fixed or determinable and collection is probable. Revenues from services are
generally recognized ratably over the contractual period or as services are
performed. For additional details regarding the manner in which we recognize
revenues, see the discussion under the caption Critical Accounting Policies - - Revenue recognition and doubtful
accounts allowance below.

37

---

---

The
following table sets forth our revenues from continuing operations (i.e.,
excluding revenues from the operations of SDP) attributable to our principal
sources of revenue/business activities and showing the percentage increase
(decrease) for the periods indicated:

|                 |  | Year ended December 31,       |      |          |   |          | 
|---------------- |  | ----------------------------- | ---- | -------- | - | -------- | 
|                 |  |                               |      |          |   |          | 
|                 |  | (approximate
  $ in millions) |      |          |   |          | 
|                 |  |                               |      | % Change |   | % Change | 
|                 |  | 2001                          |      | 2002     |   | 2003     | 
|                 |  |                               |      |          |   |          | 
|Sales            |  | $                             | 59.7 |          | $ | 52.8     | 
|Services         |  |                               | 4.2  |          |   | 5.1      | 
|Supplies         |  |                               | 27.7 |          |   | 27.7     | 
|                 |  |                               |      |          |   |          | 
|Total
  Revenues |  | $                             | 91.6 |          | $ | 85.6     | 
|                 |  |                               |      |          |   |          | 

The following table sets forth our revenues
from continuing operations (i.e., excluding revenues from the operations of
SDP) by geographical markets and showing the percentage increase (decrease) for
the periods indicated:

|                |  | Year ended December 31,       |      |          |   |          | 
|--------------- |  | ----------------------------- | ---- | -------- | - | -------- | 
|                |  |                               |      |          |   |          | 
|                |  | (approximate
  $ in millions) |      |          |   |          | 
|                |  |                               |      | % Change |   | % Change | 
|                |  | 2001                          |      | 2002     |   | 2003     | 
|                |  |                               |      |          |   |          | 
|                |  |                               |      |          |   |          | 
|North
  America |  | $                             | 18.7 |          | $ | 17.8     | 
|Mexico          |  |                               | 1.2  |          |   | 8.7      | 
|Europe          |  |                               | 36.2 |          |   | 37.5     | 
|                |  |                               |      |          |   |          | 
|Far East        |  |                               | 29.9 |          |   | 16.6     | 
|                |  |                               |      |          |   |          | 
|Other countries |  |                               | 5.6  |          |   | 5.0      | 
|                |  |                               |      |          |   |          | 
|Total Revenues  |  | $                             | 91.6 |          | $ | 85.6     | 
|                |  |                               |      |          |   |          | 

The increase of 20.2% in
total revenues from continuing operations in 2003 was due primarily to an
improvement in capital investments in the digital printing market in general, and higher demands for our
products in several countries, which until 2003 generated only a small portion
of our revenues. Moreover, we believe that the significant increase in revenues
from supplies (mainly, ink sales) was due primarily to higher demands for our
compatible inks, which increased in part because of a larger installed base of
our systems.

The
decrease of 6.6% in total revenues from continuing operations in 2002 compared
to 2001 was due primarily to the continuing slow
down of capital investments in the digital printing market in general and the lower demands for our
products in the Asia Pacific regions during 2002 in particular.

Sales in Mexico and certain other countries rose significantly due
primarily to higher demand and improvements in our distribution and sales
channels, whereas our revenues from sales in the Far East declined for the
second year in a row due primarily to continuing difficulties in China.  We believe that Europe and the Americas  will continue to generate most of our
revenues in the foreseeable future. See the
chart regarding our revenues divided by geographical regions in Item 4B 
Customer & Sales above.

As
noted above, as a result of the SDP transaction, the results of operations of
SDP are reported as discontinued operations and the consolidated results from
continuing operations no longer include revenues and expenses directly
attributable to SDP. See Note 1b to our
consolidated financial statements included in this Annual Report.Our
consolidated results of operations reflect the results of operations of SDP
only in the line item of net income from discontinued operations. For more
information about revenues (which amounted to approximately $170.1 million,
$157.1 million and $164.6 million in 2003, 2002 and 2001, respectively) and
other line items attributable to SDP, you should refer to Note 1b to our consolidated
financial statements included in this Annual Report.

38

---

---

Cost of Revenues and
Gross Profit

|                   |  | Year ended December 31,       |     
|------------------ |  | ----------------------------- | ----
|                   |  |                               |     
|                   |  | (approximate
  $ in millions) |     
|                   |  |                               |     
|                   |  | 2001                          |     
|                   |  |                               |     
|Cost of
  revenues |  | $                             | 47.8
|                   |  |                               |     
|Gross profit       |  | $                             | 43.8
|                   |  |                               |     

Cost of revenues consist of
the cost of materials, salaries, depreciation, warranty costs and other direct
expenses related to the manufacture of our products and the installation and
support of the digital printing systems sold by us. Gross profit is determined
as a percentage, the numerator of which is our total revenues less the cost of
revenues, and the denominator is our total revenues. Our gross profit is
affected by several factors, including the introduction of new products, price
erosion due to increasing competition and product mix.  Generally, our gross profit is lower during
the initial launch and manufacturing ramp-up of a new product as a result of
manufacturing inefficiencies during that period.  As the difficulties in manufacturing new products are resolved
and the volume of sales of such products increases, our gross profit generally
improves.

Overall,
gross profit in 2003, at 43.3%, was lower compared to 2002, due primarily to
price competition and increased costs and expenses associated with the
acquisition of Scitex Vision International. 
Gross profit in 2002, at 46.4%, was lower compared to 2001, due
primarily to a decline in our sales which subsequently led to an increase in
the overhead and fixed costs in the cost of goods sold as a percentage of sales
and as a result of the pressure we experienced on the price of our products
throughout 2002.

Operating Expenses

|                                     |  | Year ended December 31,*      |     
|------------------------------------ |  | ----------------------------- | ----
|                                     |  |                               |     
|                                     |  | (approximate
  $ in millions) |     
|                                     |  |                               |     
|                                     |  | 2001                          |     
|                                     |  |                               |     
|Research and
  development, gross    |  | $                             | 7.1 
|Less
  Royalty-bearing participation |  |                               | 1.0 
|                                     |  |                               |     
|Research
  and development, net      |  |                               | 6.1 
|                                     |  |                               |     
|Sales and
  Marketing                |  |                               | 21.3
|General and
  Administrative         |  |                               | 16.4
|                                     |  |                               |     
|Total
  Operating Expenses           |  | $                             | 43.8
|                                     |  |                               |     

*See
Notes 14f and 14g to our consolidated financial statements included in this
Annual Report.**Excluding write-down of goodwill, amortization of other
intangible assets, and restructuring charges in the aggregate amount of $23.9
million, $3 million and $10.4 million for 2001, 2002 and 2003, respectively
(presented separately below).

Operating
expenses.Operating
expenses comprise costs and expenses associated with research and development,
sales, marketing, and general and administrative.  During 2003, we also included write down of goodwill and other
intangible assets (see the discussion under the caption Critical Accounting
Policies below with respect to FAS 142), as well as restructuring charges as
described below.

Research
and development expenses.Research
and development expenses consist primarily of costs associated with the design,
technology development, product development, pre-manufacture and testing of our
new products and enhancements of our existing products, salaries and related
personnel costs, patent prosecution and maintenance costs and, other expenses
related to our product development and research programs. We expense all of our
research and development costs as they are incurred. The research and
development expenses in 2003 increased compared to 2001 primarily because, as
of 2003, we consolidate the results of Scitex Vision, which, by comparison to
Scitex Vision International, invests more resources in the development of new
products. The research and development expenses in 2002 slightly increased
compared to 2001 due to investments in new products, including the acquisition
of the business of Siantec in April 2002. 
We expect to continue to invest significant resources in research and
development programs for new products and enhancements of existing products and
that research and development expenses will remain at the same levels as in
2003.

39

---

---

Selling,
marketing and administrative expenses.  Selling and marketing
expenses consist primarily of salaries, travel, trade shows, promotional and
public relations activities and related costs of our sales and marketing
personnel, the costs and expenses of our foreign sales and marketing
subsidiaries and representative offices and commissions paid to independent
sales agents.  General and
administrative expenses consist primarily of salaries and related costs for our
executive and administrative staff, and insurance, legal and accounting
expenses, both in Israel and abroad, as well as provision for doubtful debts.
Selling, general, marketing and administrative expenses slightly increased in
2003 compared to 2002, whereas there was a slight decrease in 2002 compared to
2001.  The slight increase in 2003 is
attributable, mainly, to the consolidation of Scitex Visions
operations in our books and increased sales and marketing activities, whereas the slight decrease in 2002 is
attributable mainly to lower sales costs. 
General and administrative expenses in 2003 increased compared to 2002
primarily due to costs associated with the combination of Scitex Vision
International with Scitex Vision.

Write-down,
Amortization and Restructuring Charges

|                                                          |  | Year ended December 31,       |     
|--------------------------------------------------------- |  | ----------------------------- | ----
|                                                          |  |                               |     
|                                                          |  | (approximate
  $ in millions) |     
|                                                          |  |                               |     
|                                                          |  | 2001                          |     
|                                                          |  |                               |     
|Amortization
  of Intangible Assets                       |  | $                             | 8.5 
|                                                          |  |                               |     
|Write-down
  of Goodwill and
     other Intangible Assets |  |                               | 15.0
|                                                          |  |                               |     
|Restructuring
  Charges*                                  |  | $                             | 0.5 

*See
Note 14h to our consolidated financial statements included in this Annual
Report.

Amortization
of intangible assets and write-down of goodwill. Expenses for amortization of intangible
assets were $5.9 million in 2003, compared to $2.9 million in 2002, the increase
being primarily due to amortization charges associated with the combination of
Scitex Vision International with Scitex Vision. We also had a technology
write-off of approximately $3 million in 2003, primarily associated with
intangibles acquired in the context of the acquisition of Siantec by Scitex
Vision in 2002. The decrease in expenses for amortization of intangible assets
in 2002 compared to 2001 (nearly half of which was related to amortization of
technology), was due primarily to our implementation of FAS 142 (Goodwill and
Other Intangible Assets) in 2002, pursuant to which, among other things,
goodwill with indefinite lives was no longer amortized (see the discussion
under the caption Critical Accounting Policies below with respect to FAS 142)
and a technology write-off of approximately $15 million in 2001.

Restructuring
charges.We recorded
$1.6 million of restructuring costs in 2003 primarily associated with the
combination of the operations of Scitex Vision and Scitex Vision International
and implementation of a restructuring plan in Scitex Vision in the form of
reduction in work force, abandonment of leased premises and development of new
information technology system. In 2002, we did not record any restructuring
costs, compared to $0.5 million in 2001, related to reduction in
workforce.

Financial and Other Income and Expenses

Financial
income (expenses), net, consists primarily of interest earned on bank deposits,
interest incurred on bank and other loans and exchange rate differences. Net
financial expenses decreased from $3.1 million in 2002 to $2.7 million in
2003, due primarily to interest gained on the funds received from the sale of
the Creo shares during the second half of 2003. Net financial expenses slightly
increased from 2001 ($2.9 million) to 2002.

40

---

---

Other
income in 2003 totaling $0.8 million, compared to Other loss $26.3 million in 2002,
consists primarily of a $2.8 gain from the sale of our remaining shares in Creo
which was offset by write-downs of certain investments. 
Other loss of $26.3 in 2002, compared to $13 million in 2001,
reflect primarily a loss of approximately $22.3 million due to an impairment of the carrying value
of our shares in Creo that we made during the fourth quarter of 2002.

Convertible
loan to Scitex Vision.In 2000, Scitex Vision entered
into a collaboration agreement with a European supplier. Under the agreement,
the supplier is required to pay royalties to Scitex Vision on sales of ink for
use with Scitex Visions textile printing machines. As of December 31, 2003, no
such sales have been made. Scitex Vision also received from the supplier a
long-term convertible loan of $5 million which bears a 6% annual interest,
unless certain milestones are met. According to the original terms of the loan,
the loan and the accumulated interest may be converted by the supplier, at any
time during the last three months of the loan period, which ended on December
11, 2003, into ordinary shares of Scitex Vision at a conversion price based on
the fair value of such shares, less 15%. According to the agreement, if the
supplier chooses to request the repayment of the loan, the repayment shall be
made by setting-off the loan and any interest accrued thereon against royalties
due to Scitex Vision in a subsequent period. The remainder of the loan, if it
exists, shall be repaid in cash to the supplier. At the end of 2003, the
parties agreed that the loan will no longer bear any interest and will be
payable in four annual installments commencing December 2004, subject to
set-off of royalties due to Scitex Vision under the supply agreement, if any.
As a result, Scitex Vision recorded the loan based on its present value using
the interest rate which was applicable as of the date of the change in terms.
The difference between the present value and the nominal value of the loan in
the total amount of $0.4 million, as well as all interest accrued through
December 31, 2003 in the total amount of $0.9 million, were credited to
financial expenses  net.

Taxes

Israeli
companies are generally subject to income tax at the corporate rate of 36%,
and, for capital gains derived after January 1, 2003, are subject to capital
gains tax at a rate of 25%.  See in Item 5B  Corporate Tax Rate below for more
information.

Taxes
on income amounted to approximately $2.4 million in 2003, compared with a tax
benefit of $0.6 million in 2002 and taxes on income of approximately
$3 million in 2001.

As
of the end of 2003, since all deferred taxes were related to the discontinued
operations (SDP), an insignificant amount of deferred taxes remained in respect
of our continuing operations. During 2003, we increased the valuation allowance
for deferred taxes from $123 million to $185 million. This increase is due
primarily to tax losses carried forward associated with the transaction to
combine Scitex Vision and Scitex Vision International that was completed in
January 2003 and with the sales of Creo shares during the second half of 2003. See Note 12(e) to our consolidated financial statements
included in this Annual Report.

A
number of factors may impact future taxable income, including those discussed
under Risk Factors in Item 3D, as well as any tax planning strategies.  To the extent that estimates of future
taxable income are reduced or not realized, the amount of the deferred tax
asset considered realizable could be adversely affected.

Equity Investments

Our
share in the losses of associated companies was $5.6 million in 2003 compared
with $4.1 million in 2002 and $67.5 million in 2001.  We also wrote down our investment in Creo by
approximately $22.3 million during the fourth quarter of 2002.

41

---

---

Commencing January 2002, we may be deemed to
exercise significant influence on Objet. Accordingly, as required by U.S. GAAP,
in the first quarter of 2002 we retroactively changed our method of accounting
for the investment in Objet from the cost method to the equity method.
Consequently, the investment in Objet on our books as of December 31, 2001 was
restated and our equity share of the results of Objet is being included in our
results of operations starting with the first quarter of 2002.  This restatement affected other items of our
financial statements for 2001.  Please see Note 2w to our consolidated financial
statements included in this Annual Report.

In February 2004, we invested an additional
amount of $1.5 million in Jemtex and we now hold 73% of Jemtexs voting power. As a result, commencing with the first
quarter of 2004, we are consolidating the results of Jemtex with ours.

CRITICALACCOUNTINGPOLICIES

Our
discussion and analysis of our financial condition and results of operations
included in this Item 5 and elsewhere in this Annual Report are based upon our
consolidated financial statements, which have been prepared in accordance with
U.S. GAAP.  The preparation of these
financial statements often requires us to make estimates, judgments and
assumptions, which may affect the reported amounts of assets, liabilities,
revenues, expenses and related disclosures as of the date of the financial
statements and during the reported period. 
On a regular basis, we evaluate and may revise our estimates. We base
our estimates on historical experience and various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent.  Some of
those judgments can be complex, and consequently, actual results may differ
from those estimates.  For any given
individual estimate, judgment or assumption made by our management, there may
be alternative estimates, judgments or assumptions, which are also reasonable.
We believe that the estimates, assumptions and judgments described below have
the greatest potential impact on our financial statements and consider these to
be our critical accounting policies:

Deferred tax valuation allowance. 
Deferred taxes are determined utilizing the asset and liability method,
based on the estimated future tax effect resulting from differences between the
amounts presented in our financial statements and those taken into account for
tax purposes, in accordance with the related tax laws, and from tax losses
carryforward.  Valuation allowances are
included in respect of deferred tax assets when it is more likely than not that
all or a portion of such assets will not be realized.  We have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance.  Due to the uncertainty as to
utilization of the tax losses carryforward, a valuation allowance was provided
to reduce our deferred tax assets, because we expect that in the foreseeable
future it is not more likely than not that all of the deferred tax assets  will be realized.  Conversely, the carrying value of our net deferred tax assets
assumes that we will be able to generate sufficient future taxable income in
certain tax jurisdictions, based on estimates and assumptions.  A number of factors may impact future
taxable income, including those discussed under Risk Factors in Item 3D, as
well as any tax planning strategies.  To
the extent that estimates of future taxable income are reduced or not realized,
we could be required to establish additional valuation allowances and the
amount of the deferred tax asset considered realizable could be adversely
affected by a material amount.  If it
were determined that we would be able to realize a deferred tax asset in excess
of its net recorded amount, an adjustment to deferred tax assets would increase
our income.

Treatment
of income tax.  Our tax returns as well as those of our
subsidiaries are subject to examination by tax authorities in various
jurisdictions. In general, our management considers tax provisions based on its
reasonable estimate of the outcome of the examination. Our management believes
that the estimates reflected in the financial statements reflect our tax
liabilities. However, our actual tax liabilities may ultimately differ from
those estimates if taxing authorities successfully challenge our tax treatment
or if we were to prevail in matters for which provisions have been established.
Accordingly, our effective tax rate in a given financial statement period may
materially change.

42

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---

Impairment of goodwill, intangible assets
and other long-lived assets.  Under current accounting
standards, we make judgments about the useful lives and fair value of goodwill,
other intangible assets and other long-lived assets, including assumptions
about estimated future cash flows and other factors to determine the fair value
of the respective assets.  On
January 1, 2002, we adopted FAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets and FAS 142, Goodwill and Other Intangible
Assets.  FAS 144 requires that
long-lived assets be reviewed for impairment and, if necessary, written down to
the estimated fair values, whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable through
undiscounted future cash flows.  FAS 142
generally provides that goodwill and intangible assets (1) with indefinite
lives will no longer be amortized and (2) deemed to have an indefinite life
will be tested for impairment at least annually.  Prior to January 1, 2002, goodwill was amortized by us on a
straight-line basis over periods of 7 to 15 years.  As a result of the transitional impairment test that we
conducted, we determined that no impairment should be recorded in 2002 whereas
we amortized intangible assets in 2003 in an approximate amount of $3 million.
Judgments and assumptions about future cash flows and remaining lives are
complex and often subjective and can be affected by a variety of external and
internal factors.  If these estimates or
related assumptions change in the future, we may be required to record
impairment charges related to these assets.

Revenue recognition and doubtful accounts
allowance.  Our revenue recognition policy is
significant because our revenue is a key component of our results of operations.
We follow very specific and detailed guidelines, several of which are discussed
below, in measuring revenue; however, certain judgments, estimates and
assumptions affect the application of our revenue recognition:

| | Revenues
  from sales of products and supplies are recognized by us when an arrangement
  (usually in the form of a purchase order) exists, delivery has occurred and
  title passed to the customer, the price to the customer is fixed or
  determinable and collection of payment is reasonably assured. With respect to
  products with installation requirements, revenue is recognized by us when all
  of the above criteria are met and installation is completed. Sales contracts with distributors stipulate
  fixed prices and current payment terms and are not subject to the
  distributors resale or any other contingencies. Accordingly, sales of
  finished products to distributors are recognized by us as revenue upon
  delivery and after title passes to distributors.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Service
  revenue is recognized ratably over the contractual period in general, or as
  services are performed in certain cases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The
  allowance for doubtful accounts is determined as a percentage of specific
  debts doubtful of collection, the determination of which requires judgment
  and sometimes estimates of the portion that will be collected in the future.
  In performing this evaluation, significant judgments and estimates are
  involved, such as past experience, credit quality of the customer, age of the
  receivable balance and current economic conditions that may affect a
  customer's ability to pay, all of which can change rapidly and without
  advance warning.                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The
  costs associated with product warranties that we provide our customers are
  provided at the same time as the revenues are recognized, the determination
  of which requires us to make estimates and assumptions regarding the extent
  of future warranty issues and the related costs. We generally calculate the annual
  provision on the basis of the expected cost of warranty services, based on
  our past experience.                                                                                                                                                                                                                                                                                                                                                          

43

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RECENTLYISSUEDACCOUNTINGSTANDARDS

FIN
46.  In January 2003, the FASB
issued FASB Interpretation No. 46 
Consolidation of Variable Interest Entities.  Under FIN 46, entities are separated into two groups: (1) those
for which voting interests are used to determine consolidation and (2) those
for which variable interests are used to determine consolidation.  FIN 46 explains how to identify Variable
Interest Entities (VIE) and how to determine when a business enterprise should
include the assets, liabilities, non-controlling interests, and results of
activities of a VIE in its consolidated financial statements.     FIN
46 is effective as follows: for variable interests in VIEs created after
January 31, 2003, FIN 46 applies immediately; for variable interests in VIEs
created before that date, FIN 46 applies for public entities as of the
beginning of the first interim or annual reporting period beginning after June
15, 2003.  On December 24, 2003, FASB issued an
Interpretation which clarified and modified FIN 46.  To date, the adoption of this standard has not had any impact on our
consolidated financial statements.

FAS
132 (revised 2003).In December 2003, the FASB issued SFAS No.132
(revised 2003),Employers' Disclosures about Pensions and Other Postretirement
Benefits, an amendment of FASB Statements No.87, 88 and 106, and a revision of
FASB Statement No.132 (FAS 132 (revised 2003)). The statement revises
employers' disclosures about pension plans and other postretirement benefit
plans. It does not change the measurement or recognition of those plans. The
new rules require additional disclosures about the assets, obligations, cash
flows, and net periodic benefit cost of defined benefit pension plans and other
postretirement benefit plans. Part of the new disclosures provisions are
effective for 2003 calendar year-end financial statements, and accordingly have
been applied by Scitex in our consolidated financial statements included in
this Annual Report. The rest of the provisions of the statement, which have a
later effective date, are currently being evaluated by Scitex.

IMPACT OFRELATEDPARTYTRANSACTIONS

We have entered into a number of agreements with certain companies, of
which our principal shareholders, Clal and/or Discount, are affiliated.

In December 2002, we entered into a Share
Exchange Agreement with Scitex Vision, in which Clal and Discount each held approximately 14% of the share capital, and Scitex
Vision International, pursuant to which we combined the operations of such
companies.  Among other factors
considered in deciding to approve the transaction, our board of directors
received a written opinion from
the financial advisor in connection with the transaction, as to the fairness,
from a financial point of view, of the consideration to be paid by us in
connection with the transaction. In addition, in July 2003 and May 2004 we, CEI
and Discount invested in Scitex Vision in the framework of rights offerings
conducted by Scitex Vision.

Please see Item 7B  Related Party Transactions below for specific
details as to certain related party transactions entered into by us.

We believe that the terms of these related party transactions are not
different in any material respect than the terms we could get from unaffiliated
third parties. The pricing and/or value of such transactions were arrived based
on arms-length negotiations between the parties and, in certain cases, based
upon, among other things, opinions of third party financial advisors.  Our management reviewed the pricing of such
transactions and confirmed that they were not materially different than could
have been obtained from unaffiliated third parties.

Under the Companies Law and recently issued
Nasdaq rules, certain transactions and arrangements with interested parties
require approval by our board of directors and our audit committee and, in some
cases, also require approval by our shareholders.  In this respect, see the discussion in Item 6C  Approval of
Specified Related Party Transactions under Israeli Law above.

44

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IMPACT OFINFLATION ANDEXCHANGERISKS

Substantially
all of our revenues are in non-Israeli currencies.  Sales in the United States and other areas outside of Western
Europe and Japan are typically made in dollars, sales in Europe are made
primarily in Euro, dollars or pounds sterling, and sales in Japan are made
partly in Japanese yen.  This gives
rise to significant exposure to market risks, mainly from changes in foreign
exchange rates.  For more information about these risks and the
methods we employ to mitigate these risks, see also Item 11.
Quantitative and Qualitative Disclosures about Market Risk.

New
Israeli Shekel.Historically, the New Israeli Shekel, the
Israeli currency, has been devalued in relation to the U.S. dollar and other
major currencies principally to reflect the extent to which inflation in Israel
exceeds average inflation rates in Western economies. Such devaluations in any
particular fiscal period are never completely synchronized with the rate of
inflation and therefore may lag behind or exceed the underlying inflation
rate.  The table below sets forth the
annual rate of inflation, the annual rate of devaluation (or revaluation) of
the NIS against the U.S. dollar and the gap between them for the periods
indicated:

|                              |  | Year Ended
  December 31, |   
|----------------------------- |  | ------------------------- | --
|                              |  |                           |   
|                              |  | 2003                      |   
|                              |  |                           |   
|Inflation (Deflation)         |  | (1.9                      | )%
|Devaluation (Revaluation)     |  | (7.6                      | )%
|Inflation
  (devaluation) gap |  | 5.7                       | % 

Although a material portion
of Scitexs costs relate to the operations of Scitex Vision in Israel, part of
these Israeli costs are in dollars or linked to the dollar.  Costs not denominated in, or linked to,
dollars are translated to dollars, when recorded, at prevailing exchange rates
for the purposes of our financial statements. 
To the extent such costs are linked to the Israeli Consumer Price Index,
such costs may increase if the rate of inflation in Israel exceeds the rate of
devaluation of the shekel against the dollar or if the timing of such
devaluations were to lag considerably behind inflation.  Conversely, such costs may, in dollar terms,
decrease if the rate of inflation is lower than the rate of devaluation of the
shekel against the dollar. Accordingly, our Israeli operations experienced an
increase in dollar costs in 1999, 2000 and 2003, and a decrease in 2001 and
2002.  The representative dollar
exchange rate for converting the shekel to dollars, as reported by the Bank of
Israel, was NIS 4.379 on December 31, 2003 (NIS 4.737 on December 31,
2002).

Other
currencies.Until the Creo transaction in April 2000, we
had substantial operations outside the United States and Israel, and
accordingly maintained substantial non-dollar balances of assets, including
substantial accounts receivable balances related to sales made in non-dollar
currencies, mostly European currencies and Japanese yen. Our general policy was
to hedge against the exchange rate exposure arising from the existence of such
non-dollar business activities. 
Subsequent to the Creo transaction, SDP and Scitex Vision established
operations of their own outside the United States and Israel, primarily in
Europe, but the volume of activity in non-dollar currencies was significantly
reduced compared to previous years and, following the sale of SDPs operations
in January 2004, is expected to be further reduced.  The net impact of currency exchange rate and remeasurement
differences between the dollar and other currencies accounted for a net loss of
$1.2 million in 2003, compared to net losses of $1.5 million in 2002 and $0.6
million in 2001.

See also Item 11. Quantitative and Qualitative Disclosures
about Market Risk.

45

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B.                LIQUIDITY
& CAPITAL RESOURCES

OVERVIEW

On
December 31, 2003, our working capital was $159.9 million, compared
to $96.3 million on December 31, 2002. Several conflicting trends affected this
item. Working capital improved primarily as a result of an increase of $41.3
million, in the aggregate, in cash, cash equivalents and short-term
investments, as well as an increase of $26.3 million in current assets
attributed to discontinued operations (SDP) and a decrease in short term debt
(including the payment of a note underlying a $18.8 million debt to Creo in
April 2003) of approximately $7.7 million.

We have financed our operations through cash generated from operations,
including the proceeds from the sale of our shares in Creo in the second half
of 2003 which generated, in the aggregate, approximately $54 million in cash. Cash, cash equivalents, short-term
investments and a restricted deposit at December 31, 2003 were
$79.4 million and short-term bank debt (including current maturities of
long-term loans) totaled $48.0 million compared to $38.0 million and
$37.1 million, respectively, in 2002. 
The increase in cash, cash equivalents and short-term investments is
attributable primarily to the sale of our shares in Creo.  Bank debt due beyond one year totaled $6.6
million, compared to $5.5 million in 2002 (see Item 5F below).

Cash
Flows

We
had negative net cash used in activities in 2003.  The net cash flow used in operations in 2003 was approximately
$6.2 million, compared to approximately $4.4 million of positive operating
cash flow in 2002 (and a negative operating cash flow of $23.2 million in
2001).  The decrease in cash flows from
operations was due primarily to extended payment terms given to our customers
and increased manufacturing activities.

Our investment activities consist primarily of investments and
redemptions of short-term bank deposits. In 2003, $47.5 million was generated from investment
activities (excluding $3.4 million of restricted deposit) compared to $17.0
million used in investment activities in 2002 (excluding $20.2 million of
restricted deposit) and $50.0 million generated from investment activities in
2001. The increase in cash generated from investment activities in 2003 is
related primarily to $54 million generated from the sale of Creo shares in June
and August 2003. Major uses of cash for investing activities during 2003
included investments in group companies and in fixed assets.

As explained above, our financial income and expenses consist primarily
of interest earned on bank deposits, gains and losses from the exchange rate
differences of monetary balance sheet items denominated in non-dollar
currencies and interest expense paid on short-term bank loans.  Net cash used in financing activities in
2003 was approximately $9.7 million mainly due to the repayment of a $18.8 million note
we issued to Creo, which was offset by Scitex Visions withdrawals under its
credit facilities.  Net cash generated
from financing activities in 2002 and 2001 was approximately $4.5 million and
$9.8 million, respectively.

In sum, net cash flow (cash and cash equivalents) decrease in 2003
amounted to $5.9 million.

Capital
Expenditures

Capital expenditures in fixed assets in 2001, 2002, and 2003 were
approximately $15.5 million, $10.3 million, and $3.3 million, respectively.
Capital expenditures by way of investments in our group companies in 2001,
2002, and 2003 were approximately $2.0 million, $3.5 million, and $15.5
million, respectively.

During 1999 and 2000, we and KBA, our joint venture partner in Karat
Digital Press, agreed to provide guarantees in respect of bank credit lines
received by Karat.  At the end of 2000,
the loans guaranteed by us totaled approximately $18 million, of which we were
required to pay $16.5 million in March 2002. 
Of such amount, $14.4 million was repaid to us by KBA.

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Credit
Facilities

As
of December 31, 2003, Scitex Visions revolving lines of credit and long-term
loans for working capital and investments purposes from banks in Israel
amounted to $49.0 million, bearing interest ranging from LIBOR +1.1% to
LIBOR +2.3%, partially linked to the dollar and partially to the Euro. As of
June 16, 2004, the principal amount outstanding under these credit lines
amounted to $50.0 million.

These
credit lines are secured by a floating charge on Scitex Visions assets, by
approximately $18.2 million of a restricted deposit, and by a loan guarantee of
approximately $0.9 million issued by us for Scitex Visions benefit.  Under these credit lines, Scitex Vision is
required to adhere to certain financial and other restrictive covenants such as
equity level, profitability and financial ratios. In the past, Scitex Vision
failed to meet certain of these covenants but was able to cure such default
following negotiations with the banks and by raising additional funds from us
and other shareholders of Scitex Vision. However, we cannot assure you that
Scitex Vision will be successful in satisfying these covenants in the
future.

Most of the short-term bank credit of Scitex Vision is also in dollars,
generally at variable rates linked to LIBOR. 
This includes a short-term bank loan denominated in dollars and bearing
interest at a rate of LIBOR + 1.1% to LIBOR + 2.25% per annum (as of December
31, 2003, 2.3% to 3.5%, respectively) in the amount of approximately $26.5
million.  Scitex Vision also has in
place other short-term banks loans denominated in Euro and bearing interest of
one month LIBOR + 1.75% to LIBOR + 2.3% per annum (as of December 31, 2003,
3.8% to 4.4%, respectively) in the aggregate amount of approximately 11.7
million Euro (representing $14.7 million based on the exchange rate between the
Euro and the dollar as of December 31, 2003), and other credit lines of
approximately $0.7 million in various currencies.

See Item 5F below.

Tax Audits

In
Israel, we have received, or are considered to have received, final tax
assessments through the 1998 tax year.

In partial settlement of an audit of the Internal Revenue Service (IRS) of
our U.S. subsidiaries for the years 1992 through 1996, we consented to a
partial assessment by the IRS for approximately $10.6 million of federal
taxes on certain agreed upon issues. In June 2002, we received a notice from
the IRS assessing $29.6 million of additional federal income taxes for the
years 1992 through 1996.  In August
2002, we appealed the proposed additional assessment and in February 2004
reached a settlement with the IRS, whereby we agreed to an assessment of $5.7
million of additional federal income taxes for these years (rather than $29.6
million as initially proposed by the IRS, excluding interest accrued
thereon).  We have previously
established balance sheet reserves on account of this audit which, based
on our tax consultants advice, should be sufficient, and, as noted above, we have already
made advance payments to the IRS of $21.5 million on account of this audit
until the end of 2003. Accordingly, we estimate that the final additional cash
cost of the IRS audit (taking into consideration the full federal tax
assessment, state taxes and interest thereon, and after application of the
$21.5 million advance payment), will be in the range of $7 to $14 million, out
of which $9.5 million has already been paid in the first half of 2004. We
believe we have sufficient balance sheet reserves to cover the anticipated
additional payment.

In late 2002, we received a demand from the
Israeli Tax Authority (ITA) to make a tax payment of approximately $2.6 million
related to an assessment of an intracompany sale of shares that was effected
during 1996 reflecting a much higher valuation to the transaction than the one
established by us. In March 2004, we reached an agreement with the ITA,
pursuant to which we paid approximately $30,000 in full settlement for this
demand.

In April 2003, Scitex Vision International,
our indirect majority owned subsidiary, received a notice from the ITA
assessing approximately $6.5 million (including interest and linkage to the
Israeli Consumer Price Index) of Israeli income taxes for the years 1995
through 2000.  The dispute related
primarily to the interpretation of the benefits to which Scitex Vision is
entitled under the Law for the Encouragement of Capital Investments, 1959, and
the deduction of certain expenses. 
Scitex Vision International appealed the proposed assessment and, in
January 2004, reached a settlement with the ITA, whereby it agreed to pay
approximately $1.8 million in 24 monthly installments commencing April 2004 in
full settlement of the ITA audit for these years as well as for 2001.

47

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In mid-2001, Scitex Vision International filed an application for an
advance ruling by Hong Kongs Inland Revenue Department (IRD). In general, such
application sought the IRDs approval that Scitex Vision Internationals sales
outside of Hong Kong will be exempt from tax in Hong Kong and that sales within
Hong Kong will be subject to a lower tax rate. 
During 2003, the IRD declined the
application. Thereafter, Scitex Vision International sold the
local subsidiary and ceased the relevant activity in Hong
Kong. Scitex Vision International believes that due to current balance
sheet reserves, it is not necessary at this time to establish additional
reserves relating to this matter. However, it may be eventually required to pay
the IRD material amounts, which may exceed the amount of the reserves to settle
this matter, in which event, our results of operations may be adversely
affected.

In addition, we are undergoing a number of tax audits in
Europe and the tax consequences in Israel of the Creo transaction are still to
be determined with the tax authorities. 
While we believe that based on, among other things, our
consultants advice, we
established sufficient reserves for these matters, additional payments may be
required at the conclusion of these matters. 
It is not possible to predict at this time whether and when any eventual
payments will be made.

Outlook for 2004

In
2004, we expect our majority owned subsidiary, Scitex Vision, to generate cash
from its operations. Our investment activities, which may include investments
in group companies, earnout payments for past acquisitions and investments in
capital assets, are expected to be higher than the amount of cash generated by
our operating cash flow.  As described
elsewhere in this Annual Report, in June 2004 we paid approximately $28 million
in consideration for the shares purchased by us in the self tender offer and
will pay approximately $90 million to our shareholders in July 2004 as part of
the cash distribution. As a result, our shareholders equity and cash balance
will decrease by the same amount.

Our
management believes that (after taking into account the self tender offer and
cash distribution) existing cash and short-term investments together with
available credit lines and funds generated from operations of subsidiaries will
be sufficient to meet operating requirements in the year 2004.  We may also continue to invest in our
subsidiaries and group companies, and in other new companies.

MARKETRISK

For information on our market risk and the use of financial instruments
for hedging purposes, see below under Item 11  Quantitative and Qualitative
Disclosures About Market Risk.

GRANTS FROM THEOFFICE OF THECHIEFSCIENTIST

From time to time, eligible participants may receive grants under
programs of the Office of the Chief Scientist of the Israeli Ministry of
Industry, Trade and Labor. Grants received are generally repaid through a
mandatory royalty based on revenues from products incorporating know-how
developed with the grants. This governmental support is conditioned upon the
participants ability to comply with certain applicable requirements and
conditions specified in the Chief Scientists program and with the provisions
of the Law for the Encouragement of Research and Development in the Industry,
1984, and the regulations promulgated thereunder, or the Research and
Development Law.

48

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Under the Research and Development Law, research and development
programs that meet specified criteria and are approved by the research
committee of the Office of the Chief Scientist of the Israeli Ministry of
Industry, Trade and Labor are eligible for grants of up to 50% of certain
approved expenditures of such programs, as determined by said committee. In
exchange, the recipient of such grants is required to pay the Office of the
Chief Scientist royalties from the revenues derived from products incorporating
know-how developed within the framework of each such program or derived
therefrom (including ancillary services in connection therewith), up to an
aggregate of 100% of the dollar-linked value of the total grants received in
respect of such program, plus interest, or up to 150% thereof in the case of
some of our earliest programs.

The Research and Development Law generally requires that the product
developed under a program be manufactured in Israel. However, upon the approval
of the Chief Scientist, some of the manufacturing volume may be performed
outside of Israel, provided that the grant recipient pays royalties at an
increased rate, which may be substantial, and the aggregate repayment amount is
increased to 120%, 150% or 300% of the grant, depending on the portion of the
total manufacturing volume that is performed outside of Israel. Effective April
1, 2003, the Research and Development Law also allows for the approval of
grants in cases in which the applicant declares that part of the manufacturing
will be performed outside of Israel or by non-Israeli residents and the
research committee is convinced that doing so is essential for the execution of
the program.  This declaration will be a
significant factor in the determination of the Office of Chief Scientist
whether to approve a program and the amount and other terms of benefits to be
granted.  For example, the increased
royalty rate and repayment amount will be required in such cases.

The Research and Development Law also provides that know-how developed
under an approved research and development program may not be transferred to
third parties in Israel without the approval of the research committee.  Such approval is not required for the export
of any products resulting from such research or development. The Research and
Development Law further provides that the know-how developed under an approved
research and development program may not be transferred to any third parties
outside Israel.

The Research and Development Law imposes reporting requirements with
respect to certain changes in the ownership of a grant recipient.  The law requires the grant recipient and its
controlling shareholders and interested parties to notify the Office of the
Chief Scientist of any change in control of the recipient or a change in the
holdings of the means of control of the recipient that results in a non-Israeli
becoming an interested party directly in the recipient and requires the new
interested party to undertake to the Office of the Chief Scientist to comply
with the Research and Development Law. 
In addition, the rules of the Office of the Chief Scientist may require
prior approval of the Office of the Chief Scientist or additional information
or representations in respect of certain of such events. For this purpose,
control is defined as the ability to direct the activities of a company other
than any ability arising solely from serving as an officer or director of the
company.  A person is presumed to have
control if such person holds 50% or more of the means of control of a
company.  Means of control refers to
voting rights or the right to appoint directors or the chief executive officer.  An interested party of a company includes
a holder of 5% or more of its outstanding share capital or voting rights, its
chief executive officer and directors, someone who has the right to appoint its
chief executive officer or at least one director, and a company with respect to
which any of the foregoing interested parties owns 25% or more of the
outstanding share capital or voting rights or has the right to appoint 25% or
more of the directors.  Since Scitex
currently participates in these programs solely through its subsidiaries and
some of its group companies, we do not believe that any non-Israeli who becomes
a holder of 5% or more of our outstanding shares is required to comply with the
aforesaid notification and undertaking requirements.

49

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The funds available for Office of the Chief Scientist grants out of the
annual budget of the State of Israel were reduced in 1998, and the Israeli
authorities have indicated in the past that the government may further reduce
or abolish Office of the Chief Scientist grants in the future.  Even if these grants are maintained, we
cannot presently predict what would be the amounts of future grants, if any,
that we (or our Israeli affiliated companies) might receive. We recorded grant
participation from the Office of the Chief Scientist totaling approximately
$1.0 million in 2001, $0.7 million in 2002 and $0.5 million in 2003.  Pursuant to the terms of these grants,
Scitex Vision is obligated to pay royalties in the range of 3% to 5% of
revenues derived from sales of products funded with these grants. However, a
portion of the grants are from the MAGNET program that does not bear any
royalties.  As a member of the Digital
Printing Consortium, some of the grants that Scitex Vision received from the
Office of the Chief Scientist were pursuant to the MAGNET program - a program
for research and development of generic technologies within a consortium of
commercial companies and academic institutions. In this program, the effective
rate of the grants is up to 66% of the expenses and there is no obligation to pay
any royalties.  However, the MAGNET
program requires Scitex Vision to cross license certain technology developed in
connection with such program to the other members of the consortium.

As of December 31, 2003, our contingent liability to the Office of the
Chief Scientist in respect of grants received was approximately $4.2 million.

EFFECTIVECORPORATETAXRATE

Israeli companies are generally subject to tax at the rate of 36% of
taxable income and to capital gains tax at a rate of 25% for capital gains derived
after January 1, 2003 (previously, also 36%). 
However, the manufacturing facilities in Israel of some of our group
companies have been granted Approved Enterprise status under the Law for the
Encouragement of Capital Investments, 1959. 
Consequently, these facilities are eligible for tax benefits.  The tax benefit is afforded for seven years
from the year the relevant facility first earns taxable income, but no later
than 12 years from the first year of operating or 14 years from the year in
which the approval was granted.  Subject
to compliance with applicable requirements, the income derived from these
Approved Enterprise facilities will be fully tax-exempt during the first two
years of the seven-year tax benefit, and will be subject to a reduced tax rate
of a maximum of 25% during the remaining five years, but in any event not later
than 2006 regarding Approved Enterprise facilities that are already approved
and effective. The actual tax rate will depend upon the percentage of
non-Israeli holders of the share capital of these companies. In 2003, we do not
expect to have taxable income at Scitex, the parent company. See below
under Item 10E  Taxation and in Note 12 to our consolidated financial
statements for more information on our income taxes including a proposed
amendment to Israeli tax law regarding the corporate tax rate.

The above benefits are conditioned upon our fulfillment of conditions
stipulated by the Law for the Encouragement of Capital Investments, the
regulations promulgated thereunder and the instruments of approval for the
specific investments in Approved Enterprises. 
If we fail to comply with these conditions, our benefits may be canceled
and we may be required to refund the amount of the benefits received, in whole
or in part.  See above under the caption Tax Audits regarding a settlement of a
dispute with the Israeli tax authority in this respect.

C.                RESEARCH
AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Scitexs
research and development efforts, through its subsidiaries, are focused on the
development of new products and technologies, as well as enhancing the quality
and performance relative to price of our existing products, reducing
manufacturing costs and upgrading and expanding our product line through the development
of additional features and improved functionality.

Scitexs
research and development activities primarily comprise 102 employees in
Scitex Visions operations in Israel. 
In addition, a high proportion of the employees of our group companies
are engaged in research and development.

50

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Scitex
has taken advantage of royalty-bearing grants in the form of participations in
industrial research provided by the Government of Israel.  The following table shows the amounts and
relative percentages of total research and development expenditures and the
royalty-bearing participations therein, for the years indicated:

|                                                                             |  | Year Ended
  December 31, |       
|---------------------------------------------------------------------------- |  | ------------------------- | ------
|                                                                             |  |                           |       
|                                                                             |  | 2003                      |       
|                                                                             |  |                           |       
|                                                                             |  | (Dollars
  in thousands)  |       
|                                                                             |  |                           |       
|Total
  expenditure incurred                                                 |  | $                         | 11,537
|Less
  royalty-bearing participations,
     from the Government of Israel(3) |  | $                         | 467   
|                                                                             |  |                           |       
|Net
  Expenditure                                                            |  | $                         | 11,070
|                                                                             |  |                           |       

|(1) | Percentage indicates the
  ratio of the relevant item to total revenues from continuing operations.                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Percentage indicates the
  ratio of the participations to total research and development expenditure
  incurred (as shown).                                                                                                                                                                                           
|(3) | See Note 14f to our
  consolidated financial statements included in this Annual Report. For further
  information regarding the Office of the Chief Scientist of the Israeli
  Ministry of Industry, Trade and Labor, see Item 5B  Liquidity and Capital
  ResourcesGrants from the Office of the Chief Scientist.

As of the end of 2003 (and
giving effect to the SDP transaction), we, principally through Scitex Vision,
own, license or otherwise have rights in over 75 issued patents and
74 patent applications pending in the United States and elsewhere.  As part of the Creo transaction in April
2000, we assigned to Creo approximately 250 issued patents and
140 pending patent applications relating to our digital preprint and
print-on demand business.  Creo granted
back to us and our affiliates a non-exclusive license of such intellectual property,
including patents, used by us and our affiliates prior to the Creo transaction.
As part of the SDP transaction in January 2004, we assigned to Kodak
approximately 324 issued patents and 197 pending patent applications
relating to our high-speed digital printing business.  In addition, a number of issued patents and pending applications
are held by our other group companies. 
We also claim proprietary rights in various technology and trade secrets
relating to our products and operations. 
We also hold a number of trademarks and service marks in the United
States and elsewhere, including for the name Scitex
and the Scitex logo.

See
also Item 4Business OverviewIntellectual Property and Proprietary Rights.

D.          TREND
INFORMATION

| | General.  The deterioration of the global economy
  starting in the second half of 2001 has resulted in a decline of
  advertisement spending and consequently a slowdown of capital investments in
  the digital printing market in which we operate. During 2003, we identified a
  moderate improvement in the general market for commercial printers equipment.
  However, we are unable to predict the duration of this trend or the extent of
  any impact that it may have on our results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Industry.  The printing industry underwent
  substantial changes over the recent years. 
  Analog, labor intensive processes, characterized by high setup costs
  and long production runs, are being replaced by digital processes in both the
  preparation of data for printing (preprint) and in the actual printing
  process (digital print). The printing industry, which historically grown at
  GDP rates, experienced strong growth in revenue and profitability in the last
  few years through the middle of 2001, fueled mainly by increased advertising
  spending.  Since then, and
  particularly following the events of September 11, 2001, there was a
  substantial slowdown in activity in this industry, demonstrated by slower
  replacement of equipment and reduced capital equipment purchases, and there
  is no assurance that the strong capital spending experienced in the industry
  through the middle of 2001 will return. 
  During 2003, we identified a moderate improvement in the general
  market for commercial printers equipment, including in the wide format
  printing systems segment in which we operate. However, we are unable to
  predict the duration of this trend or the extent of any impact that it may
  have on our results of operations. Digital printing growth is driven by the
  demand for shorter lead times for printed products, variability and
  personalization of output and the savings derived from elimination of
  obsolescence and inventory related costs. We believe those trends will
  continue and even strengthen as the market gets accustomed to new processes
  and cost-efficiency paradigms.  In
  general, most digital printing application areas have seen double-digit
  growth rates over the last years partly due to digital processes replacing
  analog ones and partly due to new print products and applications being
  developed such as wide and super wide format printing on various types of
  substrates.

51

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| | Revenue outlook.We have seen revenues from our continuing operations increase at a
  20% rate during 2003 reaching approximately $103 million. We believe that,
  subject to general market conditions over which we have no control, we should
  be at least able to maintain our 2003 revenue level in 2004 and probably show
  moderate levels of growth.                                                                                                
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Composition of revenue.We derived approximately 41% of our revenues from services and
  consumables, up from 38% in 2002 and 35% in 2001.  We cannot predict at this time whether this trend will continue
  during 2004, as it is influenced by numerous factors beyond our control.                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Gross margins. 
  Our gross margins which depend primarily on product and revenue mix,
  slightly decreased in 2003 compared to 2002, from 46.4% to 43.3%.  Although some of our new products and
  bundled offerings currently carry gross margins lower than our current
  average, we believe that in 2004 we can slightly improve gross margins
  compared to 2003, primarily through cost reduction programs and higher
  equipment manufacturing rate.

E.          OFF-BALANCE
SHEET ARRANGEMENTS

We
have no off-balance sheet arrangements.

F.          TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table summarizes our short-term and long-term contractual
obligations as of December 31, 2003:

|                                           |  | Payments
  Due By Period (in $millions) |       
|------------------------------------------ |  | --------------------------------------- | ------
|                                           |  |                                         |       
|Contractual Obligations                    |  | Total                                   |       
|                                           |  |                                         |       
|Long-term debt                             |  | $                                       | 8,256 
|                                           |  |                                         |       
|Operating leases (vehicles and facilities) |  |                                         | 12,107
|                                           |  |                                         |       
|Total contractual
  cash obligations       |  | $                                       | 20,363
|                                           |  |                                         |       

As to our royalty
obligations and outstanding guarantees as at December 31, 2003, see Note 10 to
our consolidated financial statements included in this Annual Report.

52

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ITEM
6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.          DIRECTORS
AND SENIOR MANAGEMENT

The
following table sets forth certain information with respect to our directors
and senior management:

|Name                               |  | Age |  | Director
  Since |  | Position                                                 
|---------------------------------- |  | --- |  | ---------------- |  | ---------------------------------------------------------
|                                   |  |     |  |                  |  |                                                          
|Ami Erel(1) (2)                    |  | 57  |  | 2003(3)          |  | Chairman of the Board of
  Directors                     
|                                   |  |     |  |                  |  |                                                          
|Raanan Cohen(1) (2) (4) (5)        |  | 36  |  | 2002             |  | Interim President and
  Chief Executive Officer; Director
|                                   |  |     |  |                  |  |                                                          
|Yahel Shachar                      |  | 42  |  |                 |  | Chief Financial Officer
  & Corporate Secretary          
|                                   |  |     |  |                  |  |                                                          
|Dov Ofer                           |  | 50  |  |                 |  | President and Chief
  Executive Officer, Scitex Vision   
|                                   |  |     |  |                  |  |                                                          
|Avraham Asheri(4) (6) (7)          |  | 66  |  | 2000             |  | Director; Chairman of the
  Audit Committee              
|                                   |  |     |  |                  |  |                                                          
|Ophira
  Rosolio-Aharonson(4)(6)   |  | 55  |  | 2000             |  | Director                                                 
|                                   |  |     |  |                  |  |                                                          
|Ariella
  Zochovitsky  (4) (6) (8) |  | 48  |  | 2002             |  | Director                                                 
|                                   |  |     |  |                  |  |                                                          
|Avraham
  Fischer (9)              |  | 47  |  | 2003             |  | Director                                                 
|                                   |  |     |  |                  |  |                                                          
|Shay
  Livnat (9)  (10)            |  | 45  |  | 2003             |  | Director                                                 
|                                   |  |     |  |                  |  |                                                          
|Shimon Alon                        |  | 54  |  | 2003             |  | Director                                                 
|                                   |  |     |  |                  |  |                                                          
|Gerald Dogon(6) (8)                |  | 64  |  | 2003             |  | Director                                                 
|                                   |  |     |  |                  |  |                                                          
|Nachum Shamir                      |  | 50  |  | 2004             |  | Director                                                 

|(1)  | Member of
  the Remuneration Committee of the Board of Directors.                                                                                                                                                                                                                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Nominee of
  Discount and its wholly owned subsidiary.                                                                                                                                                                                                                                                                                                                                
|(3)  | Also served
  as director of Scitex from January 2000 to December 2001.                                                                                                                                                                                                                                                                                                               
|(4)  | Member of
  the Financial Investments Committee of the Board of Directors.                                                                                                                                                                                                                                                                                                            
|(5)  | Seconded to
  us by Discount pursuant to the Services Agreement described under Item 7B
    Services Agreements below. Mr.
  Cohen is the son of Mr. Eliahu Cohen, a member of the board of directors of
  Clal, Discount and IDB Holding Corporation Ltd. (IDB Holding), and Chief
  Executive Officer and a director of IDB Development Corporation Ltd. (IDB
  Development).
|(6)  | Member of
  the Audit Committee of the Board of Directors.                                                                                                                                                                                                                                                                                                                            
|(7)  | Initially
  nominated for election as a director by Discount.                                                                                                                                                                                                                                                                                                                         
|(8)  | An Outside
  Director pursuant to the Companies Law.                                                                                                                                                                                                                                                                                                                                
|(9)  | Nominee of
  Clal through CEI, its wholly owned subsidiary.                                                                                                                                                                                                                                                                                                                           
|(10) | Mr. Livnat
  is the son of Avraham Livnat, an affiliate of IDB Holding and the brother of
  Zvi Livnat, a co-CEO of Clal and a director of IDB Holding, IDB Development,
  Clal and Discount.                                                                                                                                                                                         

Ami Erel was appointed Chairman of our board of
directors in June 2003.  He has served
as President and Chief Executive Officer of Discount since June 2001. From
November 1999 to December 2001, he served as the Chairman and Chief Executive
Officer of Elron Electronic Industries Ltd. From 1997 to 1999, Mr. Erel served
as President and Chief Executive Officer of Bezeq, The Israel
Telecommunications Corp. Ltd. and from 1997 to 1998, he was Chairman of the
Board of Directors of PelePhone Communications Ltd. He continues to serve as
Chairman of Elron and currently serves as chairman or a director of several
companies, including  Elbit Systems
Ltd., Property and Building Corporation Ltd. and Super-Sol Ltd. He holds a
bachelor of science degree in electronic engineering from the Technion, the
Israel Institute of Technology, Haifa, Israel.

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Raanan Cohen was appointed as Interim President and Chief Executive Officer of
Scitex in January 2004. He has also served as Vice President of Discount since
August 2001, having previously served as Executive Assistant to the Chief
Executive Officer of Discount from 1999. 
Prior to joining Discount, he was an associate with McKinsey &
Company, Inc. in London from 1997.  Mr.
Cohen is a lawyer, admitted to the Israeli Bar, and from 1994 to 1995 he served
as an attorney with S. Horowitz & Co., an Israeli law firm.  He is a director of a number of companies in
the Discount group, including Cellcom Israel Ltd. and Property & Building
Corporation Ltd.  Mr. Cohen holds
bachelors degrees in law and in economics from Tel Aviv University and a
masters degree in management from J.L. Kellogg Graduate School of Management,
Northwestern University, Evanston, Illinois.

Yahel Shachar joined Scitex in December 2001 and was appointed Chief Financial
Officer and Corporate Secretary in February 2002. Before he joined Scitex, Mr.
Shachar served as Chief Operating Officer at BVR Technologies Ltd. from 1998 to
2001. From 1995 to 1998, he was an attorney with Goldfarb, Levy, Eran &
Co., an Israeli law firm.  Mr. Shachar
holds an LL.M. degree from Georgetown University (specializing in corporate,
tax and securities law) in Washington, D.C., and an LL.B. degree from the Tel
Aviv University, and is a member of the Israeli and New York bar associations.

Dov Ofer was appointed President and Chief Executive Officer of Scitex Vision
in January 2002.  He served as Scitex
Visions Executive Vice President of Sales, Marketing and Business Development
from 1999 to January 2002.  Prior to
joining Scitex Vision, Mr. Ofer served as the Managing Director of Matan
Digital Printing, a company whose super-wide format technology and operations
were acquired by Scitex Vision in 1998. 
He holds a bachelors degree
in economics from the
Hebrew University of Jerusalem, Israel, and an MBA degree from University of
California - Berkeley.

Avraham Asheri is
an economics advisor. He served as President and Chief Executive Officer of
Israel Discount Bank Ltd. from 1991 until 1998, having previously held the
position of Executive Vice President and a member of the banks Management
Committee from 1983.  Prior to joining
Israel Discount Bank, during a period of 23 years Mr. Asheri held
various offices at the Ministries of Industry and Finance, including Director
General of the Ministry of Industry and Trade, Managing Director of the
Investment Center in Israel and Trade Commissioner of Israel to the United
States. He is a member of the boards of directors of several companies, including
Elron Electronic Industries Ltd., Kardan Real Estate Ltd., Elbit Systems Ltd.
and Discount Mortgage Bank Ltd. 
Mr. Asheri holds a bachelors degree in economics and political
science from the Hebrew University of Jerusalem, Israel.

Ophira Rosolio-Aharonson
is an executive director at several private and publicly traded high-tech
companies, a strategic business consultant and a partner and advisor to several
venture capital firms in Israel and in the U.S. She was a co-founder of Seagull
Technology, Inc. and served as CEO of Terra Computers, Inc. in the US from 1992
to 1999. Prior to that she served as a senior executive, holding various
managerial positions at Clal Computers & Technology.  She is a member of the board of directors of
Cimatron Ltd. and OptiSign Ltd.  Ms.
Rosolio-Aharonson has a bachelors degree in applied mathematics and physics and
completed courses required for a masters degree in bio-medical engineering from
the Technion - Israel Institute of Technology in Haifa, and is a graduate of
the executive business and management program of Tel Aviv University.

54

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Ariella Zochovitzky is the general manager and partner of C.I.G. Capital  Investments Group Ltd., a firm of management
consultants, which she has managed since July 2001. In addition, she was a
partner in two venture capital funds from July 2000 to early 2001 and a general
manager and partner in the firm of Zochovitzky & Weinstein, certified
public accountants, from 1989 to July 2000. She was previously a partner with
the certified public accountants, Kost Forer & Gabbay (a member of Ernst
and Young International), which she joined in 1980 as a  trainee accountant,  subsequently becoming a partner.  Ms. Zochovitzky served as a director of
several companies and currently serves as a director of Provident Funds
Management - Israel Discount  Bank Ltd.,
Elco Holdings Ltd. and Inspire Investments Ltd.  She holds a bachelors degrees in economics and accounting from
the University of Haifa, Israel, and a masters degree in management from the
Tel-Aviv University and Northwestern University (J.L. Kellogg Graduate School
of Management).  She is a registered CPA
in Israel.

Avraham Fischer is the Executive Vice President of IDB Holding Corporation Ltd., the
deputy Chairman of IDB Development Ltd. and a co-Chief Executive Officer of
Clal. In addition, he is a partner of Fischer, Behar, Chen & Co., an
Israeli law firm. Mr. Fischer is the co-founder and co-Chairman of Ganden
Tourism and Aviation Ltd., a company holding investments in Israeli companies,
operating primarily in the field of tourism and aviation, and is the co-founder
and Vice-Chairman of Ganden Holdings Ltd., a company holding investments in
companies, operating primarily in the fields of real estate, communications and
technologies. He serves as a director of Clal, Discount, American Israeli Paper
Mills Ltd., Elron Electronic Industries Ltd., Elbit Systems Ltd., Vyyo Inc. and
several other companies. Mr. Fischer is a co- Chairman of Matan, a non-profit
organization.  Mr. Fischer holds an LL.B. degree from the Tel Aviv
University, and is a member of the Israeli bar association.

Shay Livnat is the President and Chief Executive Officer of Zoe Holdings Ltd., a
company he founded in 1988, primarily engaged in investments in telecom and
high-tech companies. He is a co-Chairman of UPS Israel (United Parcel Service
Israel) and UTI (Isuzu GM trucks) Ltd. and serves as a director of Taavura
Holdings Ltd. From 1988 to 1998, Mr. Livnat served as CEO of Tashtit Group. He
holds a bachelor degree in electrical engineering from Fairleigh Dickinson
University, New Jersey, USA.

Shimon Alon served, until June 2003, as Chief Executive Officer of Precise
Software Solutions Ltd., a provider of application performance management,
having held such position since September 1997, and was also President of
Precise from September 1997 until December 2000. He also served as a director
of Precise from December 1998. Following the acquisition of Precise by Veritas
Software Corp. in June 2003, Mr. Alon served as an executive advisor to Veritas
until January 2004. From October 1982 to August 1996, he worked at Scitex and
its subsidiaries in various executive management, sales, marketing and customer
support capacities, including Senior Executive Vice President of Scitex and
President of its Graphic Art Group from November 1995 to August 1996, President
and Chief Executive Officer of Scitex America Corp. from May 1995 to July 1996,
and Managing Director of Scitex Europe S.A. from February 1993 to May 1995. He
holds a degree from the Executive Management Program at the Harvard Business
School in Cambridge, Massachusetts.

Gerald Dogon was Chief Financial Officer of DSP Communications, Inc. from August
1994 through October 1998, during which period he also served DSP as Executive
Vice President from July 1996 through October 1998 and as Senior Vice President
from August 1994 through July 1996. Mr. Dogon also served as a director of DSP
from November 1997 to January 1999. From December 1987 to August 1994, he held
various senior financial positions with several Israeli companies, including
Nilit Ltd., Mul-T-Lock Ltd., Israel General Bank Ltd. and Indigo Ltd. Prior
thereto, Mr. Dogon was employed for 16 years by Scitex, where he served as
Executive Vice President and Chief Financial Officer from October 1986 to
August 1987, Corporate Vice President - Finance from September 1971 to October
1986, and Corporate Secretary from December 1972 to May 1987. He is a director
of several private companies and served as a director of Nogatech, Inc. from
1999 to 2000, of Mul-T-Lock Ltd. from 1997 to 1999, and of Contahal Ltd. from
1993 to 1998, and acted as chairman of the audit committee at both Nogatech and
Contahal. Mr. Dogon holds a bachelors degree in economics and commerce from the
University of Cape Town, South Africa.

55

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Nachum Shamir serves as the President and Chief Executive Officer of Kodak
Versamark, Inc. (whose operations were previously those of SDP) and as Vice President of
Eastman Kodak Company. From June 2003 to
January 2004, Mr. Shamir served as the President and Chief Executive
Officer of Scitex. From
January 2001 to January 2004, he served as the President and Chief Executive Officer of
SDP, having previously served as its Chief Operating Officer since July 2000.
Prior thereto, Mr. Shamir was Managing Director and General Manager of
Scitex Digital Printing (Asia Pacific) Pte Ltd., from the incorporation of this
Singapore-based company in 1994. His prior position was with the Hong Kong
based Scitex Asia Pacific (H.K.) Ltd. (now Creo Asia Pacific (H.K.) Ltd.) from
1993. Mr. Shamir holds a bachelors
degree in science from the Hebrew
University of Jerusalem and a masters degree in public administration
from Harvard University.

Additional Information

Tevel Israel International Communications Ltd., for whom Mr. Erel
served as the Chairman of the Board of Directors until November 2003, was under
a stay of proceedings and managed by a trustee and special manager appointed by
an Israeli court due to financial difficulties. In September 2003, Tevel
reached an arrangement with its creditors, which was approved by the Israeli
court and, consequently, is no longer under a stay of proceedings.

There are no family relationships between any of the directors or
members of senior management named above.

See Item 7A. Major Shareholders   1980 Voting Agreement for details of an agreement among major
shareholders relating to the election of directors. See Item 8A under the
caption Legal Proceedings for additional information regarding a lawsuit that
concerns certain of our directors and executive officers.

Recent Management Changes

From
mid-2003, we underwent several key changes to our management team:

| | In May 2003, Mr. Ami Erel
  was appointed Chairman of our Board of Directors, replacing Mr. Meir Shannie,
  who had been our Chairman since early 2001 and our director since 1998;                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                      
| | In January 2004, Mr.
  Raanan Cohen was appointed our Interim President and CEO, replacing Mr.
  Nachum Shamir, the former President and CEO of SDP, who had been our President
  and CEO since June 2003. Mr. Shamir replaced Mr. Yeoshua Agassi, who had been
  our Interim President and CEO since September 2001;
|  |                                                                                                                                                                                                                                                                                                                      
| | Messrs. Avi Fischer, Shay
  Livnat, Shimon Alon and Nachum Shamir joined our Board of Directors; and                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                      
| | Mr. Dogon was elected as
  one of our Outside Directors at our 2003 Annual General Meeting which was
  held on December 31, 2003.  He
  succeeded Prof. Shmuel Kandel, who had been our Outside Director since 2000.                                                                                                 

56

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B.            COMPENSATION

The
following table sets forth with respect to all directors and senior management
of Scitex as a group all cash and cash-equivalent forms of remuneration paid by
Scitex during the fiscal year ended December 31, 2003:

|                                                                                     |  | Salaries,
  fees, directors fees,commissions and bonuses |  | Other
  benefits
|------------------------------------------------------------------------------------ |  | --------------------------------------------------------- |  | ----------------
|                                                                                     |  |                                                           |  |                 
|All
  directors and senior management as a  group (consisting of 12 persons in 2003) |  | $ 848,405                                                 |  | $ 67,057        

Our Outside Directors, Ms.
Zochovitzky, and, since December 31, 2003, Mr. Dogon, receive annual directors
fees and participation fees equivalent to the maximum fees that were generally
permitted during 2003 for Outside Directors under regulations issued pursuant
to the Companies Law (which equated to approximately $10,500 per annum and a
participation fee of approximately $400 per board or committee meeting),
although new regulations were adopted in 2003, which would, in certain
circumstances, permit certain companies to pay higher fees.  Directors fees and attendance fees of a
similar amount are payable to all of our other directors, other than directors
who are affiliated with our principal shareholders. Except as aforesaid, we
have not compensated any of our other directors (excluding compensation for our
officers).

During
2003, an aggregate sum of approximately $56,000 was set aside by us to provide
pension, retirement and severance benefits to members of our senior management.

As of December 31, 2003, certain of our directors and officers
held options to purchase our ordinary shares. 
See Item 6E below.

C.          BOARD
PRACTICES

BOARD OF DIRECTORS

According to the Israeli Companies Law and our articles of association,
the management of our business is vested in our board of directors.  The board of directors may exercise all
powers and may take all actions that are not specifically granted to our
shareholders. As part of its powers, our board of directors may cause us to
borrow or secure payment of any sum or sums of money for our purposes, at times
and upon terms and conditions as it determines, including the grant of security
interests in all or any part of our property.

Our directors are elected at annual meetings of our shareholders.  Except for our Outside Directors, our
directors hold office until the next annual meeting of shareholders following
the annual meeting at which they were appointed, which is required to be held
at least once during every calendar year and not more than fifteen months after
the last preceding meeting.  Directors
may be removed earlier from office by resolution passed at a general meeting of
our shareholders.  Our board of
directors may temporarily fill vacancies in the board until the next annual
meeting of shareholders.

There are no arrangements or understandings between us and any of our
directors for benefits upon termination of service.

57

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ALTERNATE DIRECTORS

Our articles of association provide that a
director may appoint another person to serve as an alternate director.  To qualify as an alternate director, a
person must be qualified to serve as a director but cannot be a director or the
alternate director of another director. 
An alternate director shall have all the rights and obligations of the
director who appointed him or her.  The
alternate director may not act for such director at any meeting at which the
director appointing him or her is present. 
Unless the time or scope of any appointment is limited by the appointing
director, the appointment is effective for all purposes until the appointing
director ceases to be a director or terminates the appointment.  At present, there are no appointments of
alternate directors.

OUTSIDE DIRECTORS

Under
the Companies Law, Israeli companies whose shares are listed for trading on a
stock exchange or have been offered as securities to the public in or outside
of Israel are required to appoint two Outside Directors.  Our Outside Directors are Ariella
Zochovitzky and Gerald Dogon.

The Companies Law provides that a person may not be appointed as an
outside director of a company if the person or the persons relative, partner,
employer or any entity under the persons control has, as of the date of the
persons appointment to serve as an outside director, or had, during the two
years preceding that date any affiliation with:

| |  | the company;                                                        
| | - | --------------------------------------------------------------------
| |   |                                                                     
| |  | any entity
  controlling the company; or                            
| |   |                                                                     
| |  | any entity
  controlled by the company or by its controlling entity.

The term
affiliation includes:

| |  | an
  employment relationship;                                           
| | - | ------------------------------------------------------------------------
| |   |                                                                         
| |  | a business
  or professional relationship maintained on a regular basis;
| |   |                                                                         
| |  | control; and                                                            
| |   |                                                                         
| |  | service as
  an office holder.                                          

The Companies
Law defines the term office holder of a company to include a director, the
chief executive officer, the chief business manager, a vice president and any
officer that reports directly to the chief executive officer.

No person can serve as an outside director if the persons position or
other business creates, or may create conflict of interests with the persons
responsibilities as an outside director or may otherwise interfere with the
persons ability to serve as an outside director. Until the lapse of two years
from termination of office, a company may not engage an outside director to
serve as an office holder and cannot employ or receive services from that
person, either directly or indirectly, including through a corporation controlled
by that person.

Outside directors are to be elected by a majority vote at a
shareholders meeting, provided that either:

| |  | at least
  one-third of the shares of non-controlling shareholders voted at the meeting
  vote in favor of the election; or                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                             
| |  | the total
  number of shares voted against the election of the outside director does not
  exceed one percent of the aggregate voting rights in the company.

The initial
term of an Outside Director is three years and may be extended for an
additional three years.  The term of
office of Ms. Zochovitzky and Mr. Dogon commenced in December 2002 and December
2003, respectively.

Outside Directors may be removed from office only by the same
percentage of shareholders as is required for their election, or by a court,
and then only if the Outside Directors cease to meet the statutory
qualifications for their appointment or if they violate their duty of loyalty
to the company.  Each committee of a companys board of
directors empowered with powers of the board
of directors is required to include at least one Outside Director except
for the audit committee, which is required to include all Outside
Directors.

58

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COMMITTEES OF THE BOARD

Subject
to the provisions of the Companies Law, our board of directors may delegate its
powers to committees consisting of board members. Our board of directors established the following committees:

Audit Committee. 
Under the Companies Law,
our board of directors is required to appoint an audit committee, which must be
comprised of at least three directors, including all of the Outside Directors,
but may not include:

| |  | the chairman of the board,                                                                             
| | - | -------------------------------------------------------------------------------------------------------
| |   |                                                                                                        
| |  | a controlling shareholder
  or any relative thereof, or                                                
| |   |                                                                                                        
| |  | any director who is
  employed by the company or provides services to the company on a regular
  basis.

Under the Companies Law, the
role of the audit committee is:

| |  | to examine irregularities
  in the management of the companys business, including in consultation with
  the internal auditor and/or the companys independent accountants, and to
  recommend remedial measures to the board, and                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                
| |  | to review, and, where
  appropriate, approve certain related party transactions specified under the
  Companies Law, which it may not approve unless at the time of approval the
  two Outside Directors are serving as members of the audit committee and at
  least one of whom was present at the meeting in which an approval was
  granted, as more fully described below.

Since our
ordinary shares are listed on Nasdaq, we are also subject to Nasdaq rules which
currently provide that a listed company is required to have an audit committee
consisting of at least three independent directors, all of whom are financially
literate and one of whom has accounting or related financial management
expertise. Our Audit Committee comprises Mr. Asheri (chairman of the Audit
Committee), Ms. Zochovitzky and Mr. Dogon (our Outside Directors) and Ms.
Rosolio-Aharonson.  In addition, we have
adopted a charter as required by the Nasdaq rules.

Our Audit Committee assists the board in
fulfilling its responsibility for oversight of the quality and integrity of the
our accounting, auditing and financial reporting practices and financial
statements and the independence qualifications and performance of our outside
auditors.  Our Audit Committee
also has the authority and responsibility to oversee our outside auditors, to
recommend for shareholder approval the appointment and, where appropriate,
replacement of our outside auditors and to pre-approve audit engagement fees
and all permitted non-audit services and fees.

In May 2004, our Board of Directors resolved
to designate the Audit Committee as our Qualified Legal Compliance Committee,
or the QLCC.  In its capacity as the
QLCC, the Audit Committee is responsible for investigating reports made by
attorneys appearing and practicing before the SEC in representing us of
perceived material violations of U.S. federal or state securities laws,
breaches of fiduciary duty or similar violations by us or any of our agents.

Remuneration Committee.Our board of
directors has also appointed a remuneration committee, which currently
comprises Ami Erel, Avraham Fischer, Gerald Dogon and Raanan Cohen.  The role of the remuneration committee is to
review the salaries and incentive compensation of our executive officers and to
make recommendations on such matters for approval by the board of
directors.  The members of the
remuneration committee also administer our share incentive and stock option
plans, subject to additional board approval where required pursuant to the
Companies Law.

59

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Financial Investments Committee.Our board of
directors has also appointed a financial investments committee, which currently
comprises Avraham Asheri, Raanan Cohen, Ophira Rosolio-Aharonson and Ariela
Zochovitzky.  The role of the financial
investments committee is to review and manage our financial and other
investments (cash management) in accordance with the principles approved by the
board of directors.

INTERNAL AUDITOR

Under the Companies Law, our board of directors is also required to
appoint an internal auditor proposed by the audit committee.  The role of the internal auditor is to
examine, among other things, whether our activities comply with the law and
orderly business procedure. The internal auditor may not be an interested party
or officer holder, or a relative of any interested party or officer holder, and
may not be a member of our independent accounting firm.  The Companies Law defines the term
interested party to include a person who holds 5% or more of the companys
outstanding share capital or voting rights, a person who has the right to
appoint one or more directors or the general manager, or any person who serves
as a director or as the general manager. Mr. Joseph Ginossar of Fahn, Kanne
& Co., an Israeli accounting firm, serves as our internal auditor.

APPROVAL OF SPECIFIED RELATED PARTY  TRANSACTIONS UNDER ISRAELI LAW

Fiduciary Duties of
Office Holders.The Companies Law imposes a duty
of care and a duty of loyalty on all office holders of a company.

The duty of care requires an office holder to act with the level of
care with which a reasonable office holder in the same position would have
acted under the same circumstances.  The
duty of care includes a duty to use reasonable means to obtain:

| |  | information
  on the advisability of a given action brought for his approval or performed
  by him by virtue of his position; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                  
| |  | all other
  important information pertaining to these actions.                                                                   

The duty of
loyalty of an office holder includes a duty to:

| |  | refrain from
  any conflict of interest between the performance of his duties in the company
  and the performance of his other duties or his personal affairs;         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                         
| |  | refrain from
  any activity that is competitive with the company;                                                                                                       
| |   |                                                                                                                                                                         
| |  | refrain from
  exploiting any business opportunity of the company to receive a personal gain
  for himself or others; and                                               
| |   |                                                                                                                                                                         
| |  | disclose to
  the company any information or documents relating to the companys affairs
  which the office holder has received due to his position as an office holder.

Disclosure of Personal Interests of an Office Holder. The Companies Law requires that an office
holder disclose to the company any personal interest that he or she may have,
and all related material information known to him or her, in connection with
any existing or proposed transaction by the company.  The disclosure is required to be made promptly and in any event
no later than the board of directors meeting in which the transaction is first
discussed.  A personal interest of an office
holder includes an interest of a company in which the office holder is,
directly or indirectly, a 5% or greater shareholder, director or general
manager or in which he or she has the right to appoint at least one director or
the general manager.  In the case of an
extraordinary transaction, the office holders duty to disclose applies also to
a personal interest of a relative of the office holder.  An extraordinary transaction is a
transaction not in the ordinary course of business, not on market terms, or
likely to have a material impact on the companys profitability, assets or
liabilities.

60

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Under the Companies Law, once the office holder complies with the above
disclosure requirement, the board of directors is authorized to approve the
transaction, unless the articles of association provide otherwise.  Nevertheless, a transaction that is adverse
to the companys interest may not be approved.

If the transaction is an extraordinary transaction, then it also must
be approved by the companys audit committee and board of directors, and, under
certain circumstances, by the shareholders of the company.  When an extraordinary transaction is
considered by the audit committee and board of directors, the interested
director may not be present or vote, unless a majority of the members of the
board of directors or the audit committee, as the case may be, has a personal
interest in the matter.  If a majority
of members of the board of directors have a personal interest therein,
shareholder approval is also required.

Under the Companies Law, all arrangements as to compensation of
directors in public companies such as ours generally require the approvals of
the audit committee, the board of directors and the shareholders, in that
order.

INSURANCE & INDEMNIFICATION OF DIRECTORS AND SENIOR MANAGEMENT

Insurance.Under the
Companies Law, a company may, if its articles of association so provide and
subject to the provisions set forth in the law, enter into a contract to insure
the liability of an office holder for acts or omissions committed in his or her
capacity as an office holder of the company for:

| | the breach of his or her
  duty of care to the company or to another person;                                                                                                                                     
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                  
| | the breach of his or her
  duty of loyalty to the company, provided that he or she acted in good faith
  and had reasonable cause to assume that such act would not prejudice the
  interests of the company; and
|  |                                                                                                                                                                                                                  
| | a financial obligation
  imposed upon him or her in favor of another person.                                                                                                                                     

Our articles were amended in
December 2000 to contain provisions in line with the aforesaid provisions and,
having obtained the approvals required under the Companies Law and our
articles, we have procured the permitted insurance for our office holders.  In
December 2003, the Companys shareholders set the maximum annual premium for
such insurance at $1,000,000.

Indemnification.Subject to
certain qualifications, the Companies Law also permits a company, if its
articles of association so provide, to indemnify an office holder for acts or
omissions committed in his or her capacity as an office holder of the company
for:

| | a financial obligation
  imposed upon him or her by a court judgment, including a settlement or an
  arbitrators award approved by court; and                                                                                                                                                                                                                                                                                          
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | reasonable litigation
  expenses, including attorneys fees, expended by an office holder or charged
  to him or her by a court: (a) in a proceeding instituted against him or her
  by or on behalf of the company or by another person, (b) in a criminal charge
  from which he or she was acquitted, or (c) in criminal proceedings in which
  he or she was convicted of a crime which does not require proof of criminal
  intent.

In addition, the Companies
Law provides that a companys articles may permit the company to indemnify an
office holder following a determination to this effect made by the company
after the occurrence of the event in respect of which the office holder will be
indemnified. It also permits the company to undertake in advance to indemnify
an office holder, provided that the undertaking is limited to types of
occurrences, which, in the opinion of the companys board of directors, are, at
the time of giving the undertaking, foreseeable and to an amount the board of
directors has determined is reasonable in the circumstances.

61

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Our
articles were amended in December 2000 to contain provisions in line with the
aforesaid provisions of the Companies Law relating to indemnification of our
office holders.  In April 2004, the
Companys audit committee, board of directors and shareholders also resolved to
indemnify the Companys office holders, including any future director or
officer of the Company who may be considered a controlling shareholder (as
such term is defined under the Companies Law), by providing them with a Letter
of Indemnification to be substantially in the form approved by the
shareholders. (See Exhibit 4(c)(3) in Item
19 for the form of the Letter of Indemnification to office holders.)

Limitations on
Exculpation, Insurance and Indemnification.The Companies
Law provides that a company may not exculpate or indemnify an office holder, or
enter into an insurance contract which would provide coverage for any monetary
liability incurred as a result of any of the following:

| |  | a breach by
  the office holder of his or her duty of loyalty unless, with respect to
  insurance coverage, the office holder acted in good faith and had a
  reasonable basis to believe that the act would not prejudice the company;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                        
| |  | a breach by
  the office holder of his or her duty of care if the breach was committed intentionally
  or recklessly;                                                                                                                  
| |   |                                                                                                                                                                                                                                        
| |  | any act or
  omission committed with the intent to derive an illegal personal benefit; or                                                                                                                                              
| |   |                                                                                                                                                                                                                                        
| |  | any fine
  imposed against the office holder.                                                                                                                                                                                          

In addition, under the
Companies Law, exculpation and indemnification of, and procurement of insurance
coverage for, our office holders must be approved by our audit committee and
our board of directors and, if the beneficiary is a director, by our
shareholders.

Our
articles also provide that, subject to the provisions of applicable law, we may
procure insurance for or indemnify any person who is not an office holder,
including without limitation, any of our employees, agents, consultants or
contractors.

D.          EMPLOYEES

The
following table details certain data on the workforce (including temporary
employees) of Scitex and its consolidated subsidiaries for the periods
indicated*:

|                                                           |  | As at
  December 31, |    
|---------------------------------------------------------- |  | -------------------- | ---
|                                                           |  |                      |    
|                                                           |  | 2003                 |    
|                                                           |  |                      |    
|Approximate
  numbers of employees by geographic location  |  |                      |    
|United
  States                                            |  |                      | 67 
|Israel                                                     |  |                      | 246
|Europe
  and elsewhere                                     |  |                      | 142
|                                                           |  |                      |    
|Total
  workforce                                          |  |                      | 455
|                                                           |  |                      |    
|Approximate
  numbers of employees by category of activity |  |                      |    
|Research
  and development                                 |  |                      | 102
|Sales
  and marketing                                      |  |                      | 53 
|Customer
  support                                         |  |                      | 102
|Operations
  and logistics                                 |  |                      | 111
|General
  and administrative                               |  |                      | 87 
|                                                           |  |                      |    
|Total
  workforce                                          |  |                      | 455
|                                                           |  |                      |    

* Excludes the
employees of SDP for these years who were transferred to Kodak in connection
with the sale of SDPs business in January 2004.

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(1) Includes 43 employees of Creo Asia Pacific (H.K.) Ltd., an
affiliate of Creo Inc., who were dedicated to providing services to Scitex
Vision and being paid by us. In January 1, 2003, Scitex Vision terminated the
services of Creo Asia Pacific, and the majority of the above employees were
transferred to Scitex Vision.

We
maintained substantially the same number of employees during 2001 and
2002.  The increase in the number of our
employees from 2002 to 2003 resulted mainly due to the acquisition of Scitex
Vision International by Scitex Vision. 
During 2003, we employed on average approximately 16 temporary
employees.

We
consider our relations with our employees to be good and we have never
experienced a strike or work stoppage.

Our
employees are not generally represented by labor unions.  Nevertheless, with respect to our employees
in Israel, certain provisions of the collective bargaining agreements between
the Histadrut (General Federation of Labor in Israel) and Israels Coordination
Bureau of Economic Organizations (including the Manufacturers Association) are
applicable to such employees by Israeli governmental order.  These provisions principally concern
cost-of-living wage increases, paid vacation and holidays, length of the
workday, wage tariffs, termination, severance payments and other conditions of
employment.  However, we generally
provide our employees with benefits and conditions beyond the required
minimums, including contributing to funds to provide severance.

E.          SHARE
OWNERSHIP

SECURITY OWNERSHIP OF OUR DIRECTORS AND EXECUTIVE OFFICERS

The following table details as of June 23, 2004 the number of our
shares owned (including the shares underlying options or warrants held by such
person that are exercisable within 60 days), and stock options held, by members
of our senior management.

|Name and
  Address |  | Number of
  Shares
  Owned |  | Percent of
  Shares
  Outstanding |  | Number of stock
  options held(1)
|------------------ |  | -------------------------- |  | --------------------------------- |  | ---------------------------------
|                   |  |                            |  |                                   |  |                                  
|Dov Ofer (2)       |  | 15,000                     |  | *                                 |  | - -                              

* less than 1%
of our outstanding ordinary shares.

|(1) | Each stock
  option is exercisable into one ordinary share.  All our shares have identical voting rights.                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Dov Ofer is
  the President and CEO of Scitex Vision. The 15,000 shares held by Mr. Ofer
  are in the form of stock options, which are exercisable within 60 days of the
  date of this Annual Report. The exercise price of the stock options is
  $11.1875.

STOCK OPTION PLANS

From
time to time, we grant our employees and directors options to purchase our
shares pursuant to our share option plans:

| | 1991 Plans. In
  September 1991, our shareholders approved two plans, the Scitex Israel Key
  Employee Share Incentive Plan 1991, primarily designed for employees of
  Scitex and its subsidiaries located in Israel, and the Scitex International
  Key Employee Stock Option Plan 1991 (as amended, 1995), primarily designed
  for employees of Scitexs non-Israeli subsidiaries. Terms of the options
  granted under the plans, such as length of term, exercise price, vesting and
  exercisability, are determined by our board of directors.  These plans expired in September 2001,
  except with respect to outstanding options granted under such plans.  Accordingly, no further options can be
  granted under such plans. Outstanding options under the 1991 plans expire at
  various dates from 2004 through 2011.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | 2001 and 2003 Plans.In
  December 2001, our shareholders approved the adoption of the Scitex 2001
  Stock Option Plan, primarily designed for key employees of Scitex and its
  subsidiaries.  The aggregate number of
  shares that were initially authorized and reserved for issuance under the
  2001 plan was 750,000 shares.  In
  December 2003, our shareholders approved the adoption of the Scitex 2003
  Share Option Plan for our officers, directors and consultants who are Israeli
  residents.  When the shareholders
  adopted the 2003 plan, they also adopted an amendment to the 2001 plan, as a
  result of which the number of shares reserved for issuance under the 2001
  plan was increased from 750,000 to 1,900,000 with all such reserved shares
  being available for issuance under either the 2001 plan or the 2003
  plan.  Terms of the options granted
  under the plans, such as length of term, exercise price, vesting and
  exercisability, are determined by our board of directors.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following
table details certain information with respect to the foregoing plans:

|                                                         |  | 1991 Share
  Option Plans* |   | 2001 and 2003
  Share Option
  Plans** | 
|-------------------------------------------------------- |  | -------------------------- | - | -------------------------------------- | 
|                                                         |  |                            |   |                                        | 
|Number of
  shares available for future option awards    |  |                            |   | 0                                      | 
|Number of
  options exercised                            |  |                            |   | 860,295                                | 
|Number of
  options outstanding                          |  |                            |   | 664,362                                | 
|Weighted
  average exercise price of options outstanding |  |                            | $ | 10.57                                  | 

*
The data presented in this column are as of June 17, 2004.
             ** The data
presented in this column are as of the date of this Annual Report.

The
foregoing description is qualified in its entirety by reference to the Scitex
Israel Key Employee Share Incentive Plan 1991, the Scitex International Key
Employee Stock Option Plan 1991 (as amended, 1995), the Scitex 2001 Stock
Option Plan (as amended, 2003), and to the Scitex 2003 Share Option Plan which
are filed as exhibits in Item 19 of this Annual Report, all of which are hereby
incorporated by reference.

Subsidiaries
Stock Option Plans.
Scitex Vision adopted a share option plan, primarily designed for employees of
Scitex Vision and its subsidiaries. 
This plan permits the granting of options for the purchase of shares in
Scitex Vision.  During 2003, Scitex
Vision granted options under its plan to employees, exercisable, in the
aggregate (including options already granted), into approximately 8.8% of its
share capital.  In this respect, see also in Item 7B. Related Party Transactions  Scitex
Vision-Scitex Vision International Combination below.

REPURCHASEPROGRAM

In
May 1998, our board of directors approved a program for our repurchase of up to
two million of our ordinary shares, to be held for the benefit of employees
within the framework of our stock option plans.  These ordinary shares are held by a trustee for the reissue to
employees upon the exercise of existing stock options.  Under the approved program, we may not
purchase ordinary shares from our major shareholders. A balance of 448,975
ordinary shares are held by the trustee pursuant
to the program, purchased with funds provided by us. No ordinary shares have
been repurchased under this program since August 5, 1999.

ITEM 7.     MAJOR
SHAREHOLDERS & RELATED PARTY TRANSACTIONS

A.          MAJOR
SHAREHOLDERS

Unless
otherwise stated, all data in this Item 7 is as of June 23, 2004, at which date
there were 38,066,363 of our ordinary shares outstanding, excluding:

| | the 448,975 ordinary shares purchased by the trustee pursuant
  to the repurchase program described above; and
|- | --------------------------------------------------------------------------------------------------------------

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| | the 4,952,050 ordinary
  shares purchased by us in the self tender
  offer described above which are deemed issued but considered treasury shares
  (or dormant shares as such term is defined under the Israeli Companies Law)
  that carry no rights, including voting rights and the right to receive
  dividends, while owned by us. These shares will be available for us to sell
  in the future without further shareholder action (except as required by
  applicable law).
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
all instances, the percentage of ownership is equal to the voting rights of our
ordinary shares and all ordinary shares have identical voting rights. In
particular, the ordinary shares held by our principal shareholders do not carry
different voting rights.

To our knowledge, except as described below, we are not directly or
indirectly owned or controlled (i) by any corporation, (ii) by any foreign
government or (iii) by any other natural or legal person, nor are there any
arrangements, the operation of which may at a subsequent date result in a
change in control of Scitex.

The following table sets forth the number of our ordinary shares owned
by any person who is known to us to own beneficially more than 5% of our
ordinary shares or otherwise affiliated with Discount and/or Clal:

| | Name and Address                                                                                                                                |  | Number of
  Shares
  Owned* |            | Percent of
  Shares
  Outstanding* | 
| | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | ---------------------------------- | 
| |                                                                                                                                                 |  |                             |            |                                    | 
| | Clal
  Electronics Industries Ltd. (CEI) (1)
       3 Azrieli Center, Triangular Tower, 45th
  Floor
       67023 Tel Aviv, Israel            |  |                             | 18,702,255 | (2)                                | 
| |                                                                                                                                                 |  |                             |            |                                    | 
| | Discount
  Investment
  Corporation Ltd. (Discount) (3)
       3 Azrieli Center, Triangular Tower, 44th
  Floor
       67023 Tel Aviv, Israel |  |                             | 18,702,255 | (2)                                | 
| |                                                                                                                                                 |  |                             |            |                                    | 
| | AXA
  Financial, Inc.
       1290 Avenue of the Americas
       New York, NY 10104 (4)                                                          |  |                             | 2,402,000  |                                    | 
| |                                                                                                                                                 |  |                             |            |                                    | 
| | Mivtach
  Shamir Holdings Ltd. (5)                                                                                                              |  |                             | 2,090,200  |                                    | 
| |                                                                                                                                                 |  |                             |            |                                    | 
| | Ilanot
  Discount Ltd. (6)                                                                                                                      |  |                             | 263,967    |                                    | 
| |                                                                                                                                                 |  |                             |            |                                    | 
| | Clal
  Insurance Enterprises Holdings Ltd. (7)                                                                                                  |  |                             | 163,415    |                                    | 

| | *   | The number
  of shares owned by a shareholder or a group includes shares, if any, that
  such shareholder or group has the right to receive upon the exercise of
  options which are exercisable within 60 days as of June 23, 2004.                                                                                                                                                                                                                                                                                        
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | **  | Less than
  1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (1) | CEI is a
  wholly owned subsidiary of Clal. Clal may be deemed to share with its wholly
  owned subsidiary, CEI, an Israeli company, the power to vote and dispose of
  our outstanding ordinary shares held by CEI.                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (2) | Consists of
  9,409,532 ordinary shares owned by CEI and 9,292,723 ordinary shares owned by
  Discount, representing approximately 24.7% and 24.4% of our outstanding
  shares, respectively. Of the 9,292,723 ordinary shares owned by Discount,
  4,880,334 shares are held through DIC Loans Ltd., an Israeli company wholly
  owned by Discount. Each of Clal and Discount may be deemed to share the power
  to vote the shares held by the other by virtue of the Voting Agreement
  between them, as described below.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (3) | Discount may
  be deemed to share with its wholly owned subsidiary, DIC Loans Ltd., an
  Israeli company, the power to vote and dispose of our outstanding ordinary shares
  held by DIC Loans Ltd.                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (4) | Based upon
  Schedule 13G filed by AXA with the SEC on February 10, 2004, AXA claims sole
  voting power, as of December 31, 2003, over 2,622,000 shares, of which it had
  sole dispositive power over 2,402,000 shares. The majority of the shares
  reported are held by unaffiliated third party client accounts managed by a
  majority owned subsidiary of AXA, Alliance Capital Management L.P., an
  investment adviser.                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (5) | Based on a
  report received by Scitex on June 24, 2004. The 2,092,200 shares are held by
  a wholly owned subsidiary of Mivtach Shamir. Mivtach Shamirs address is 4
  Koyfman Street, Tel-aviv 68012, Israel.                                                                                                                                                                                                                                                                                                            

65

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| | (6) | Based on a
  report received by Scitex on June 28, 2004. As of May 3, 2003, IDB
  Development and Discount together owned a 45% interest in Ilanot. Ilanots
  address is Africa-Israel House, 14 Achad Haam Street, Tel Aviv 65142,
  Israel.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                
| | (7) | Based on a
  report received by Scitex on June 28, 2004. As of May 10, 2003, Clal
  Insurance is a majority owned subsidiary of IDB Development.  Clal Insurances address is 48 Menachem
  Begin Road, Tel Aviv 66184, Israel.                

Clal, CEI, Discount, IDB Development and IDB Holding

Both Clal
and CEI are Israeli companies, holding investments in Israeli companies that
operate primarily in the fields of high-tech and electronics.  Clal also operates in the fields of cement,
textiles, paper and cartons, biotechnology and management of venture capital
funds.

Discount
is an Israeli company holding investments, predominantly in companies located
in Israel or that are Israel-related that operate mainly in the fields of
communications, advanced technology, industry, real estate and commerce.

Clal
and Discount are both controlled by IDB Development Corporation Ltd. (IDB
Development), a majority owned subsidiary of IDB Holding.  Both IDB Development and IDB Holding are
Israeli companies. IDB Development holds investments in various entities,
operating primarily in the fields of insurance, real estate, high-tech and
electronics. IDB Holding is a holding company that, through IDB Development,
holds investments in various entities, operating primarily in the fields of
insurance, real estate, high-tech and electronics.

Each
of IDB Developments, IDB Holdings, Discounts and Clals respective shares
are listed on the TASE. The principal address of Clal, CEI, Discount, IDB
Development and IDB Holding is 3 Azrieli Center, Triangular Tower, Tel Aviv
67023, Israel.

Based
upon reports received by Scitex, since May 19, 2003, IDB Holding is controlled
by a group comprised of:

| | Ganden
  Investment I.D.B. Ltd. (Ganden),
  a private Israeli company controlled by Nochi Dankner (who is also the
  Chairman of IDB Holding, IDB Development, Clal and Discount) and his sister
  Shelly Bergman (who is also a director of IDB Holding, IDB Development, Clal
  and Discount), that holds 31.02% of the equity and voting power of IDB
  Holding;
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                      
| | Manor Investments - IDB
  Ltd. (Manor), a private Israeli company controlled by Ruth Manor (whose
  husband, Isaac Manor, and their son, Dori Manor, are directors of IDB
  Holding, IDB Development, Clal and Discount), that holds 10.34% of the equity
  and voting power of IDB Holding; and                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                      
| | Avraham Livnat Investments
  (2002) Ltd. (Livnat), a private Israeli company controlled by Avraham
  Livnat (whose son, Zvi Livnat, is a director of IDB Holding, IDB Development,
  Clal and Discount, and whose other son, Shay Livnat, is a director of
  Scitex), that holds 10.34% of the equity and voting power of IDB Holding.                             

Ganden,
Manor and Livnat, owning in the aggregate approximately 51.7% of the equity and
voting power of IDB Holding, entered into a shareholders agreement relating to,
among other things, their joint control of IDB Holding, the term of which is
until May 19, 2023. In addition, Shelly Bergman owns approximately 4.9% of the
equity and voting power of IDB Holding, Ganden Holdings Ltd., a private Israeli
company controlled by Nochi Dankner and Shelly Bergman, owns approximately 0.1%
of the equity and voting power of IDB Holding, Manor Holdings B.A. Ltd., a
private Israeli company wholly owned by Isaac Manor and Ruth Manor, owns
approximately 0.04% of the equity and voting power of IDB Holding and Avraham
Livnat Ltd., a private Israel company controlled by Avraham Livnat and Zvi
Livnat, owns approximately 0.04% of the equity and voting power of IDB Holding.

66

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Based
on the foregoing, IDB Holding and IDB Development (by reason of their control
of Clal and Discount), Ganden, Manor and Livnat (by reason of their control of
IDB Holding) and Nochi Dankner, Shelly Dankner-Bergman, Ruth Manor, and Avraham
Livnat (by reason of their control of Ganden, Manor and Livnat, respectively)
may be deemed to share with CEI and Discount the power to vote and dispose of
Scitexs shares beneficially owned by CEI and Discount (including Discounts
wholly owned subsidiary) amounting, in the aggregate, to 49.13% of such shares.

1980 Voting Agreement

On
December 1, 1980, Clal (whose holdings of our shares are held by CEI), Discount
and PEC Israel Economic Corporation, a company that is currently a wholly owned
subsidiary of Discount, entered into a Voting Agreement.  Under this agreement, they agreed to vote
our shares in concert with respect to the election of our directors and with
respect to any ordinary resolution submitted to our shareholders. The agreement
also grants rights of first refusal if one of the parties wishes to sell its
shares of Scitex to a third party. The agreement was for an initial term of ten
years, subject to renewal for additional periods of ten years each unless and
until prior notice was given by one party of its intention not to renew.  The agreement was automatically renewed and
is currently in effect until November 30, 2010.

By
reason of the 1980 Voting Agreement, Clal and Discount may be deemed to share the power to vote and dispose of our outstanding
ordinary shares held by such companies (including Discounts wholly owned subsidiaries) amounting, in the
aggregate, to 49.13% of such ordinary shares.

The foregoing description is qualified in its entirety by
reference to the Voting Agreement, dated December 1, 1980, by and among
Discount, PEC and Clal which is filed as Exhibit 10.h to our Registration
Statement on Form F-1 (filed May 26, 1983) and which is hereby incorporated by
reference.

Significant changes in percentage ownership
by major shareholders during last three years

At
January 1, 2000, Discount (jointly with PEC and DIC Loans) and CEI each held
approximately 13% of our outstanding ordinary shares.  In January 2000, Discount, PEC and CEI together acquired
International Paper Companys 13.2% holding in us, increasing the joint
holdings of Discount, PEC and DIC Loans to approximately 19.7% and the holding
of CEI to approximately 19.5%, of our outstanding ordinary shares.  Subsequent increases in their shareholdings
were the result of purchases (in the over-the-counter market) made by CEI (from
January 2000) and Discount (from September 2000) through November 2000. In
December 2003, PEC transferred all of the ordinary shares held by it to
Discount.

In
August 2002, Clal and Discount announced that they were considering the
possibility of conducting a joint tender offer to acquire between 6% to 10% of
our ordinary shares, subject to regulatory requirements and further
examination.  In December 2002, Clal and
Discount announced that they had decided not to conduct such tender offer.

In
June 2004, Clal and Discount tendered, in the aggregate, approximately 260,000
ordinary shares in the self tender offer we commenced on May 14, 2004. We
purchased from Clal and Discount all of these shares. Following consummation of
the tender offer, Discount and Clal beneficially own, in the aggregate,
18,702,255 ordinary shares, representing 49.13% our outstanding ordinary
shares, compared to 18,962,020 ordinary shares, representing 44.08% of our
outstanding ordinary shares, prior to the tender offer.

67

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Record Holders

As
of June 23, 2004, we had 343 shareholders of record, of whom 300 were
registered with addresses in the United States, representing approximately
65.6% of our outstanding ordinary shares. These numbers are not representative
of the number of beneficial holders of our shares nor is it representative of
where such beneficial holders reside since many of these ordinary shares were
held of record by brokers or other nominees (including one U.S. nominee
company, CEDE & Co., which held approximately 41.8% of our outstanding
ordinary shares as of said date).

Duties of Shareholders

Disclosure by Controlling Shareholders.
Under the Companies Law, the disclosure requirements that apply to an office
holder also apply to a controlling shareholder of a public company.  A controlling shareholder is a shareholder
who has the ability to direct the activities of a company, including a
shareholder that owns 25% or more of the voting rights if no other shareholder
owns more than 50% of the voting rights, but excluding a shareholder whose
power derives solely from his or her position on the board of directors or any
other position with the company.

Extraordinary
transactions with a controlling shareholder or in which a controlling
shareholder has a personal interest, and the engagement of a controlling
shareholder as an office holder or employee, generally require the approval of
the audit committee, the board of directors and the shareholders, in that
order.  The shareholder approval must
include at least one-third of the shares of non-interested shareholders voted
on the matter.  However, the transaction
can be approved by shareholders without this one-third approval if the total
shares of non-interested shareholders voted against the transaction do not
represent more than one percent of the voting rights in the company.

General Duties of Shareholders.  In
addition, under the Companies Law, each shareholder has a duty to act in good
faith toward the company and other shareholders and to refrain from abusing his
or her power in the company, such as in shareholder votes.  In addition, specified shareholders have a
duty of fairness toward the company. 
These shareholders include any controlling shareholder, any shareholder
who knows that it possesses the power to determine the outcome of a shareholder
vote and any shareholder who, pursuant to the provisions of the articles of
association, has the power to appoint an office holder or any other power with
respect to the company.  However, the
Companies Law does not define the substance of this duty of fairness.

B.          RELATED
PARTY TRANSACTIONS

Bayside Lease

Since April 2000, Scitex Vision International has leased approximately
21,000 square feet of its principal facilities in the Herzlia Industrial Park,
Israel, from Bayside Land Corporation Ltd., an affiliate of Discount.  The rent attributable to such premises for
the year ended December 31, 2002, was approximately $0.6 million.   As part of its relocation to Netanya,
Israel, during 2003, this lease was terminated, effective November 2003.

Clal Insurance

We
purchase insurance policies in Israel with a number of insurance companies in
respect of which Clal Insurance Company Ltd., an affiliate of CEI and Discount,
acted as leader.  In certain instances,
we were a beneficiary of insurance policies purchased from Clal Insurance
Company by a subsidiary of Creo Inc., in which we no longer hold an equity
interest.  During 2003, we paid premiums
on such insurance in insignificant amounts. 
The extent to which Clal Insurance Company, or other insurance companies
to which it is affiliated, participated, varied from policy to policy.  All insurance was effected at normal
business rates.

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Services Agreements

Clal Services Agreement.
In November 2001, we entered into a Services Agreement with Clal in connection
with the transfer of our corporate offices to facilities leased to Clal at the
Azrieli Center, Tel Aviv and the seconding of personnel. Pursuant to the Clal
Services Agreement, Clal provided us with office space for our personnel,
together with other services, such as accounting, security, information
management services (MIS) and cleaning. 
In addition, Clal seconded certain executives to serve in various
management positions in us.  In
addition, with effect from January 1, 2003, two other Scitex employees became
employees of Clal and were seconded back to us for 100% of their work
hours.  Pursuant to the Clal Services
Agreement, other employees of Clal and us may be seconded to each other (on
full time or part time basis) on an as-needed basis, as agreed from time to
time between the parties.

The Clal Services Agreement provided that certain services may be
provided by subsidiaries of Clal or directly from third party suppliers, and
Clal may assign its rights and obligations under the Clal Services Agreement,
in whole or in part, to its affiliates. Generally, the services rendered (other
than the seconding of employees) were to be provided by Clal at the actual cost
incurred by Clal for the services and do not include any overhead expense, or
general and administrative cost. 
However, if the actual cost incurred by Clal may not be determined with
respect to any service, the cost to us will generally be calculated either (i)
on the basis of the proportion of office space occupied by us at Azrieli Center
(including, proportionally, by employees seconded to us by Clal and excluding,
proportionally, employees seconded to Clal by us), for rental of the facilities
and common parts, cleaning, security, local taxes, electricity and all other
expenses associated with facility maintenance; or (ii) on the basis of the
number of our employees located at Azrieli Center (including, proportionally,
those seconded to us by Clal and excluding, proportionally, those seconded to
Clal by us) for other, generally unspecified, services.  Certain services, such as accounting and MIS
services, are at a fixed rate.  During
2003, the aggregate cost of the services (including rental), other than the
seconding of employees, was approximately $7,300 per month, compared to $7,700
per month in 2002.  In 2003, we paid
Clal the sum of approximately $430,000 in connection with the seconding of
Clals employees to us.

The audit committees of both us and Clal agreed to periodically review
and adjust the services rendered and amounts paid pursuant to the Clal Services
Agreement.  However, the aggregate
changes in respect of (i) the amount payable for seconded employees shall not
exceed $300,000 per annum and (ii) the amount payable for other services
provided to us may not exceed $20,000 per quarter, in both cases, from that
envisaged at the commencement of the Clal Services Agreement.

In
light of the Discount Services Agreement (described below), which has become
effective in January 2004, we and Clal have agreed to suspend substantially all
the services provided by Clal to us pursuant to the Clal Services Agreement,
including the termination of (1) the use by us of the office space
provided by Clal, including related ancillary services (such as cleaning,
security and MIS), which are now provided to us by Discount pursuant to the Discount
Services Agreement, and (2) the seconding of personnel by Clal to us,
which is no longer required. The other provisions of the Clal Services
Agreement continue in full force and effect, and Clal may continue to provide
certain other services to us pursuant to the Clal Services Agreement.

The
Clal Services Agreement was submitted to and approved by our audit committee,
our board of directors and our shareholders, in that order. Similarly, the
suspension of certain services under the Services Agreement was also submitted
to and approved by our audit committee, our board of directors and our
shareholders, in that order.

The
foregoing description of the Clal Services Agreement is only a summary and does
not purport to be complete and is qualified by reference to the full text of
the Clal Services Agreement and the amendment thereto filed by us as Exhibit
4(d)(1) in Item 19.

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Discount Services Agreement. We entered into a Services
Agreement with Discount in connection with the transfer of our corporate
offices to facilities leased by Discount at the Azrieli Center, Tel Aviv, and the seconding of one of Discounts senior officers to serve as our President
and/or Chief Executive Officer. The Agreement became effective as of January
15, 2004.

Pursuant to the Discount Services Agreement, Discount
provides us with office space at the Azrieli Center for our personnel, together
with ancillary services, such as cleaning, security and MIS, similar to that
previously provided by Clal pursuant
to the Clal Services Agreement.  In
addition, with effect from January 5, 2004, Discount seconds Mr. Raanan Cohen, Vice President of
Discount (or another senior officer
of Discount if agreed upon by us and
Discount) to serve as Interim
President and Chief Executive Officer of Scitex, who will dedicate
approximately 40% of his work hours to us. We are required to provide to such
person an indemnity letter in connection with personal liabilities that may
arise from serving in such capacity as provided by us to our other executive
officers. Mr. Raanan Cohen currently is also a director of Scitex.

Certain services may be provided by Discount
through its subsidiaries or directly from third party suppliers. Discount may assign its rights and obligations under the
Discount Services Agreement, in whole or in part, to its affiliates. Generally,
the services rendered will be provided by Discount at the actual cost incurred
by Discount for the services and will not include any overhead expense, or
general and administrative cost.  However,
if the actual cost incurred by Discount may not be determined with respect to
any service, the cost to us will generally be calculated either (i) on the
basis of the proportion of the office space occupied by us at Azrieli Center
(including a relative part of common areas) for cleaning, security, local
taxes, electricity and all other expenses associated with facility maintenance
or (ii) on the basis of the number of our employees located at Azrieli
Center for other, generally unspecified, services, according to the nature of
the service. Certain services, such as MIS, will be charged to us at a fixed
rate.

Our audit committee will periodically review the
services rendered and amounts paid under the Discount Services Agreement. It is
estimated that, initially, the aggregate cost of the services (including the
leased office space, but excluding the seconding of Mr. Cohen) will be
approximately $17,000 per fiscal quarter. The specific approval of our audit
committees is required for any material increases in the amounts paid under the
Discount Services Agreement. However, in no event shall the aggregate increase
in the office space occupied by us at Azrieli Center exceed 175% of the office
space occupied by us at the commencement of the agreement. We will also pay
Discount the sum of NIS 493,000
(currently equivalent to approximately $110,000) per annum, in connection with
the services of Mr. Cohen as our President and CEO.  This sum is based upon the actual
cost incurred by Discount with respect to the services of Mr. Cohen.  In the event of a change in the cost of such
services to Discount or, having regard to our needs, the parties agree upon a
change in the percentage of the work hours to be dedicated to us by
Mr. Cohen (or such other senior officer of Discount who may serve as
President and/or Chief Executive Officer of Scitex), the consideration payable
for these services shall be increased or decreased accordingly, subject to the
approval of our Audit Committee, provided that in no event the sum payable in
respect of such services may exceed NIS 750,000 (currently equivalent to approximately $168,000) per annum.

If either of the parties wish to cease to provide or
receive any or all of the services (including the office space), it may do so
by giving prior written notice of at least three months to the other party,
unless otherwise agreed by the parties. 
In such circumstances, Discount is required to provide us
reasonable cooperation and assistance in order to enable us to implement such
service by ourselves, but in no event will such assistance be for more than 30
days from the date of termination.

The
Discount Services Agreement was submitted to and approved by our audit
committee, our board of directors and our shareholders, in that order.

70

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The foregoing description of the Discount Services Agreement
is only a summary and does not purport to be complete and is qualified by
reference to the full text of the Discount Services Agreement filed by us as
Exhibit 4(d)(3) in Item 19.

Combination of Scitex Vision and Scitex
Vision International

In January 2003, we completed a transaction to combine the operations
of Scitex Vision International (our then wholly owned subsidiary) and Scitex
Vision (in which we held approximately 42.5% of the outstanding share capital)
through a share exchange.  Pursuant to
the Share Exchange Agreement, (1) we sold all of our shares in Scitex Vision
International to Scitex Vision (so that Scitex Vision International became a
wholly owned subsidiary of Scitex Vision), and (2) Scitex Vision issued to us
shares representing approximately 67% of Scitex Visions outstanding share
capital, and agreed to reserve up to approximately 5.9% of its share capital,
on a fully diluted and as converted basis, for the issue of stock options to Scitex
Vision Internationals employees (collectively, the Consideration). The
Consideration is subject to adjustments in our favor, if, at any time prior to
the earlier to occur of (1) January 1, 2010 and (2) the closing of an initial
public offering of Scitex Visions equity securities (with minimum requirements
as to Scitex Visions valuation at, and the proceeds of, such offering), any of
a number of specified adverse events occur in respect of Scitex Vision.  As required in the Share Exchange Agreement,
we transferred $15 million to Scitex Vision International as an investment
therein. Immediately following this transaction, we held, in the aggregate,
approximately 75.5% of Scitex Visions outstanding share capital.

Each
of Scitex Vision International (for the benefit of Scitex Vision) and Scitex
Vision (for our benefit) made customary representations and warranties in the
Share Exchange Agreement with respect to each partys respective business
operations.  We also made limited
representations and warranties for the benefit of Scitex Vision.  The representations and warranties made by
the parties survived for a limited period of one year (until January 2004),
except for certain representations that survive until the earlier of the (i)
expiration date of the applicable statute of limitations and (ii) closing of an
initial public offering of Scitex Visions equity securities.  In the event of damages incurred as result
of breach of the representations and warranties made by us or Scitex Vision
International or failure to perform covenants or agreements, we are required to
indemnify Scitex Vision. Similarly, in the event of damages incurred as result
of breach of the representations and warranties made by Scitex Vision or
failure to perform covenants or agreements, Scitex Vision is required to
indemnify us.  The indemnification will
be paid out solely in shares of Scitex Vision and is capped, in the aggregate,
at $7 million (if we are required to indemnify Scitex Vision) or $6 million (if
Scitex Vision is required to indemnify us).

This
transaction was a related party transaction because CEI and Discount, who are
our principal shareholders, may have had a personal interest in the transaction
by virtue of their shareholdings in Scitex Vision (prior to the transaction,
each of CEI and Discount held approximately 14% of Scitex Visions share
capital). 
Accordingly, as required by the Companies Law, the transaction was
approved by our audit committee, board of directors and a special majority of
our shareholders, in that order.  In
addition, the financial advisor in connection with the transaction delivered to
our board of directors a written opinion as to the fairness, from a financial
point of view, of the consideration to be paid by us in connection with the
transaction.

The foregoing description of the Share Exchange Agreement is
only a summary and does not purport to be complete and is qualified by
reference to the full text of the agreement filed by us as Exhibit 4(d)(2) to
Item 19.

We
face litigation in connection with this transaction, as more fully described in
Item 8 under the caption Legal Proceedings.

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Rights Offerings by Scitex Vision

In
July 2003 and May 2004, Scitex Vision concluded rights offerings to its
shareholders in which we invested approximately $5.0 million and $4.2 million,
respectively, in accordance with our pro rata share of such offering. Clal and
Discount, our two principal shareholders who are also shareholders of Scitex
Vision, invested their pro rata share of the rights offerings in an aggregate
of approximately $0.9 million each.

The
investments were carried through convertible loans, which have a five year
maturity period and bear an interest at the rate of the higher of (i) LIBOR +
1% per annum and (ii) the Israeli consumer price index. The principal amount of
the loans, including interest accrued thereon, may be converted into shares of
Scitex Vision at a specified conversion price (subject to adjustments for
specified events):

| |  | The conversion price of
  the July 2003 loan reflects the valuation of the aforesaid combination of
  Scitex Vision and Scitex Vision International in January 2003 (i.e.,
  valuation of $54 million for the combined entities).    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                      
| |  | The conversion price of
  the May 2004 loan reflects a valuation of $60 million to Scitex Vision, and
  is based upon, among other things, a written opinion of a financial advisor
  retained by Scitex Visions board of directors.

In addition, we and the
other lenders received warrants to purchase additional shares of Scitex Vision
with 25% coverage of the principal amount of the loans, exercisable for a
period of five years at an exercise price equal to the conversion price of the
loans, as applicable. Other key terms of the loans include the subordination of
the loans to senior bank loans and the grant of registration rights with
respect to the securities underlying the loans and warrants.

Prior
to the July 2003 rights offering, Scitex Visions share capital was divided
into ordinary shares and several series of preferred shares. In conjunction
with the rights offering, Scitex Vision reclassified its share capital by way
of converting all preferred shares into ordinary shares and currently has only
one class of shares, the ordinary shares, outstanding.

Following
our investment in the rights offerings, we now hold an approximate 75.5%
interest (68.5% on a fully-diluted basis) in Scitex Vision whereas Clal and
Discount each hold an approximate 7% interest.

We
face litigation in connection with these transactions, as more fully described
in Item 8 under the caption Legal Proceedings.

Other

During
2003, we maintained business relationships and entered into various other
transactions in the ordinary course of business with a number of other
companies affiliated with our major shareholders, all on terms which management
believes were no less favorable to us than would be obtained in transactions
with unaffiliated third parties.

C.          INTERESTS
OF EXPERT AND COUNSEL.

Not
applicable.

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ITEM
8.FINANCIAL INFORMATION

A.          CONSOLIDATED STATEMENTS AND OTHER FINANCIAL
INFORMATION

FINANCIAL STATEMENTS

Our
consolidated financial statements are listed in Item 18.

EXPORT SALES

During
2003, Scitex, through its consolidated subsidiaries, had export sales from both
the United States and Israel.  Export
sales from the United States were primarily of products manufactured by
discontinued operations (SDP) and amounted to $112.4 million in 2003, compared
to approximately $93.9 million in 2002 and $94.4 million in 2001.  Export sales from Israel were of products
manufactured by Scitex Vision and amounted to $59.3 million in 2003, compared
to approximately $51.5 million in 2002 and to $59.6 million in 2001.  Altogether, export sales (from Israel only)
in 2003 accounted for 58% of total net sales, compared to approximately 60% in
2002 and 65% in 2001.

LEGAL PROCEEDINGS

We
are from time to time named as a defendant in certain routine litigation
incidental to our business. Except as described below, we are currently not
party to any legal proceedings which would reasonably be expected to have a
material adverse effect on our financial position.

| | In October 2003, an NIS 14
  million (approximately $3.1 million) lawsuit was filed by CDI, one of Scitex
  Visions  shareholders, against us,
  Scitex Vision and others, mainly other shareholders of Scitex Vision (among
  them, our two largest shareholders, Clal and Discount) and the directors of
  Scitex Vision in the period relevant for the lawsuit (three of whom are our
  present or former office holders). 
  The lawsuit generally alleges that the terms of the transaction to
  combine the operations of Scitex Vision and Scitex Vision International and
  the manner in which it was effected prejudiced the rights of CDI as a
  minority shareholder of Scitex Vision (see
  Item 7B above). In November 2003, CDI also sent a demand letter to
  Scitex Vision, as a preliminary step for a derivative action, whereby CDI
  demanded that Scitex Vision initiate a lawsuit against us, Scitex Vision
  International and Scitex Visions directors in the period relevant for the
  claim for an alleged breach of fiduciary duties of the directors and
  misrepresentations in connection with an undertaking by Scitex to transfer
  $15 million to Scitex Vision International as part of the aforesaid
  transaction. Scitex Vision rejected these demands.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | In December 2003, a
  separate motion was filed by CDI against us, Scitex Vision, and two other
  shareholders of Scitex Vision in connection with Scitex Visions rights
  offering that was concluded in July 2003 (See
  Item 7B above). In particular, the motion alleges that the
  reorganization of Scitex Visions share capital that was effected in
  conjunction with the rights offering was invalid and prejudiced the rights of
  CDI. In light of its allegations, CDI requested that the court order the
  defendants to provide information and documents with respect to this matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | In late May 2004, CDI
  filed another lawsuit against us, Scitex Vision, Clal and Discount in
  connection with Scitex Visions rights offering that was concluded in May
  2004 (See Item 7B above). The
  lawsuit generally alleges that the terms of the transaction and the manner in
  which it was effected prejudiced the rights of CDI as a minority shareholder
  of Scitex Vision. CDI requested the court to order that the resolutions of
  Scitex Visions audit committee, board of directors and general meeting of
  shareholders authorizing the transaction be annulled, and that the
  transaction is void.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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We
and Scitex Vision do not believe that these claims have merit and we intend to
vigorously defend our position on these issues. However, we cannot assure you
the outcome of any such litigation at this time or whether CDI may initiate
further legal proceedings against Scitex Vision or us.

In
addition, see the discussion in Item 5B under the captionTax Audits.

DIVIDEND POLICY

Except as described below, we did not distribute any dividends (in cash
or otherwise), bonus shares or declared any split, recapitalization or make any
rights offerings to the holders of our shares since the third quarter of
1996.  We continually review our
dividend policy and the payment, or non-payment, of a dividend should not be
considered indicative as to the payment of future dividends.  For
general information on the applicable tax rate on dividends, please see in
Item10E. Tax below.

On June 22, 2004, we announced a distribution of $2.36 per ordinary
share, or approximately $90 million in the aggregate, payable on July 12, 2004
to our shareholders of record as of June 30, 2004.

B.          SIGNIFICANT
CHANGES

Except
as otherwise disclosed in this Annual Report, no significant change has
occurred since December 31, 2003. In particular, please see the description of
the sale of our SDP business to Kodak in January 2004, under Item 10C
Additional InformationMaterial Agreements.

ITEM 9.     THE
OFFER AND LISTING

A.          OFFER AND
LISTING DETAILS

Our
ordinary shares are listed and traded on the Nasdaq National Market, or Nasdaq,
and the Tel Aviv Stock Exchange, or the TASE, both under the symbol
SCIX.  The shares commenced trading on
the TASE on January 7, 2001 and on Nasdaq on May 20, 1980.

All
share prices on Nasdaq are reported in U.S. dollars and all share prices on the
TASE are reported in NIS.  As of December
31, 2003, the exchange rate was equal to approximately NIS 4.379 per $1.00 (NIS
4.737 on December 31, 2002).

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The
following table sets forth, for the periods indicated, the high and low closing
sales prices per ordinary share on Nasdaq and on the TASE as reported in
published financial sources:

|Annual High
     and Low |  | Nasdaq
  National Market |       | The Tel
  Aviv Stock Exchange |  
|------------------------ |  | ------------------------ | ----- | ----------------------------- | -
|                         |  |                          |       |                               |  
|                         |  | High                     |       | Low                           |  
|                         |  |                          |       |                               |  
|1999                     |  | $                        | 16.06 |                               | $
|2000                     |  | $                        | 18.75 |                               | $
|2001                     |  | $                        | 9.75  |                               | $
|2002                     |  | $                        | 5.50  |                               | $
|2003                     |  | $                        | 5.16  |                               | $
|Quarterly High and
  Low |  |                          |       |                               |  
|2002                     |  |                          |       |                               |  
|First
  Quarter          |  | $                        | 5.50  |                               | $
|Second
  Quarter         |  | $                        | 3.15  |                               | $
|Third
  Quarter          |  | $                        | 2.20  |                               | $
|Fourth
  Quarter         |  | $                        | 1.90  |                               | $
|2003                     |  |                          |       |                               |  
|First
  Quarter          |  | $                        | 1.89  |                               | $
|Second
  Quarter         |  | $                        | 2.59  |                               | $
|Third
  Quarter          |  | $                        | 3.36  |                               | $
|Fourth
  Quarter         |  | $                        | 5.16  |                               | $
|2004                     |  |                          |       |                               |  
|First
  Quarter          |  | $                        | 5.67  |                               | $
|Most Recent Six
  Months |  |                          |       |                               |  
|December
  2003          |  | $                        | 5.16  |                               | $
|January
  2004           |  | $                        | 5.67  |                               | $
|February
  2004          |  | $                        | 5.45  |                               | $
|March
  2004             |  | $                        | 5.65  |                               | $
|April
  2004             |  | $                        | 5.89  |                               | $
|May
  2004               |  | $                        | 5.84  |                               | $
|June
  2004*             |  | $                        | 6.14  |                               | $

* Through June
28, 2004.

B.          PLAN
OF DISTRIBUTION.

Not Applicable.

C.          MARKETS.

Our
ordinary shares trade on Nasdaq and, with effect from January 7, 2001, the
TASE.  The shares trade in both markets
under the symbol SCIX.

D.          SELLING
SHAREHOLDERS.

Not Applicable.

E.          DILUTION.

Not Applicable.

F.          EXPENSES
OF THE ISSUE.

Not Applicable.

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ITEM
10.     ADDITIONAL INFORMATION

A.          SHARE
CAPITAL

Not Applicable.

B.          MEMORANDUM
AND ARTICLES OF ASSOCIATION

Set out below is a description of certain
provisions of our Memorandum of Association and Articles of Association, and of
the Israeli Companies Law related to such provisions. This description is only
a summary and does not purport to be complete and is qualified by reference to
the full text of the Memorandum and Articles which are incorporated by
reference to exhibits to this Annual Report and by Israeli law.

We
were first registered under Israeli law on November 2, 1971 as a private
company, succeeding a predecessor corporation, Scientific Technology Ltd.,
which was founded on September 5, 1968. In May 1980 we became a public company. 
We are registered with
the Registrar of Companies in Israel under number 52-003180-0.

OBJECTS AND PURPOSES

Pursuant to Section 2(I)(a) of our
Memorandum of Association, the principal object for which we are established is
to engage in the activity or business of,
inter alia, developing, manufacturing, producing, vending,
purchasing, licensing, leasing, importing, exporting, or otherwise dealing in
any products and moveable property of every kind and description, and to engage
in selling, promoting, leasing, licensing, importing, exporting, or otherwise
dealing in, any services.  We may also
acquire, create, form, operate, encourage or otherwise promote or manage any
kind of enterprise.

DIRECTORS

The Companies Law requires that
transactions between a company and its office holders (which term includes
directors) or that benefit its office holders, including arrangements as to the
compensation of office holders, be approved as provided for in the Companies
Law and the companys articles of association. 
(For further information as to such
approval provisions, seeItem 6.  Directors, Senior Management and Employees -
Board Practices - Approval of Specified Related Party Transactions under
Israeli Law.)

Under our Articles, in general, the
management of our business is vested in the Board of Directors, which may
exercise all such powers, including the power to borrow or secure the payment
of any sum or sums of money for the purposes of the Company, in such manner, at
such times and upon such terms and conditions in all respects, as it thinks
fit.

There is no requirement under our Articles
or Israeli law for directors to retire on attaining a specific age. The
Articles do not require directors to hold our ordinary shares to qualify for election.

SHARES

Our registered capital is divided into
48,000,000 ordinary shares of nominal (par) value NIS 0.12 each.  There are no other classes of shares.  All of our outstanding shares are fully paid
and non-assessable.  The shares do not
entitle their holders to preemptive rights.

Subject to the rights of holders of shares
with special rights (which may be issued in the future), holders of paid up
ordinary shares are entitled to participate in the payment of dividends and, in
the event of our winding-up, in the distribution of assets available for
distribution, in proportion to the nominal value of their respective holdings
of the shares in respect of which such dividend is being paid or such
distribution is being made.  Our
Articles do not specify any time limit after which dividend entitlement lapses.

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Each ordinary share is entitled to one
vote on all matters to be voted on by shareholders, including the election of
directors.  Our ordinary shares do not have cumulative voting
rights.  As a result, the holders of our ordinary shares that represent a simple
majority of the voting power represented at a shareholders meeting and voting
at the meeting have the power to elect all of the directors put forward for
election, subject to specific requirements under the Companies Law with respect
to the election of Outside
Directors. (For further information as to these requirements,
seeItem 6C. 
Board Practices - Outside Directors.)

The Companies Law requires that extraordinary transactions with a controlling
shareholder or in which a controlling shareholder has a personal interest, and the engagement of a controlling
shareholder as an office holder or employee, be approved as provided for in the
Companies Law, which may necessitate the approval of at least one-third of the shares of
non-interested shareholders voting on the matter. 
(For further information as to such
provisions, seeItem 7A.  Major Shareholders - Duties of Shareholders.)

VARIATION OF RIGHTS

Shares with preferential rights relating,
among other things, to dividends, voting and repayment of share capital can be
created by adoption of a special resolution, which requires approval by at
least 75% of the voting power represented at the meeting in person or by proxy
and voting thereon.  In addition,
through a special resolution, we can subdivide issued and outstanding ordinary
shares.  Modification or abrogation of
the rights of any class of shares requires the written consent of the holders
of 75% of the issued shares of such a class or adoption of a special resolution
by affected shareholders voting separately as a class.

GENERAL MEETINGS

Our Articles provide that an annual
general meeting must be held at least once in every calendar year at such time
within a period of not more than 15 months after the holding of the last
preceding annual general meeting, and at such place, as may be determined by
the Board of Directors.  Our Board of
Directors may, in its discretion, convene additional shareholder meetings and,
pursuant to the Companies Law, must convene a meeting upon the demand of two
directors or one quarter of the directors in office or upon the demand of the
holder or holders of five percent of our issued share capital and one percent
of our voting rights or upon the demand of the holder or holders of five
percent of our voting rights.

Under the Companies Law, shareholder
meetings generally require prior notice of not less than 21 days.  The function of the annual general meeting
is to receive and consider the directors report, profit and loss account and
balance sheet, to elect directors and appoint auditors and fix their fees, and
to transact any other business which under the Articles or by law are to be
transacted at our annual general meeting.

The quorum required for either an ordinary
(regular) or an extraordinary (special) meeting of shareholders consists of at
least two shareholders present in person or by proxy and holding or representing
between them at least one-third of our voting power.  If a meeting is convened at the request of shareholders and no
quorum is present, it shall be dissolved. 
If a meeting is otherwise called and no quorum is present, the meeting
is adjourned to the same day one week later at the same time and place, or to
such other day time and place as our Chairman may determine with the consent of
a majority of the voting power represented at the meeting and voting on the
question of an adjournment.  Two or more
shareholders present in person or by proxy and holding or representing between
them at least one-third of our voting power shall constitute a quorum at the
adjourned meeting.

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Generally,
under the Companies Law and our
Articles, shareholder resolutions are deemed adopted if approved by the holders
of a simple majority of the voting rights represented at a meeting unless a
different majority is required by law or pursuant to our Articles.  The Companies Law provides that resolutions
on certain matters, such as amending a companys articles of association,
assuming the authority of the board of directors in certain circumstances,
appointing auditors, appointing external directors, approving certain
transactions, increasing or decreasing the registered share capital and
approving a merger with another company must be made by the shareholders at a
general meeting.  A company may
determine in its articles of association certain additional matters in respect
of which resolutions by the shareholders in a general meeting will be required.

A company such as us, incorporated prior
to February 1, 2000, is subject to various rules with respect to the transition
from being governed by the Israeli Companies Ordinance [New Version], 5743  1983, to being
governed by the Companies Law.  These
rules provide, among other things, that any amendment to the Memorandum or
Articles will generally require a resolution adopted by the holders of 75% or
more of the voting power represented and voting at a general meeting, and that
the approval of a merger will require a resolution adopted by the holders of
75% or more of the voting power represented and voting at a general meeting,
unless and until we amend our Articles in such manner to provide for a
different majority.

Subject to the Companies Law, a resolution
in writing signed by the holders of all of our ordinary shares entitled to vote
at a meeting of shareholders or to which all such shareholders have given their
written consent will be sufficient to adopt the resolution in lieu of a meeting.

LIMITATION ON RIGHTS TO OWN SHARES

Our Memorandum of Association, our
Articles and Israeli law do not restrict in any way the ownership or voting of
ordinary shares by non-residents or persons who are not citizens of Israel,
except with respect to subjects of nations which are in a state of war with
Israel. Fully
paid ordinary shares may be freely transferred pursuant to our articles of
association unless the transfer is restricted or prohibited by another
instrument.

DIVIDEND AND LIQUIDATION RIGHTS

Dividends on our ordinary shares may be
paid only out of profits and other surplus, as defined in the Companies Law, as
of the end of the most recent fiscal year or as accrued over a period of two
years, whichever is higher.  Our board
of directors is authorized to declare dividends, provided that there is no
reasonable concern that payment of the dividend will prevent us from satisfying
our existing and foreseeable obligations as they become due.  Notwithstanding the foregoing, dividends may
be paid with the approval of a court, provided that there is no reasonable
concern that payment of the dividend will prevent us from satisfying our
existing and foreseeable obligations as they become due.  In the event of our liquidation, after
satisfaction of liabilities to creditors, our assets will be distributed to the
holders of ordinary shares in proportion to their respective holdings.  This liquidation right may be affected by
the grant of preferential dividends or distribution rights to the holders of a
class of shares with preferential rights that may be authorized in the future.

CHANGE OF CONTROL

There
are no specific provisions of our Memorandum or Articles that would have an
effect of delaying, deferring or preventing a change in control of us or that
would operate only with respect to a merger, acquisition or corporate
restructuring involving us (or any of our subsidiaries). However, certain
provisions of the Companies Law may have such effect.

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The Companies Law includes provisions that allow a merger transaction
and requires that each company that is a party to a merger have the transaction
approved by its board of directors and a vote of the majority of its shares, at
a shareholders meeting called on at least 21 days prior notice.  For purposes of the shareholder vote, unless
a court rules otherwise, the merger will not be deemed approved if a majority
of the shares held by parties other than the other party to the merger, or by
any person who holds 25% or more of the shares or the right to appoint 25% or
more of the directors of the other party, vote against the merger.  Upon the request of a creditor of either
party to the proposed merger, the court may delay or prevent the merger if it
concludes that there exists a reasonable concern that as a result of the
merger, the surviving company will be unable to satisfy the obligations of any
of the parties to the merger.  In
addition, a merger may not be completed unless at least 70 days have passed
from the time that a proposal of the merger has been filed with the Israeli
Registrar of Companies.

The Companies Law also provides that an acquisition of shares of a
public company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 25% shareholder of the company and
there is not any other existing shareholder who holds 25% or more of the
company.  An acquisition of shares of a
public company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 45% shareholder of the company and
there is no existing majority shareholder in the company.  If following any acquisition of shares, the
acquirer will hold 90% or more of the companys shares, the acquisition may not
be made other than through a tender offer to acquire all of the shares of such
class.  If more than 95% of the
outstanding shares are tendered in the tender offer, all the shares that the
acquirer offered to purchase will be transferred to it.  However, the remaining minority shareholders
may seek to alter the tender offer consideration by court order.

Lastly, Israeli tax law treats some acquisitions, such as
stock-for-stock exchanges between an Israeli company and a foreign company,
less favorably than U.S. tax laws. For example, Israeli tax law may, under
certain circumstances, subject a shareholder who exchanges his ordinary shares
for shares in another corporation to taxation prior to the sale of the shares
received in such stock-for-stock swap.

NOTIFICATION OF SHAREHOLDING

There
are no specific provisions of our Memorandum or Articles governing the
ownership threshold above which shareholder ownership must be disclosed.

CHANGES IN CAPITAL

Our Articles require that changes in
capitalization must be adopted by special resolution, approved by the holders
of 75% or more of the voting power represented and voting at a general meeting.
Subject thereto, the conditions
imposed by our Memorandum and Articles governing changes in the capital, are no
more stringent than is required by Israeli law.

C.          MATERIAL
CONTRACTS

SALE OF SDPS BUSINESS

On November 24, 2003 we entered into an Asset Purchase Agreement with
Eastman Kodak Company, or Kodak, whereby Kodak agreed to acquire substantially
all of the assets and business of Scitex Digital Printing, Inc. (SDP), a
wholly-owned US subsidiary of Scitex, for $250 million in cash and assumed
substantially all of SDPs liabilities related to the ongoing business.  In addition, as part of the transaction, we
retained $12 million of SDPs cash balance at closing, producing  total cash consideration for the transaction
of $262 million.

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We completed the sale on January 5, 2004.  At closing, $15 million of the proceeds of the sale, which amount
was released 20 business days after closing, was placed in a custody account to
cover unknown federal tax liens. 
Furthermore, $10 million of the proceeds of the sale was placed in a
custody account to cover possible indemnification claims.  Such amount is to be held in the custody
account for two years following the closing date (until January 5, 2006)
subject to extension to allow any claims to be resolved.  In the absence of claims, the amount held in
the custody account could be reduced to $5 million at the first anniversary of
closing.  We made representations and warranties
in the purchase agreement for the benefit of Kodak, which generally survive for
a period of two years following the closing of the transaction or, for certain
matters, the expiration of the applicable statute of limitations.  We agreed to indemnify Kodak from damages or
losses arising from any breach of the representations and warranties, subject
to certain limitations (including customary deductibles, de minimis exceptions
and caps) detailed in the purchase agreement. 
We also agreed to indemnify Kodak against any damages or losses arising
from any breach of a covenant or agreement made by us in the purchase agreement
or from any liability of SDP that we retained under the terms of the purchase
agreement.  We are obligated to satisfy
these indemnification obligations to the extent not satisfied out of amounts in
the custody account discussed above.

The foregoing description of the Asset Purchase Agreement is
only a summary and does not purport to be complete and is qualified by
reference to the full text of the agreement filed by us as Exhibit 4(a)(2) in
Item 19.

COMBINATION OF SCITEX VISION AND SCITEX VISION INTERNATIONALOn December 22, 2002, we
entered into a Share Exchange Agreement with Scitex Vision Ltd. and Aprion
Digital Ltd.For a discussion
of this agreement, see Item 7B  Related Party Transaction under the caption
Combination of Scitex Vision and Scitex Vision International.

SALE OF CREO SHARES

On November 20, 2001, we
entered into an agreement with Dundee Securities Corporation, or Dundee, an
affiliate of Dundee Bancorp Inc., whereby Dundee agreed to act as our agent in
a private sale of up to 7.0 million common shares of Creo held by us in
consideration of up to a 4% commission out of the gross proceeds of such sale.  On November 29, 2001, we completed the sale,
through the agent, of the entire 7.0 million shares to various Canadian
institutional investors for approximately $77.7 million, less approximately
$1.6 million, representing commissions and expenses paid to Dundee. We made representations
and warranties in the agreement for the benefit of Dundee, which survive for a
period of two years following the closing of the transaction. In addition, we
agreed to indemnify Dundee and its representatives against all damages arising
from our breach of the representations and warranties.

On June 5, 2003, we entered into an
agreement with Raymond James Ltd. and Dundee, whereby Dundee and Raymond James
agreed to act as our agents in a private sale of 3.0 million common shares of
Creo held by us in consideration of a 1.75% commission out of the gross
proceeds of such sale.  On June 12,
2003, we completed the sale, through the agents, of the entire 3.0 million
shares to various financial institutions in Canada for approximately $24
million, less approximately $0.45 million, representing commissions and
expenses paid to the agents.We made representations and warranties in the Agreement for the
benefit of the agents, which survive for a period of two years following the
closing of the transaction. In addition, we agreed to indemnify the agents and
their representatives against all damages arising from our breach of the
representations and warranties.

On August 11, 2003, we entered into an
Agreement with Raymond James and Dundee, whereby Dundee and Raymond James
agreed to act as our agents in a private sale of the remainder of our Creo
shares - 3.25 million common shares of Creo held by us - in consideration of a
1.75% commission out of the gross proceeds of such sale.  On August 11, 2003, we completed the sale,
through the agents, of the entire 3.25 million shares to various financial
institutions in Canada for approximately $31 million, less approximately $0.5
million, representing commissions and expenses paid to the agents.We made representations and
warranties in the Agreement for the benefit of the agents, which survive for a
period of two years following the closing of the transaction. In addition, we
agreed to indemnify the agents and their representatives against all damages
arising from our breach of the representations and warranties.

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The foregoing description of the November 2001 Agreement,
the June 2003 Agreement and the August 2003 Agreement is only a summary and
does not purport to be complete and is qualified by reference to the full text
of the agreements filed by us as Exhibits in Item 19.

D.          EXCHANGE
CONTROLS

There
are currently no Israeli currency control restrictions on payments of dividends
or other distributions with respect to our ordinary shares or the proceeds from
the sale of the shares, except for the obligation of Israeli residents to file
reports with the Bank of Israel regarding certain transactions.  However, legislation remains in effect
pursuant to which currency controls can be imposed by administrative action at
any time.

E.          TAXATION

The following is a general summary only and should not be
considered as income tax advice or relied upon for tax planning purposes.
Holders of our ordinary shares should consult their own tax advisors as to the
United States, Israeli or other tax consequences of the purchase, ownership and
disposition of ordinary shares, including, in particular, the effect of any
foreign, federal, state or local taxes.

U.S. TAX CONSIDERATIONS

Subject to the limitations described herein, the following discussion
describes certain material U.S. federal income tax considerations applicable to
a U.S. holder (as defined below) regarding the acquisition, ownership and
disposition of our ordinary shares.  A
U.S. holder means a holder of our ordinary shares who is:

| |  | an
  individual citizen or resident of the United States;                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                    
| |  | a
  corporation (or another entity taxable as a corporation for U.S. federal
  income tax purposes) created or organized in the United States or under the
  laws of the United States or any political subdivision thereof;       
| |   |                                                                                                                                                                                                                                    
| |  | an estate,
  the income of which is subject to U.S. federal income tax regardless of its
  source; or                                                                                                                              
| |   |                                                                                                                                                                                                                                    
| |  | in general,
  a trust, if a U.S. court is able to exercise primary supervision over the
  administration of the trust and one or more United States persons have the
  authority to control all substantial decisions of the trust.

Unless
otherwise specifically indicated, this discussion does not consider the United
States tax consequences to a person that is not a U.S. holder (a non-U.S.
holder) and considers only U.S. holders that will own our ordinary shares as
capital assets.  This discussion is
based on current provisions of the Internal Revenue Code of 1986, as amended,
referred to as the Code, current and proposed Treasury regulations promulgated
under the Code administrative pronouncements and judicial decisions, all as in
effect today and all of which are subject to change, possibly with a
retroactive effect, which change could materially affect the U.S. federal
income tax considerations described herein. 
This discussion does not address all aspects of U.S. federal income
taxation that may be relevant to any particular U.S. holder based on the U.S.
holders individual circumstances.  In
particular, this discussion does not address the potential application of the
alternative minimum tax or the U.S. federal income tax consequences to U.S.
holders that are subject to special treatment, including, without limitation,
U.S. holders who:

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| |  | are
  broker-dealers or insurance companies;                                                            
| | - | --------------------------------------------------------------------------------------------------------
| |   |                                                                                                         
| |  | are
  tax-exempt organizations or retirement plans;                                                     
| |   |                                                                                                         
| |  | are
  financial institutions or financial services entities;                                            
| |   |                                                                                                         
| |  | hold
  ordinary shares as part of a straddle, hedge or conversion transaction with
  other investments; 
| |   |                                                                                                         
| |  | have
  acquired their shares upon the exercise of employee stock options or
  otherwise as compensation;
| |   |                                                                                                         
| |  | hold their
  shares through partnerships or other pass-through entities;                                
| |   |                                                                                                         
| |  | own
  directly, indirectly or by attribution at least 10% of our voting power; and                      
| |   |                                                                                                         
| |  | have a
  functional currency that is not the U.S. dollar.                                               

In addition,
this discussion does not address any aspect of state, local or non-U.S. tax
laws or the possible application of United States federal gift or estate tax.

U.S. holders should review the summary below under Israeli Taxation
for a discussion of Israeli tax consequences and certain other tax consequences
pursuant to the income tax treaty between the governments of Israel and the
U.S., which may be applicable to them.

U.S.
holders should consult their own tax advisors with respect to the specific U.S.
federal, state and local income tax consequences and any applicable non-U.S.
tax consequences to them of purchasing, holding or disposing of the ordinary
shares.  U.S. holders are also urged to
consult their own tax advisors concerning whether they will be eligible for
benefits under the income tax treaty between the governments of Israel and the
U.S.

U.S. HOLDERSOFORDINARYSHARES

TAXATIONOFDIVIDENDSPAIDONORDINARYSHARES

Subject to the discussion below under Tax Consequences if We are a
Passive Foreign Investment Company, a U.S. holder generally will be required
to include in gross income as ordinary dividend income the amount of any
distribution paid on our ordinary shares, including the amount of any Israeli
taxes withheld in respect of such distribution, on the date the distribution is
received, to the extent the distribution is paid out of our current or
accumulated earnings and profits, as determined for U.S. federal income tax
purposes. Distributions in excess of our earnings and profits will be applied
against and will reduce the U.S. holders basis in our ordinary shares and, to
the extent in excess of the basis, will be treated as gain from the sale or
exchange of our ordinary shares. 
Distributions of our current or accumulated earnings and profits will
not qualify for the dividends-received deduction applicable in certain cases to
U.S. corporations.

Distributions of our current or accumulated earnings and profits paid
in foreign currency to a U.S. holder, and the amount of any Israeli withholding
tax thereon, will be included in the gross income of a U.S. holder in an amount
equal to the U.S. dollar value of such foreign currency calculated by reference
to the exchange rate in effect on the day the distribution is received by the
U.S. holder, regardless of whether such foreign currency is converted into U.S.
dollars.  If a U.S. holder converts
dividends paid in foreign currency into U.S. dollars on the day such dividends
are received, the U.S. holder generally should not be required to recognize
foreign currency gain or loss with respect to such conversion.  If the foreign currency received in the
distribution is not converted into U.S. dollars on the date of receipt, any
foreign currency gain or loss recognized upon a subsequent conversion or other
disposition of such foreign currency generally will be treated as U.S. source
ordinary income or loss.

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Subject to certain conditions and limitations, any Israeli withholding
tax imposed with respect to a distribution of our current or accumulated
earnings and profits generally will be eligible for credit against the
recipient U.S. holders U.S. federal income tax liability or, at the U.S.
holders election, may be claimed as a deduction against income in determining
such tax liability.  Distributions of
our current or accumulated earnings and profits to U.S. holders will be treated
as foreign source income and generally will be categorized as passive income
or, in the case of certain holders, financial services income for purposes of
computing the U.S. foreign tax credit allowable to U.S. holders.  U.S. holders are advised that any Israeli
tax paid under circumstances in which an exemption from such tax was available
will not give rise to a deduction or credit for foreign taxes paid for U.S.
federal income tax purposes.  The
calculation of allowable foreign tax credits and, in the case of a U.S. holder
that elects to deduct foreign taxes, the availability of deductions for foreign
taxes paid involve the application of complex rules that depend on a U.S.
holders particular circumstances. Accordingly, U.S. holders should consult
their own tax advisors regarding their eligibility for foreign tax credits or
deductions.

TAXATIONOFTHEDISPOSITIONOFORDINARYSHARES

Subject to the discussion below under Tax Consequences if We are a
Passive Foreign Investment Company, upon the sale, exchange or other
disposition of our ordinary shares, a U.S. holder generally will recognize
capital gain or loss in an amount equal to the difference between the U.S.
dollar value of the amount realized on the sale, exchange or other disposition
and the U.S. holders adjusted tax basis, determined in U.S. dollars, in the
ordinary shares.  Capital gain from the
sale, exchange or other disposition of ordinary shares held for one-year or
less will be short-term capital gain or, if held for more than one-year,
long-term capital gain. In the case of individual U.S. holders, long-term
capital gains generally are subject to U.S. federal income tax at preferential
rates (generally, a maximum rate of 15%) and short-term capital gains generally
are subject to tax at ordinary income rates.

Gain or loss recognized by a U.S. holder on a sale, exchange or other
disposition of our ordinary shares generally will be treated as U.S. source
income or loss for U.S. foreign tax credit purposes.  However, under certain circumstances and subject to the
limitations specified in the income tax treaty between the governments of
Israel and the U.S., such gain or loss recognized by a U.S. holder who
qualifies as a resident of the U.S. (within the meaning of such treaty) and who
is entitled to claim the benefits afforded to such resident under such treaty
may be treated as foreign-source for U.S. foreign tax credit purposes.  U.S. holders should consult their own tax
advisors regarding the application of the U.S. foreign tax credit limitations
to gain or loss recognized on the sale, exchange or other disposition of our
ordinary shares.

The deductibility of a capital loss recognized on the sale, exchange or
other disposition of ordinary shares is subject to significant
limitations.  U.S. holders should
consult their own tax advisors in this regard.

A U.S. holder that receives foreign currency upon disposition of
ordinary shares and converts the foreign currency into U.S. dollars after the
settlement date or trade date (whichever date the U.S. holder is required to
use to calculate the value of the proceeds of sale) generally will have foreign
exchange gain or loss based on any appreciation or depreciation in the value of
the foreign currency against the U.S. dollar, which will generally be U.S.
source ordinary income or loss.

Tax Rates.  The Jobs and Growth Tax Relief
Reconciliation Act of 2003 (effective for tax years after December 31, 2002
through December 31, 2008), reduces the individual tax rates on both capital
gains and certain dividend income (qualified dividend income).  The top individual rate on adjusted capital
gains is generally reduced from 20% to 15% (5% for taxpayers in the lower
brackets) and on qualified dividend income from 38.6% to 15%.  The reduced rates on long-term capital gains
and qualified dividend income apply to (i) sales and exchanges (and payments
received) on or after May 6, 2003 and (ii) qualified dividend income received
after December 31, 2002, respectively.

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Qualified dividend income generally includes dividends paid by non-U.S.
corporations if, among other things, certain minimum holding periods are met
and either (i) the shares with respect to which the dividend has been paid are
readily tradable on an established securities market in the U.S. or (ii) the
non-U.S. corporation paying such a dividend is eligible for the benefits of a
comprehensive U.S. income tax treaty (such as the income tax treaty between the
governments of Israel and the U.S.) which provides for the exchange of
information.  We currently believe that
if we were to pay any dividends with respect to our ordinary shares, the
dividends would constitute qualified dividend income for U.S. federal income
tax purposes; provided, however, that we are not treated as a passive foreign
investment company for U.S. federal income tax purposes (see discussion below
under Tax Consequences if We are a Passive Foreign Investment Company).  The top U.S. federal income tax rate
applicable to income received by U.S. holders who are corporations for U.S. federal
income tax purposes is 35%.  U.S. holders
should consult their own tax advisor regarding the specific U.S. tax rates
applicable to any distribution made by us with respect to our ordinary shares
or gain realized on the sale, exchange or other disposition of our ordinary
shares, based on their particular circumstances.

TAXCONSEQUENCESIFWEAREAPASSIVEFOREIGNINVESTMENTCOMPANY

We will be a passive foreign investment company, or PFIC, if 75% or
more of our gross income in a taxable year, including the pro rata share of the
gross income of any company, U.S. or foreign, in which we are considered to
own, directly or indirectly, 25% or more of the shares by value, is passive
income. Alternatively, we will be considered to be a PFIC if at least 50% of
our assets in a taxable year, averaged over the year and ordinarily determined
based on fair market value and including the pro rata share of the assets of
any company in which we are considered to own, directly or indirectly, 25% or
more of the shares by value, are held for the production of, or produce,
passive income.

If we were a PFIC, and a U.S. holder did not make an election to treat
us as a qualified electing fund (a QEF) as described below, excess
distributions by us to a U.S. holder would be taxed in a special way. Excess
distributions are amounts received by a U.S. holder on shares in a PFIC in any
taxable year that exceed 125% of the average distributions received by the U.S.
holder from the PFIC in the shorter of:

| |  | the three
  previous taxable years; or                                                 
| | - | ---------------------------------------------------------------------------------------
| |   |                                                                                        
| |  | the U.S.
  holders holding period for ordinary shares before the present taxable year.

Excess
distributions must be allocated ratably to each day that a U.S. holder has held
shares in a PFIC.  A U.S. holder would
then be required to include amounts allocated to the current taxable year in
its gross income as ordinary income for that year. Further, a U.S. holder would
be required to pay tax on amounts allocated to each prior taxable year at the
highest rate in effect for that year on ordinary income and the tax would be
subject to an interest charge at the rate applicable to deficiencies for income
tax.

The entire amount of gain that is realized by a U.S. holder upon the
sale or other disposition of our ordinary shares will also be treated as an
excess distribution and will be subject to tax as described above.

A U.S. holders tax basis in our ordinary shares that were inherited
from a deceased person who was a U.S. holder would not receive a step-up to
fair market value as of the date of the deceaseds death but would instead be
equal to the deceaseds basis, if lower.

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The special PFIC rules described above will not apply to a U.S. holder
if the U.S. holder makes an election to treat us as a QEF in the first taxable
year in which the U.S. holder owns ordinary shares or in which we are a PFIC,
whichever is later, and if we comply with specified reporting requirements.
Instead, a shareholder of a QEF is required for each taxable year in which we
are a PFIC to include in income a pro rata share of the ordinary earnings of the
QEF as ordinary income and a pro rata share of the net capital gain of the QEF
as long-term capital gain, subject to a separate election to defer payment of
taxes. If deferred, the taxes will be subject to an interest charge. We will
supply U.S. holders with the information needed to report income and gain under
a QEF election if we are classified as a PFIC.

The QEF election is made on a shareholder-by-shareholder basis.  Once made, the election applies to all
subsequent taxable years of the U.S. holder in which it holds our ordinary
shares and for which we are a PFIC and can be revoked only with the consent of
the Internal Revenue Service, or IRS.  A
shareholder makes a QEF election by attaching a completed IRS Form 8621,
including the required election statement and the PFIC annual information
statement, to a timely filed U.S. federal income tax return for the year of the
election.  The election statement also
must be filed with the IRS Service Center in Philadelphia.  In addition, an electing U.S. holder must
act each year to maintain a QEF election by attaching a Form 8621 to the U.S.
holders timely filed tax return and comply with any other requirements as
specified by the IRS.

A U.S. holder of PFIC shares which are publicly traded could elect to
mark the stock to market annually, recognizing as ordinary income or loss each
year an amount equal to the difference as of the close of the taxable year
between the fair market value of the PFIC shares and the U.S. holders adjusted
tax basis in the PFIC shares. Losses would be allowed only to the extent of net
mark-to-market gain previously included by the U.S. holder under the election
for prior taxable years. If the mark-to-market election were made, then the
rules presented above would not apply for periods covered by the election.

If a QEF election or mark-to-market election is not made for the first
taxable year in which the U.S. holder holds our ordinary shares or in which we
are a PFIC, whichever is later, then special rules will apply and U.S. holders
should consult their tax advisors regarding the application of those rules.

Based on the opinion of our tax consultants, we do not believe we were
a PFIC in 2003.  However, there can be
no assurance that we will not become a PFIC in 2004 or in subsequent years.  The tests for determining PFIC status are
applied annually and it is difficult to make accurate predictions of future
income and assets, which are relevant to this determination.  Accordingly, there can be no assurance that
we will not become a PFIC in 2004 or at a later stage.  U.S. holders who hold ordinary shares during
a period when we are a PFIC will be subject to these rules, even if we cease to
be a PFIC, subject to specified exceptions for U.S. holders who made a QEF
election.

U.S. holders are urged to consult their tax
advisors about the PFIC rules, including eligibility for and the manner and
advisability of making, the QEF elections or the mark-to-market election.

NON-U.S. HOLDERSOFORDINARYSHARES

Except as described in Information Reporting and Backup Withholding
below, a non-U.S. holder of ordinary shares generally will not be subject to
U.S. federal income or withholding tax on the payment of dividends on, and the
proceeds from the disposition of, ordinary shares, unless:

| |  | the item is effectively
  connected with the conduct by the non-U.S. holder of a trade or business in
  the United States;                                                                                                           
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                      
| |  | in the case
  of a resident of a country which has a treaty with the United States, the
  item is attributable to a permanent establishment;                                                                                         
| |   |                                                                                                                                                                                                                                      
| |  | in the case
  of an individual, the item is attributable to a fixed place of business in
  the United States;                                                                                                                        
| |   |                                                                                                                                                                                                                                      
| |  | the non-U.S.
  holder is an individual who holds the ordinary shares as a capital asset and
  is present in the United States for 183 days or more in the taxable year of
  the disposition and does not qualify for an exemption; or

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| |  | the non-U.S.
  holder is subject to tax under the provisions of U.S. tax law applicable to
  U.S. expatriates.
| | - | --------------------------------------------------------------------------------------------------------------

INFORMATIONREPORTINGANDBACKUPWITHHOLDING

Dividend payments with respect to ordinary shares and proceeds from the
sale or other disposition of ordinary shares may be subject to information
reporting to the IRS and possible U.S. backup withholding at a current rate of
28%.  Backup withholding will not apply,
however, to a holder who furnishes a correct taxpayer identification number or
certificate of foreign status and makes any other required certification or who
is otherwise exempt from backup withholding. 
U.S. persons who are required to establish their exempt status generally
must provide IRS Form W-9 (Request for Taxpayer Identification Number and
Certification).  Non-U.S. holders
generally will not be subject to U.S. information reporting or backup
withholding.  However, such holders may
be required to provide certification of non-U.S. status (generally on IRS Form
W-8BEN) in connection with payments received in the U.S. or through certain
U.S.-related financial intermediaries.

Backup withholding is not an additional tax.  Amounts withheld as backup withholding may be credited against a
holders U.S. federal income tax liability, and a holder may obtain a refund of
any excess amounts withheld by filing the appropriate claim for refund with the
IRS and furnishing any required information.

ISRAELI TAXATION

The following summary describes the current tax structure
applicable to companies incorporated in Israel, with special reference to its
effect on us.  It also discusses Israeli
tax consequences material to persons purchasing our ordinary shares.  To the extent that the summary is based on
new tax legislation yet to be judicially or administratively interpreted, we
cannot be sure that the views expressed will accord with any future
interpretation by the Israeli tax authorities or courts.  The summary is not intended, and should not be construed, as
legal or professional advice and does not exhaust all possible tax
considerations.  Accordingly, you should
consult your tax advisor as to the particular tax consequences of an investment
in our ordinary shares.

TAX REFORM

On January 1, 2003, the Law for Amendment of the Income Tax Ordinance
(Amendment No. 132), 5762-2002, known as the tax reform, came into effect.

The tax reform, aimed at broadening the categories of taxable income
and reducing the tax rates imposed on employment income, introduced, among
other things, the following provisions:

| |  | Reduction of
  the tax rate levied on capital gains (other than gains deriving from the sale
  of listed securities) derived after January 1, 2003, to a general rate of 25%
  for both individuals and corporations. Regarding assets acquired prior to
  January 1, 2003, the reduced tax rate will apply to a proportionate part of
  the gain, in accordance with the holding periods of the asset, before or
  after January 1, 2003, on a linear basis;                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Imposition
  of Israeli tax on all income of Israeli residents, individuals and
  corporations, regardless of the territorial source of income, including
  income derived from passive sources such as interest, dividends and
  royalties;                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Introduction
  of controlled foreign corporation (CFC) rules into the Israeli tax structure.
  Generally, under such rules, an Israeli resident who holds, directly or
  indirectly, 10% or more of the rights in a foreign corporation whose shares
  are not publicly traded (or which has offered less than 30% of its shares or
  any rights to its shares to the public), in which more than 50% of the rights
  are held directly or indirectly by Israeli residents, and a majority of whose
  income in a tax year is considered passive income, will be liable for tax on
  the portion of such income attributed to his holdings in such corporation, as
  if such income were distributed to him as a dividend;

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| |  | Imposition
  of capital gains tax on capital gains realized as of January 1, 2003 by
  individuals who are Israeli residents, from the sale of shares of publicly
  traded companies on the Tel Aviv Stock Exchange, or TASE, and from the sale
  of shares of publicly traded Israeli companies on certain other stock
  exchanges (such gain was previously exempt from capital gains tax in Israel
  in certain cases). For information with respect to the applicability of
  Israeli capital gains taxes on the sale of ordinary shares, see Capital Gains Tax below;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Effectuation
  of a new regime for the taxation of shares and options issued to employees,
  officers and directors; and                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Introduction
  of tax at a rate of 25% on dividends paid by one Israeli company to another
  (which are generally not subject to tax), if the source of such dividends is
  income that was derived outside of Israel.                                                                                                                                                                                                                                                                                                                                                      

GENERALCORPORATETAXSTRUCTURE

Generally, Israeli companies are subject to tax at the rate of 36% of
taxable income (and are subject to Capital
Gains Tax at a rate of 25% for capital gains, other than gains deriving
from the sale of listed securities, derived
after January 1, 2003).  However,
the effective tax rate payable by a company that derives income from an
approved enterprise (as defined below) may be considerably less, as further
discussed below.

On June 2, 2004, the Israeli government introduced a bill to the
Israeli parliament proposing, among others, changes to the corporate tax rate.
The bill proposes to reduce the corporate tax rate to 35% for the 2004 tax
year, 34% for the 2005 tax year, 32% for the 2006 tax year and 30% for the 2007
tax year and thereafter. In order to enact the bill as law, the bill must be
approved by the Israeli parliament and published. The bill might be modified
prior to enactment or might not be enacted at all.

TAXBENEFITSUNDERTHELAWFORTHEENCOURAGEMENTOFCAPITALINVESTMENTS, 1959

The Law for the Encouragement of Capital Investments, 1959, as amended,
or the Investment Law, provides that upon application to the Investment Center
of the Israeli Ministry of Industry, Trade and Labor, a proposed capital
investment in eligible facilities may be designated as an Approved
Enterprise.  The applicable law
regarding Approved Enterprise programs is scheduled to expire on June 30, 2004.  Accordingly, requests for new programs or expansions
that are not approved on or before June 30, 2004 will not confer any tax
benefits, unless the term of the law will be extended. Each certificate of
approval for an Approved Enterprise relates to a specific investment program
delineated both by its financial scope, including its capital sources, and by
its physical characteristics, such as the equipment to be purchased and
utilized pursuant to the program.  The
tax benefits derived from any such certificate of approval relate only to
taxable income derived from  the
specific Approved Enterprise.  If a
company has more than one approval or only a portion of its capital investments
are approved, its effective tax rate is the result of a weighted combination of
the applicable rates.  The tax benefits
under the law are not generally available with respect to income derived from
products manufactured outside of Israel.

Taxable income of a company derived from an Approved Enterprise
(including income generated by a company from the grant of a usage right with
respect to know-how developed by the Approved Enterprise, income generated from
royalties and income derived from a service which is auxiliary to such usage
right or royalties, provided that such income is generated within the Approved
Enterprises ordinary course of business) is subject to company tax at the
maximum rate of 25%, rather than the usual rate of 36%, for the Benefit
Period.  The Benefit Period is seven
years (and under certain circumstances, as further detailed below, ten years),
commencing with the year in which the Approved Enterprise first generates
taxable income, and is limited to 12 years from commencement of production or
14 years from the date of approval, whichever is earlier.

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A company that has an Approved Enterprise program is eligible for
further tax benefits if it qualifies as a foreign investors company.  A foreign investors company is a company
that more than 25% of its shares of capital stock and combined share and loan capital
is owned by non-Israeli residents.  A
company that qualifies as a foreign investors company and has an Approved
Enterprise program is eligible for tax benefits for a ten-year benefit period
and to a reduced tax rate of 10% to 20% depending on the level of foreign
investment in each year.

Under an amendment to the
Investments Law that was made within the framework of the tax reform (described
above), it was clarified that tax benefits under the Investments Law shall also
apply to income generated by a company from the grant of a usage right with
respect to know-how developed by the Approved Enterprise, income generated from
royalties, and income derived from a service which is auxiliary to such usage
right or royalties, provided that such income is generated within the Approved
Enterprises ordinary course of business.

A company owning an Approved Enterprise may elect to forego certain
government grants extended to Approved Enterprises in return for an alternative
package of benefits.  Under the
alternative package, the companys undistributed income derived from an
Approved Enterprise will be exempt from tax for a period of between two and ten
years from the first year of taxable income, depending on the geographic
location of the Approved Enterprise within Israel, and the company will be eligible
for the tax benefits under the law for the remainder of the Benefit Period.

The Investment Center bases its decision of whether to approve or
reject a companys application for designation as an Approved Enterprise, among
other things, on criteria set forth in the law and related regulations, the
then prevailing policy of the Investment Center and the specific objectives and
financial criteria of the applicant. 
Accordingly, a company cannot be certain in advance whether its
application will be approved.  In
addition, the benefits available to an Approved Enterprise are conditional upon
compliance with the conditions stipulated in the law and related regulations
and the criteria set forth in the specific certificate of approval.  In the event that a company violates these
conditions, in whole or in part, it may be required to refund the amount of tax
benefits, in whole or in part, plus an amount linked to the Israeli consumer
price index and interest.

A major portion of our production facilities have been granted the
status of Approved Enterprises.  Under the Investments Law, income arising
from our Approved Enterprises facilities is tax-free under the alternative
package of benefits described above for a period of two years beginning with
the first year in which the company generated taxable income, and thereafter,
entitled to reduced tax rates based on the level of foreign ownership for
specified periods.  We have derived, and
expect to continue to derive, a substantial portion of our income from our Approved
Enterprises facilities.  Subject to
compliance with applicable requirements, the benefits for most of our
production facilities in Israel will continue until termination in 2009. See above in Item 5B under the caption Tax Audits
regarding a dispute with the Israeli tax authority in this respect.

All dividends are considered to be attributable to the entire
enterprise and their effective tax rate is the result of a weighted combination
of the applicable tax rates. We currently intend to reinvest the amount of our
income and not to distribute such income as a dividend.  In the event that we do pay a cash dividend
from income that is derived from our Approved Enterprises pursuant to the
alternative package of benefits, which income would normally be tax-exempt, we
would be required to pay tax on the amount intended to be distributed as
dividends at the rate which would have been applicable had we not elected the
alternative package of benefits, which rate is ordinarily up to 25%, and to
withhold at source on behalf of the dividend recipient an additional 15% of the
amount distributed as dividends.

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The law also provides that an Approved Enterprise is entitled to
accelerated depreciation on its property and equipment that are included in an
approved investment program.

TAXBENEFITSFORRESEARCHANDDEVELOPMENT

Israeli tax law allows, under specified circumstances, a tax deduction
for expenditures in the year incurred, including capital expenditures, in
scientific research and development projects, if the expenditures are approved
by the relevant Israeli government ministry and the research and development is
for the promotion of the company and carried out by or on behalf of the company
seeking such deduction.  However, the
amount of such deductible expenses must be reduced by the sum of any funds
received through government grants for the finance of such scientific research
and development projects.  Expenditures
not so approved are deductible over a three-year period.

TAXBENEFITSUNDERTHELAWFORTHEENCOURAGEMENTOFINDUSTRY(TAXES), 1969

According to the Law for the Encouragement of Industry (Taxes), 1969,
an Industrial Company is a company located in Israel, at least 90% of the
income of which, in any tax year, exclusive of income from government loans,
capital gains, interest and dividends, is derived from an Industrial
Enterprise owned by it.  An Industrial
Enterprise is defined as an enterprise owned by an industrial company whose
major activity in a given tax year is industrial production activity.  Although Scitex Vision believes that it
currently qualifies as an Industrial Company within the definition of the Law
for the Encouragement of Industry (Taxes), 1969, it is currently in dispute
with the Israeli tax authority, as discussed in Item 5B under the caption Tax
Audits.

Under the law, Industrial Companies are entitled to preferred corporate
tax benefits, among others, such as:

| |  | deduction of
  purchases of know-how and patents over an eight-year period for tax purposes;                                                                                     
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                  
| |  | deduction
  over a three-year period of expenses involved with the issuance and listing
  of shares on a stock exchange;                                                         
| |   |                                                                                                                                                                                  
| |  | the right to
  elect, under certain conditions, to file a consolidated tax return with
  related Israeli Industrial Companies that satisfy conditions set forth in the
  law; and
| |   |                                                                                                                                                                                  
| |  | accelerated
  depreciation rates on equipment and buildings.                                                                                                                     

Eligibility
for the benefits under the law is not subject to receipt of prior approval from
any governmental authority.  However,
the Israeli tax authorities may determine that Scitex Vision does not qualify
as an Industrial Company (see above in Item 5B under the caption Tax
Audits).  In addition, it might not
continue to qualify as an Industrial Company in the future.  As a result of either of the foregoing, the
benefits described above might not be available to Scitex Vision in the future.

SPECIAL PROVISIONS RELATING TO TAXATION UNDER INFLATIONARY CONDITIONS

The Income Tax Law (Inflationary Adjustments), 1985 represents an
attempt to overcome the problems presented to a traditional tax system by an
economy undergoing inflation.  The law
is highly complex.  Its features that
are material to us can be described as follows:

| |  | A special
  tax adjustment for the preservation of equity whereby certain corporate
  assets are classified broadly into fixed (inflation immune) assets and
  non-fixed (soft) assets.  Where a
  companys equity, as defined in the law, exceeds the depreciated cost of its
  fixed assets, as defined in the law, the company may take a deduction from
  taxable income that reflects the effect of multiplication of the annual rate
  of inflation on such excess, up to a ceiling of 70% of taxable income in any
  single tax year, with the unused portion carried forward, linked to the
  increase in the consumer price index. 
  If the depreciated cost of fixed assets exceeds a companys equity,
  then the excess multiplied by the annual rate of inflation is added to
  taxable income;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

89

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| |  | Subject to
  certain limitations set forth in the law, depreciation deductions on fixed
  assets and losses carried forward are adjusted for inflation based on the
  increase of the Israeli consumer price index; and                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                            
| |  | Taxable
  gains on certain listed securities, which are taxed at a reduced tax rate
  with respect to individuals following the tax reform (and which were
  previously exempt from tax), are taxable at the companys tax rate in certain
  circumstances.

CAPITALGAINSTAX

Israeli law generally imposes on residents and non-residents of Israel
a tax on the sale of any capital assets by residents of Israel, as defined for
Israeli tax purposes, and on the sale of assets in Israel, including shares in
Israeli companies (and our ordinary shares), by both residents and
non-residents of Israel, unless a specific exemption is available or unless a
tax treaty between Israel and the shareholders country of residence provides
otherwise.  The law distinguishes
between the inflationary surplus and the real gain.  The inflationary surplus is a portion of the total capital gain
which is equivalent to the increase of the relevant assets purchase price that
is attributable to the increase in the Israeli consumer price index or, in
certain circumstances, a foreign currency exchange rate, between the date of
purchase and the date of sale.  The real
gain is the excess of the total capital gain over the inflationary
surplus.

Pursuant to the tax reform, generally,
capital gains tax is imposed on Israeli residents at a rate of 15% on real
gains derived on or after January 1, 2003, from the sale of shares in
(i) companies publicly traded on the TASE; or (ii) Israeli companies
publicly traded on Nasdaq, or on a recognized stock exchange in a country that
has a treaty for the prevention of double taxation with Israel; or (iii)
companies dually traded on both the TASE and Nasdaq, such as Scitex, or on a
recognized stock exchange or a regulated market outside of Israel.  This tax rate is contingent upon the
shareholder not claiming a deduction for financing expenses, and does not apply
to: (i) the sale of shares to a relative (as defined in the Tax Reform);
(ii) the sale of shares by dealers in securities; (iii) the sale of shares by
shareholders that report in accordance with the Inflationary Adjustment Law; or
(iv) the sale of shares by shareholders who acquired their shares prior to
an initial public offering (that are subject to a different tax
arrangement).  The tax basis of shares
acquired prior to January 1, 2003 will be determined in accordance with the
average closing share price in the three trading days preceding January 1,
2003.  However, a request may be made to
the tax authorities to consider the actual adjusted cost of the shares as the
tax basis if it is higher than such average price. In December 2003, regulations
promulgated pursuant to the Tax Reform were amended so that, in certain
circumstances, capital gains derived from the sale and subsequent (same day)
repurchase of shares traded on the TASE or from shares of Israeli companies
publicly traded on a recognized stock exchange or regulated market in a country
that has a treaty for the prevention of double taxation with Israel, may be
taxed at a rate equal to the withholding tax rate applicable to revenues
derived from such sale. In accordance with an announcement published by the
Israeli Income Tax Commission, the withholding tax rate applicable to the sale
of such shares until the end of 2003 tax year, which was equal at such time to
1% of the revenues generated in their sale, was determined as the final tax
rate applicable to such sale. The amended regulations also determined that the
day of such sale and repurchase shall be considered the new date of purchase of
such shares. The foregoing is not applicable to: (i) dealers in securities;
(ii) shareholders that report in accordance with the Inflationary Adjustments
Law; (iii) shareholders who acquired their shares prior to an initial public
offering; (iv) in some cases, shareholders that received their shares within
the framework of an employer-employee relationship; or (v) shareholders claiming
a deduction for financing expenses in connection with such shares. The
regulations further provide that with respect to shares of Israeli companies
traded on a stock exchange outside of Israel, the market price determined at
the close of the trading day preceding the day of the sale and repurchase of
such shares, will constitute the new tax basis for any future sale of such
shares.

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Non-Israeli residents are exempt from Israeli
capital gains tax on any gains derived from the sale of shares publicly traded
on the TASE, provided such gains do not derive from a permanent establishment
of such shareholders in Israel, and are exempt from Israeli capital gains tax
on any gains derived from the sale of shares of Israeli companies publicly
traded on a recognized stock exchange outside of Israel, provided, however,
that such capital gains are not derived from a permanent establishment in
Israel and that such shareholders did not acquire their shares prior to an
initial public offering.  In addition,
non-Israeli companies will not be entitled to the exemption with respect to
capital gains derived from the sale of shares of Israeli companies traded on
the TASE if an Israeli resident (i) has a controlling interest of 25% or more
in such non-Israeli company, or (ii) is the beneficiary or is entitled to 25%
or more of the revenues or profits of such non-Israeli company, whether
directly or indirectly.

In some instances, where our shareholders may
be liable to Israeli tax on the sale of our ordinary shares, the payment of the
consideration may be subject to the withholding of Israeli tax at the source.

U.S.-Israel Income Tax Treaty

Pursuant to an income tax treaty between the governments of the United
States and Israel, the sale of shares by a person who qualifies as a resident
of the United States within the meaning of the treaty and who is entitled to
claim the benefits afforded to a resident by the treaty will not be subject to
Israeli capital gains tax.  This
exemption does not apply if (i) the person holds, directly or indirectly,
shares representing 10% or more of our voting power during any part of the
12-month period preceding the applicable sale, or (ii) the capital gains from
such sale can be allocated to a permanent establishment in Israel.  However, under the circumstances and subject
to the limitations specified in the Israeli-U.S. treaty, the person would be
permitted to claim a credit for the capital gains tax paid in Israel against
the U.S. income tax imposed with respect to the applicable sale, subject to the
limitations in U.S. laws applicable to foreign tax credits.

TAXATION OF DIVIDENDS

Non-residents
of Israel are subject to income tax on income accrued or derived from sources
in Israel.  These sources of income
include passive income such as dividends, royalties and interest, as well as
non-passive income from services rendered in Israel.  On distributions of dividends other than bonus shares, or stock
dividends, we would be required to withhold income tax at the rate of 25%.  If the income out of which the dividend is
being paid is attributable to an Approved Enterprise under the Law for the
Encouragement of Capital Investments, 1959, the rate is 15%.  A different rate may be provided in a treaty
between Israel and the shareholders country of residence.  Under the U.S.-Israel tax treaty, if the
income out of which the dividend is being paid is not attributable to an
Approved Enterprise, then income tax with respect to shareholders that are U.S.
corporations holding at least 10% of our voting power in the twelve-month
period preceding the distribution of such dividends, is required to be withheld
at the rate of 12.5%.

Under an amendment to the Inflationary Adjustments Law, non-Israeli
companies may be subject to Israeli taxes on the sale of securities of an
Israeli company, subject to the provisions of any applicable taxation treaty or
unless a specific exemption is available.

For information with respect to the
applicability of Israeli capital gains taxes on the sale of ordinary shares by
United States residents, see Capital Gains Tax above.

F.          DIVIDENDS
AND PAYING AGENTS.

Not Applicable.

91

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G.          STATEMENT
BY EXPERTS.

Not Applicable.

H.          DOCUMENTS
ON DISPLAY

We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, applicable to foreign private issuers and,
in accordance therewith, are obligated to file reports, including annual
reports on Form 20-F, and other information with the SEC relating to our
business, financial condition and other matters. You may examine such reports,
exhibits and other information filed by us with the SEC, without charge, at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C., 20549. You may also receive copies of these
materials by mail from the SECs Public Reference Branch at 450 Fifth Street,
N.W., Washington, D.C., 20549, at prescribed rates. For more information on the
public reference rooms, call the SEC at 1-800-SEC-0330.  The SEC maintains an Internet website at
http://www.sec.gov that contains reports, proxy statements, information
statements and other material that are filed through the SECs Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. We began filing through the
EDGAR system on November 6, 2002.

As
a foreign private issuer, we are exempt from the rules under the Exchange Act
prescribing the furnishing and content of proxy statements, and our officers,
directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of the
Exchange Act.  In addition, we are not
required under the Exchange Act to file periodic reports and financial
statements with the SEC as frequently or as promptly as United States companies
whose securities are registered under the Exchange Act.

I.          SUBSIDIARY
INFORMATION

Not Applicable.

ITEM
11.          QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our functional currency and that of most of our
consolidated subsidiaries is the U.S. dollar. 
Accordingly, we have balance sheet exposure deriving from the gap
between assets and liabilities in each currency other than the dollar.  This exposure is limited, mainly for
balances in European currencies and New Israeli Shekels, or NIS.  We hedge certain assets or liabilities
denominated in currencies other than the dollar, by balancing debt with
receivables in the same currency.

We do not actively hedge interest rate
exposure or engage in other transactions intended to manage risks relating to
interest rate fluctuations.  The interest income on our cash equivalents and
short-term investments is sensitive to changes in the general level of market
interest rates.  We mitigate the impact
of fluctuations in interest rates primarily through diversification and by
limiting the average duration of our interest-bearing investment
portfolio.  The interest rate for the
credit lines we use varies according to changes in the dollar LIBOR rate as
well as the Euro LIBOR rate.

92

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---

PRESENTATIONOFEXCHANGERATEANDINTERESTRATERISK(POSITIONASOFDECEMBER31, 2003)

The table below details the balance sheet exposure,
by currency, as of December 31, 2003 (at fair value).  All data in the table has been translated for convenience into
the dollar equivalent (in millions). 
Explanatory notes are provided below the table.

|Balance
  sheet exposure by currency as of December 31, 2003
|------------------------------------------------------------
|                                                            
|European
  Currencies                                       
|                                                            
|$ 16.8                                                      

| | The amounts shown in the table represent monetary assets less
  liabilities.                                                                                                                                            
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                         
| | The table does not include data with respect to balance sheet
  exposure for certain equity investments in which the functional currency was
  the local currency, since those balances do not create any such exposure.
|  |                                                                                                                                                                                                                         
| | European Currencies include all European currency exposure.                                                                                                                                                           

(See Item
5. Operating And Financial Review And Prospects - Impact of Inflation and
Exchange Rates and Note 13 to our consolidated financial statements included
in this Annual Report.)

For information about forward-exchange
contracts please see Note 13a to our Consolidated Financial Statement included in this Annual Report.

ITEM 12.     DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES

Not
applicable.

P A R T  I I

ITEM 13.     DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES

Not
applicable.

ITEM 14.     MATERIAL
MODIFICATIONS IN THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

In
December 2003, our shareholders approved amendments to Article 69 of our
Articles of Association, relating to the procedures governing notices, as
described in Item 3 of our Notice and Proxy Statement for the Annual General
Meeting of our shareholders held on December 31, 2003, included in our report
on Form 6-K, filed with the SEC on April 1, 2004, which is incorporated herein
by reference.

In
April 2004, our shareholders approved additional amendments to our Articles of
Association, as follows:

| | Article 53 was amended,
  with respect to the source of funds available for payment of dividends; and                                                                                                                                                                                                                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Articles 7, 52, 56 and 57
  were amended, with respect to the corporate approvals required for reduction
  of share capital and distribution of dividends, all as described in Items 2
  and 4 of our Notice and Proxy Statement for the Extraordinary General Meeting
  of our shareholders held on April 25, 2005, included in our report on Form
  6-K, filed with the SEC on April 1, 2004, which is incorporated herein by
  reference.

93

---

---

ITEM 15.     CONTROLS
AND PROCEDURES

Disclosure controls and procedures.  Our
chief executive officer, or CEO, and chief financial officer, or CFO, are
responsible for establishing and maintaining our disclosure controls and
procedures. These controls and procedures were designed to ensure that
information required to be disclosed in the reports that we file under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the
SEC. We evaluated these disclosure controls and procedures under the
supervision of our CEO and CFO as of December 31, 2003.  Based on this evaluation, our CEO and CFO
concluded that our disclosure controls and procedures are effective in timely
alerting them to information required to be disclosed in our periodic reports
to the SEC.

Internal control over financial reporting. 
There were no changes in the Companys internal control over financial
reporting that occurred during the year ended December 31, 2003 that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

You should note that in the designing and evaluating the
disclosure controls and procedures, we recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.  For example, we have investments in certain
unconsolidated entities, on which we exercise only limited control, if at all,
on management and operational aspects. 
Accordingly, our disclosure controls and procedures with respect to such
entities are necessarily limited compared to those we maintain with respect to
our consolidated subsidiaries.

ITEM 16A.     AUDIT
COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that three of the four members of
the audit committee are audit committee financial experts as defined in Item
16A of Form 20-F.  Our audit committee
financial experts
are Mr. Asheri, Ms. Zochovitzky and Mr. Dogon.

ITEM 16B.     CODE
OF ETHICS

We
have adopted a Code of Ethics and Business Conduct, which applies to all of our
directors, executive officers and employees. 
A copy of our Code of Ethics and Business Conduct has been posted on our
Internet website, http://www.scitex.com.

ITEM 16C.     PRINCIPAL
ACCOUNTANT FEES AND SERVICES

In the annual general meeting held in
December 2003, our shareholders re-appointed Kesselman & Kesselman, a member of
PricewaterhouseCoopers International Ltd. (PWC), to serve as our independent auditors for the fiscal year ending December 31, 2003. In the extraordinary general meeting held in
April 2004, our shareholders re-appointed Kesselman & Kesselman to
serve as our independent auditors until
the next annual meeting.

94

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---

PWC, including Kesselman & Kesselman, billed the following fees to us for professional
services in each of the last two fiscal years:

|                         |  | Year ended December 31,       |     
|------------------------ |  | ----------------------------- | ----
|                         |  |                               |     
|                         |  | (approximate
  $ in millions) |     
|                         |  |                               |     
|                         |  | 2002                          |     
|                         |  |                               |     
|Audit
  Fees (1)         |  | $                             | 0.37
|Audit-Related
  Fees (2) |  |                               | --  
|Tax
  Fees(3)            |  |                               | 0.18
|All
  Other Fees (4)     |  |                               | 0.03
|                         |  |                               |     
|Total
  Fees             |  | $                             | 0.58
|                         |  |                               |     

|(1) | Audit Fees are the aggregate fees billed for the audit of our
  annual financial statements, reviews of interim financial statements and
  attestation services that are normally provided in connection with statutory
  and regulatory filings or engagements.        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                           
|(2) | Audit-Related Fees are the aggregate fees billed for assurance and
  related services that are reasonably related to the performance of the audit
  or review of our financial statements and are not reported under Audit Fees.                                        
|    |                                                                                                                                                                                                                                                                           
|(3) | Tax Fees are the aggregate fees billed for professional services
  rendered for tax compliance, tax advice on actual or contemplated
  transactions and tax planning. 
  Kesselman & Kesselman provided us with tax services such as PFIC
  evaluation and tax planning.
|    |                                                                                                                                                                                                                                                                           
|(4) | All Other Fees are the aggregate fees billed for professional
  services that are not reported under the captions Audit Fees,  Audit-Related Fees or Tax Fees.                                                                                                    

Our Audit
Committee oversees our independent auditors. 
See also the description under the heading Board Practices in Item 6.
Directors, Senior Management and Employees.

Our Audit Committees policy is to require committee approval of any
audit or permitted non-audit services proposed to be provided by our
independent auditors before engaging our independent auditors to provide such
services. This policy is designed to assure that such engagements do not impair
the independence of our auditors.

ITEM 16D.     EXEMPTIONS FROM
THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.

ITEM 16E.     PURCHASES OF
EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Not effective.

P A R T   I I I

ITEM
17.          FINANCIAL
STATEMENTS

We have responded to Item 18 in lieu of this item.

ITEM
18.          FINANCIAL
STATEMENTS

Scitex is filing as part of this Annual Report:

| | consolidated
  financial statements (and related Schedule II) of Scitex for the year ended
  December 31, 2003;                       
|- | --------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                       
| | consolidated
  financial statements of Jemtex for the year ended December 31, 2003;                                                   
|  |                                                                                                                                       
| | consolidated
  financial statements of Jemtex for the year ended December 31, 2002;                                                   
|  |                                                                                                                                       
| | a summary of
  selected financial data from the consolidated financial statements of Objet
  for the year ended December 31, 2003; and

95

---

---

| | the
  consolidated financial statements of Creo Inc. for the fiscal year ended
  September 30, 2001 and 2002, which are incorporated by reference to Exhibit
  10(a)(2) in Item 19 of this Annual Report.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                        | Page    
|----------------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                                        |         
|Index to
  the Financial Statements of the Registrant:                                                                  |         
|                                                                                                                        |         
|Report of Independent
  Auditors                                                                                        | F2      
|Consolidated Balance
  Sheets at December 31, 2003 and 2002                                                             | F3-F4   
|Consolidated Statements of
  Operations for the Three Years ended December 31, 2003                                     | F5      
|Consolidated Statements of
  Changes in Shareholders Equity  for
  the Three Years ended December 31, 2003             | F6      
|Consolidated Statements of
  Cash Flows  for the Three Years ended
  December 31, 2003                                  | F7-F8   
|Notes to Consolidated
  Financial Statements                                                                            | F9-F47  
|                                                                                                                        |         
|Index to
  the Financial Statements Schedules of the Registrant                                                         |         
|                                                                                                                        |         
|Report of Independent
  Auditors on Financial Statement Schedule                                                        | S-1     
|Schedule II  Valuation
  and Qualifying Accounts                                                                       | S-2     
|                                                                                                                        |         
|Associated
  Companies                                                                                                  |         
|                                                                                                                        |         
|Report of Independent
  Auditors and consolidated financial statements of Jemtex for the year
  ended December 31, 2003 | J-1-J-17
|Consolidated financial statements of Jemtex for the year
  ended December 31, 2002                                      | H-1-H-13
|Report of Independent
  Auditors of Objet and selected financial data for the year ended
  December 31, 2003            | O-1-O-2 

ITEM 19.     EXHIBITS

|1.1     | Memorandum of Association
  of the Registrant. (1)                                                                                                                      
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                         
|1.2     | Amended and Restated Articles
  of Association of the Registrant.                                                                                                       
|        |                                                                                                                                                                         
|3.      | Voting Agreement dated
  December 1, 1980, by and among Discount Investment Corporation Ltd., PEC
  Israel Economic Corporation and Clal Electronics Industries Ltd. (2)
|        |                                                                                                                                                                         
|4(a)(1) | Agreement dated November
  20, 2001 between Dundee Securities Corporation and the Registrant. (3)                                                                       
|        |                                                                                                                                                                         
|4(a)(2) | Asset Purchase Agreement
  dated November 24, 2003, between Eastman Kodak Company, the Registrant,
  Scitex Digital Printing, Inc. and Scitex Development Corp.         
|        |                                                                                                                                                                         
|4(a)(3) | Agreement dated June 5,
  2003 by and among Dundee Securities Corporation, Raymond James Ltd. and the
  Registrant.                                                     
|        |                                                                                                                                                                         
|4(a)(4) | Agreement dated August 11,
  2003 by and among Dundee Securities Corporation, Raymond James Ltd. and the
  Registrant.                                                  
|        |                                                                                                                                                                         
|4(c)(1) | The Scitex Israel Key
  Employee Share Incentive Plan 1991. (1)                                                                                                         
|        |                                                                                                                                                                         
|4(c)(2) | The Scitex International
  Key Employee Stock Option Plan 1991 (as amended, 1995). (1)                                                                                  
|        |                                                                                                                                                                         
|4(c)(3) | Form of the Letter of
  Indemnification provided to office holders. (4)                                                                                                 

96

---

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|4(c)(4)  | The Scitex 2001 Stock
  Option Plan (as amended, 2003). (5)                                                                                                                              
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                          
|4(c)(5)  | The Scitex 2003 Share
  Option Plan. (6)                                                                                                                                                 
|         |                                                                                                                                                                                          
|4(d)(1)  | Services Agreement dated
  November 1, 2001, between Clal and the Registrant (as amended, 2004).                                                                                         
|         |                                                                                                                                                                                          
|4(d)(2)  | Share Exchange Agreement
  dated December 22, 2002, by and among the Registrant, Scitex Vision Ltd. and
  Aprion Digital Ltd. (7)                                                        
|         |                                                                                                                                                                                          
|4(d)(3)  | Services Agreement dated
  March 1, 2004, between Discount Investment Corporation Ltd. and the
  Registrant.                                                                             
|         |                                                                                                                                                                                          
|8        | List of Subsidiaries of
  the Registrant.                                                                                                                                                
|         |                                                                                                                                                                                          
|10(a)(2) | Year 2002 Annual Report to
  Shareholders of Creo Inc. for the fiscal year ended September 30, 2002, pages
  28 through 42 (inclusive) of which are incorporated herein by reference. (8)
|         |                                                                                                                                                                                          
|10(a)(3) | Comments by Independent
  Accountants of Creo Inc. for U.S. Readers on Canada  U.S.  Reporting Differences, dated November 12,
  2002. (9)                                              
|         |                                                                                                                                                                                          
|12.1     | Certification
  of CEO of the Registrant pursuant to Rule 13a-14(a) as adopted pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002.                                              
|         |                                                                                                                                                                                          
|12.2     | Certification
  of CFO of the Registrant pursuant to Rule 13a-14(a) as adopted pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002.                                              
|         |                                                                                                                                                                                          
|13.1     | Certification
  of CEO of the Registrant pursuant to Rule 13a-14(b), as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002.                                             
|         |                                                                                                                                                                                          
|13.2     | Certification
  of CFO of the Registrant pursuant to Rule 13a-14(b), as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002.                                             
|         |                                                                                                                                                                                          
|14(a)(1) | Consent of
  Kesselman & Kesselman, Independent Accountants
  of Registrant.                                                                                                             
|         |                                                                                                                                                                                          
|14(a)(2) | Consent of
  Ziv Haft, Independent Accountants of Jemtex InkJet Printing Ltd.                                                                                                            
|         |                                                                                                                                                                                          
|14(a)(3) | Consent of Independent
  Accountants of Objet Geometries Ltd.                                                                                                                            
|         |                                                                                                                                                                                          
|14(a)(4) | Consent of KPMG LLP,
  Independent Accountants of Creo Inc.                                                                                                                              

|   
|---
|(1)
|(2)
|(3)
|(4)
|(5)
|(6)
|(7)
|(8)
|(9)
|   

97

---

---

SIGNATURES

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

| | SCITEX
  CORPORATION LTD. |                            
| | ------------------------- | ---------------------------
| | (Registrant)              |                            
| |                           |                            
| |                           |                            
| | By:                       | /S/ Raanan Cohen           
| |                           |                            
| |                           | Raanan Cohen               
| |                           | President of
  the Company 
| |                           | & Chief
  Executive Officer

Date: June 30, 2004

98

---

---

SCITEX CORPORATION LTD.

2003 CONSOLIDATED FINANCIAL STATEMENTS

---

---

SCITEX CORPORATION LTD.

2003 CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

|                                     | Page                                
|------------------------------------ | ------------------------------------
|                                     |                                     
|REPORT OF
  INDEPENDENT AUDITORS     | F-2                                 
|                                     |                                     
|CONSOLIDATED
  FINANCIAL STATEMENTS: |                                     
|                                     | Balance sheets                      
|                                     | Statements of operations            
|                                     | Statements of
  shareholders equity
|                                     | Statements of cash flows            
|                                     | Notes to financial
  statements     

The amounts are stated in U.S. dollars ($).

---

---

---

---

---

|LOGO |                                                                                                                                                                                               
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                               
|     |                                                                                                                                                                                               
|     | Kesselman & KesselmanCertified Public Accountants (Isr.)
  Trade Tower, 25 Hamered StreetTel Aviv 68125 Israel
  P.O Box 452 Tel Aviv 61003Telephone +972-3-7954555
  Facsimile +972-3-7954556

REPORT OF INDEPENDENT AUDITORS

To the shareholders ofSCITEX CORPORATION LTD.

We have audited the consolidated
balance sheets of Scitex Corporation Ltd. (the Company) and its subsidiaries
as of December 31, 2003 and 2002 and the related consolidated statements of
operations, shareholders equity and cash flows for each of the three years in the
period ended December 31, 2003. These financial statements are the responsibility of
the Companys Board of Directors and management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We did not audit the financial
statements of certain associated companies, the Companys investment in which, as
reflected in the balance sheets as of December 31, 2003 and 2002 is $ 3,328,000 and $
2,544,000, respectively, and the Companys share in losses of which is $ 5,637,000, $
2,379,000 and $ 62,927,000 in 2003, 2002 and 2001, respectively. The financial statements
of those companies were audited by other independent auditors, whose reports have been
furnished to us, and our opinion, insofar as it relates to amounts included for those
companies, is based on the reports of the other independent auditors.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States), and
auditing standards generally accepted in Israel, including those prescribed by the Israeli
Auditors (Mode of Performance) Regulations, 1973. 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 the
Companys Board of Directors and management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports of the other
independent auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits
and the reports of the other independent auditors, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated financial
position of the Company and its subsidiaries as of December 31, 2003 and 2002 and the
consolidated results of operations, shareholders equity and cash flows for each of
the three years in the period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States.

As discussed in note 2i to the
consolidated financial statements, effective January 1, 2002, the Company changed its
method of accounting for goodwill to conform with FASB statement of Financial Accounting
Standard No. 142 Goodwill and Other intangible assets.

|                                       | /s/ Kesselman
  & Kesselman                                  
|-------------------------------------- | -------------------------------------------------------------
|                                       |                                                              
|Tel-Aviv, Israel
        March 1, 2004 | Kesselman
  & Kesselman
  Certified Public Accountants (Isr.)

---

---

SCITEX CORPORATION LTD.

CONSOLIDATED BALANCE SHEETS

|                                                                                                    |  | December
  31             | 
|--------------------------------------------------------------------------------------------------- |  | ------------------------- | 
|                                                                                                    |  |                           | 
|                                                                                                    |  | 2003                      | 
|                                                                                                    |  |                           | 
|                                                                                                    |  | U.S. dollars in thousands | 
|                                                                                                    |  |                           | 
|A s s e t s                                                                                         |  |                           | 
|                                                                                                    |  |                           | 
|CURRENT ASSETS:                                                                                     |  |                           | 
|Cash
  and cash equivalents                                                                         |  | 52,861                    | 
|Short-term
  investments                                                                            |  | 8,235                     | 
|Restricted
  deposit                                                                                |  | 18,262                    | 
|Trade
  receivables                                                                                 |  | 36,002                    | 
|Other
  receivables                                                                                 |  | 9,995                     | 
|Inventories
  (note 14b)                                                                            |  | 22,575                    | 
|Current
  assets of discontinued operation                                                          |  | 161,602                   | 
|                                                                                                    |  |                           | 
|T
  o t a l current assets                                                                          |  | 309,532                   | 
|                                                                                                    |  |                           | 
|INVESTMENTS
  AND OTHER NON-CURRENT                                                                 |  |                           | 
|ASSETS:                                                                                             |  |                           | 
|Associated
  companies                                                                              |  | 3,328                     | 
|Other
  investments and non-current assets (note 5)                                                 |  | 1,301                     | 
|Funds
  in respect of employee rights upon retirement                                               |  | 2,040                     | 
|Deferred
  income taxes                                                                             |  | 112                       | 
|                                                                                                    |  |                           | 
|                                                                                                    |  | 6,781                     | 
|                                                                                                    |  |                           | 
|PROPERTY, PLANT
  AND EQUIPMENT, net of
       accumulated depreciation and amortization (note
  6) |  | 9,204                     | 
|                                                                                                    |  |                           | 
|GOODWILL(note 7)                                                                                    |  | 5,472                     | 
|OTHER
  INTANGIBLE ASSETS,net
  of accumulated amortization (note 8)                                |  | 18,027                    | 
|NON-CURRENT
  ASSETS OF DISCONTINUED OPERATION                                                      |  | 48,897                    | 
|                                                                                                    |  |                           | 
|                                                                                                    |  |                           | 
|                                                                                                    |  | 397,913                   | 
|                                                                                                    |  |                           | 

| |              |  | )                                            
| | ------------ |  | ---------------------------------------------
| | Ami Erel     |  | ) Chairman
  of the Board of Directors       
| |              |  |                                              
| |              |  |                                              
| |              |  | )                                            
| | Raanan Cohen |  | ) Interim President & Chief Executive Officer

F-3

---

---

|                                                                                                                                                                                                                                         |  | December
  31             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | -
|                                                                                                                                                                                                                                         |  |                           |  
|                                                                                                                                                                                                                                         |  | 2003                      |  
|                                                                                                                                                                                                                                         |  |                           |  
|                                                                                                                                                                                                                                         |  | U.S. dollars in thousands |  
|                                                                                                                                                                                                                                         |  |                           |  
|Liabilities and shareholders equity                                                                                                                                                                                                     |  |                           |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                     |  |                           |  
|Short-term
  bank credit and loans (note 14d)                                                                                                                                                                                            |  | 45,351                    |  
|Current
  maturities of long-term loans (note 14d)                                                                                                                                                                                       |  | 2,602                     |  
|Note
  payable issued to an investee company                                                                                                                                                                                             |  |                           |  
|Trade
  payables                                                                                                                                                                                                                         |  | 14,505                    |  
|Taxes
  on income, net of advances                                                                                                                                                                                                       |  | 29,517                    |  
|Accrued
  and other liabilities (note 14c)                                                                                                                                                                                               |  | 25,677                    |  
|Current
  liabilities related to discontinued operation                                                                                                                                                                                  |  | 31,935                    |  
|                                                                                                                                                                                                                                         |  |                           |  
|T
  o t a l current liabilities                                                                                                                                                                                                          |  | 149,587                   |  
|                                                                                                                                                                                                                                         |  |                           |  
|LONG-TERM
  LIABILITIES:                                                                                                                                                                                                                 |  |                           |  
|Loans,
  net of current maturities: (note 14d)                                                                                                                                                                                           |  |                           |  
|Banks                                                                                                                                                                                                                                    |  | 6,623                     |  
|Other                                                                                                                                                                                                                                    |  | 3,623                     |  
|Liability
  for employee rights upon retirement (note 9)                                                                                                                                                                                 |  | 3,022                     |  
|Long-term
  liabilities related to discontinued operation                                                                                                                                                                                |  | 5,431                     |  
|                                                                                                                                                                                                                                         |  |                           |  
|T
  o t a l long-term liabilities                                                                                                                                                                                                        |  | 18,699                    |  
|                                                                                                                                                                                                                                         |  |                           |  
|                                                                                                                                                                                                                                         |  |                           |  
|CONVERTIBLE
  LONG-TERM LOANS FROM                                                                                                                                                                                                       |  |                           |  
|RELATED
  PARTIES(note 14d)                                                                                                                                                                                                              |  | 756                       |  
|COMMITMENTS AND
  CONTINGENT LIABILITIES (note 10)                                                                                                                                                                                       |  |                           |  
|                                                                                                                                                                                                                                         |  |                           |  
|                                                                                                                                                                                                                                         |  |                           |  
|T
  o t a l liabilities                                                                                                                                                                                                                  |  | 169,042                   |  
|                                                                                                                                                                                                                                         |  |                           |  
|MINORITY
  INTEREST                                                                                                                                                                                                                      |  | 4,173                     |  
|                                                                                                                                                                                                                                         |  |                           |  
|SHAREHOLDERS EQUITY(note
  11):                                                                                                                                                                                                         |  |                           |  
|Share
  capital - ordinary shares of NIS 0.12 par value
            (authorized -
  December 31, 2003 and 2002 -
            48,000,000
  shares; issued and outstanding -
            December 31, 2003
  and 2002 - 43,467,388 shares) |  | 6,205                     |  
|Capital
  surplus                                                                                                                                                                                                                        |  | 368,104                   |  
|Accumulated
  other comprehensive income (loss)                                                                                                                                                                                          |  | (552                      | )
|Accumulated
  deficit                                                                                                                                                                                                                    |  | (144,852                  | )
|Treasury
  shares, at cost (December 31, 2003 and 2002 -
            448,975 shares)                                                                                                                                                     |  | (4,207                    | )
|                                                                                                                                                                                                                                         |  |                           |  
|T
  o t a l shareholders equity                                                                                                                                                                                                         |  | 224,698                   |  
|                                                                                                                                                                                                                                         |  |                           |  
|                                                                                                                                                                                                                                         |  |                           |  
|                                                                                                                                                                                                                                         |  | 397,913                   |  
|                                                                                                                                                                                                                                         |  |                           |  

The accompanying notes are an integral part
of the financial statements.

F-4

---

---

SCITEX CORPORATION LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                                   |                              | Year ended
  December 31                            |        
|---------------------------------------------------------------------------------- | ---------------------------- | --------------------------------------------------- | -------
|                                                                                   |                              |                                                     |        
|                                                                                   |                              | 2003                                                |        
|                                                                                   |                              |                                                     |        
|                                                                                   |                              | U.S. dollars in thousands
  (except per share data) |        
|                                                                                   |                              |                                                     |        
|REVENUES:                                                                          |                              |                                                     |        
|                                                                                   | Sales                        |                                                     |        
|                                                                                   | Services                     |                                                     |        
|                                                                                   | Supplies                     |                                                     |        
|                                                                                   |                              |                                                     |        
|                                                                                   |                              |                                                     |        
|                                                                                   | T o t a l revenues           |                                                     |        
|                                                                                   |                              |                                                     |        
|COST OF REVENUES:                                                                  |                              |                                                     |        
|                                                                                   | Cost of
  sales              |                                                     |        
|                                                                                   | Cost of
  services           |                                                     |        
|                                                                                   | Cost of
  supplies           |                                                     |        
|                                                                                   |                              |                                                     |        
|                                                                                   | T o t a l
  cost of revenues |                                                     |        
|                                                                                   |                              |                                                     |        
|                                                                                   |                              |                                                     |        
|GROSS PROFIT                                                                       |                              |                                                     | 44,538 
|                                                                                   |                              |                                                     |        
|                                                                                   |                              |                                                     |        
|RESEARCH AND DEVELOPMENT COSTS -net (note
  14f)                                   |                              |                                                     | 11,070 
|                                                                                   |                              |                                                     |        
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(note
  14g)                           |                              |                                                     | 35,339 
|                                                                                   |                              |                                                     |        
|AMORTIZATION OF INTANGIBLE ASSETS(in 2001 -
  including
       goodwill)           |                              |                                                     | 5,871  
|                                                                                   |                              |                                                     |        
|WRITE-DOWN OF GOODWILL AND OTHER INTANGIBLE ASSETS                                 |                              |                                                     | 2,967  
|                                                                                   |                              |                                                     |        
|RESTRUCTURING CHARGES(note 14h)                                                    |                              |                                                     | 1,590  
|                                                                                   |                              |                                                     |        
|                                                                                   |                              |                                                     |        
|OPERATING LOSS                                                                     |                              |                                                     | (12,299
|                                                                                   |                              |                                                     |        
|FINANCIAL EXPENSES
  - net (note 14i)                                              |                              |                                                     | (2,651 
|                                                                                   |                              |                                                     |        
|WRITE-DOWN OF INVESTMENT IN AN ASSOCIATED COMPANY                                  |                              |                                                     |        
|                                                                                   |                              |                                                     |        
|OTHER INCOME (LOSS)- net  (note 14j)                                               |                              |                                                     | 787    
|                                                                                   |                              |                                                     |        
|                                                                                   |                              |                                                     |        
|LOSS BEFORE TAXES ON INCOME                                                        |                              |                                                     | (14,163
|                                                                                   |                              |                                                     |        
|TAXES ON
  INCOME (note 12)                                                        |                              |                                                     | (2,402 
|                                                                                   |                              |                                                     |        
|SHARE IN LOSSES OF ASSOCIATED COMPANIES                                            |                              |                                                     | (5,637 
|                                                                                   |                              |                                                     |        
|MINORITY INTERESTS IN LOSSES OF A SUBSIDIARY                                       |                              |                                                     | 3,546  
|                                                                                   |                              |                                                     |        
|NET LOSS FROM CONTINUING OPERATIONS                                                |                              |                                                     | (18,656
|NET INCOME FROM DISCONTINUED OPERATION                                             |                              |                                                     | 20,043 
|                                                                                   |                              |                                                     |        
|NET INCOME (LOSS)                                                                  |                              |                                                     | 1,387  
|                                                                                   |                              |                                                     |        
|                                                                                   |                              |                                                     |        
|EARNINGS (LOSS)
  PER SHARE (EPS) - BASIC:                                       |                              |                                                     |        
|Continuing
  operations                                                            |                              | $                                                   | (0.43  
|Discontinued
  operation                                                           |                              | $                                                   | 0.46   
|                                                                                   |                              |                                                     |        
|                                                                                   |                              | $                                                   | 0.03   
|                                                                                   |                              |                                                     |        
|EARNINGS (LOSS)
  PER SHARE (EPS) - DILUTED:                                     |                              |                                                     |        
|Continuing
  operations                                                            |                              | $                                                   | (0.43  
|Discontinued
  operation                                                           |                              | $                                                   | 0.46   
|                                                                                   |                              |                                                     |        
|                                                                                   |                              | $                                                   | 0.03   
|                                                                                   |                              |                                                     |        
|WEIGHTED AVERAGE NUMBER OF SHARES     USED IN COMPUTATION OF EPS (in
  thousands): |                              |                                                     |        
|Basic                                                                              |                              |                                                     | 43,018 
|                                                                                   |                              |                                                     |        
|Diluted                                                                            |                              |                                                     | 43,018 
|                                                                                   |                              |                                                     |        
|                                                                                   |                              |                                                     |        

The accompanying notes are an integral part of the financial
statements.

F-5

---

---

SCITEX CORPORATION LTD.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

|                                                                                                                                 |  | Share
  capital           |  | Capital
  surplus |  | Accumulated
  other
  comprehensive
  Income (loss) |        | Retained
  earnings
  (accumulated
  deficit) |  | Treasury
  shares |          | Total
  shareholders
  equity | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ----------------- |  | --------------------------------------------------- | ------ | --------------------------------------------- |  | ----------------- | -------- | ------------------------------ | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|                                                                                                                                 |  | U.S. dollars in thousands | 
|                                                                                                                                 |  |                           | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|BALANCE AT
  JANUARY 1, 2001                                                                                                     |  | 6,205                     |  | 364,619           |  |                                                     | 904    |                                               |  |                   | 138,811  |                                | 
|CHANGES DURING THE YEAR ENDED DECEMBER 31, 2001:                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Net loss                                                                                                                         |  |                           |  |                   |  |                                                     |        |                                               |  |                   | (253,020 | )                              | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Other
  comprehensive income (loss), net, in respect of:                                                                         |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Currency
  translation adjustments                                                                                               |  |                           |  |                   |  |                                                     | (306   | )                                             |  |                   |          |                                | 
|Available-for-sale
  securities                                                                                                  |  |                           |  |                   |  |                                                     | 7,342  |                                               |  |                   |          |                                | 
|Derivative
  instruments designated for cash flow hedge                                                                          |  |                           |  |                   |  |                                                     | (200   | )                                             |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Total comprehensive loss                                                                                                         |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Issuance
  of shares by a development-stage associated company                                                                   |  |                           |  |                   |  |                                                     | 14     |                                               |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|BALANCE AT
  DECEMBER 31, 2001                                                                                                   |  | 6,205                     |  | 364,619           |  |                                                     | 7,754  |                                               |  |                   | (114,209 | )                              | 
|CHANGES
  DURING THE YEAR ENDED DECEMBER 31, 2002:                                                                               |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Net loss                                                                                                                         |  |                           |  |                   |  |                                                     |        |                                               |  |                   | (32,030  | )                              | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Other
  comprehensive income (loss), net, in respect of:                                                                         |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Currency
  translation adjustments                                                                                               |  |                           |  |                   |  |                                                     | 189    |                                               |  |                   |          |                                | 
|Available-for-sale
  securities                                                                                                  |  |                           |  |                   |  |                                                     | (7,342 | )                                             |  |                   |          |                                | 
|Derivative
  instruments designated for cash flow
  hedge                                                                        |  |                           |  |                   |  |                                                     | 200    |                                               |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Total comprehensive loss                                                                                                         |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|BALANCE AT
  DECEMBER 31, 2002                                                                                                   |  | 6,205                     |  | 364,619           |  |                                                     | 801    |                                               |  |                   | (146,239 | )                              | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|CHANGES
  DURING THE YEAR ENDED DECEMBER 31, 2003:                                                                               |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Net
  income                                                                                                                     |  |                           |  |                   |  |                                                     |        |                                               |  |                   | 1,387    |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Other
  comprehensive loss, net, in respect of:                                                                                  |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Currency
  translation adjustments                                                                                               |  |                           |  |                   |  |                                                     | (1,353 | )                                             |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Total comprehensive income                                                                                                       |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|Share in
  beneficial conversion feature relating to convertible
        preferred shares issued by Scitex Vision.
  See note 3a |  |                           |  | 3,485             |  |                                                     |        |                                               |  |                   |          |                                | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 
|BALANCE AT
  DECEMBER 31, 2003                                                                                                   |  | 6,205                     |  | 368,104           |  |                                                     | (552   | )                                             |  |                   | (144,852 | )                              | 
|                                                                                                                                 |  |                           |  |                   |  |                                                     |        |                                               |  |                   |          |                                | 

The accompanying notes are an integral part of the financial
statements.

F-6

---

---

(Continued - 1)

SCITEX CORPORATION LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                      |                                                                                                                     | Year ended
  December 31    |        
|------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | --------------------------- | -------
|                                      |                                                                                                                     |                             |        
|                                      |                                                                                                                     | 2003                        |        
|                                      |                                                                                                                     |                             |        
|                                      |                                                                                                                     | U.S.
  dollars in thousands |        
|                                      |                                                                                                                     |                             |        
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                                                                     |                             |        
|                                      | Net income
  (loss)                                                                                                 |                             | 1,387  
|                                      | Net income
  from discontinued operation                                                                            |                             | (20,043
|                                      |                                                                                                                     |                             |        
|                                      | Net loss
  from continuing operations                                                                               |                             | (18,656
|                                      | Adjustments
  to reconcile net loss from continuing operations
       to net cash provided by operating activities: |                             |        
|                                      | Income and
  expenses not involving cash flows:                                                                     |                             |        
|                                      | Minority
  interests in losses of subsidiaries                                                                      |                             | (3,546 
|                                      | Share in
  losses of associated companies - net                                                                     |                             | 5,637  
|                                      | Depreciation
  and amortization                                                                                     |                             | 9,406  
|                                      | Write-down
  of goodwill and other intangible assets                                                                |                             | 2,967  
|                                      | Restructuring
  charges                                                                                             |                             | 291    
|                                      | Loss (gain)
  on disposal of fixed assets                                                                           |                             | 321    
|                                      | Gain from
  sale of interest in a subsidiary                                                                        |                             | (3,774 
|                                      | Share in
  beneficial conversion feature of convertible
       preferred shares issued by a subsidiary              |                             | 3,485  
|                                      | Loss from
  change in percentage of holding in an
       associated company                                         |                             |        
|                                      | Gain from
  sale of available-for-sale securities                                                                   |                             | (2,823 
|                                      | Loss from
  sale of investments in an
       associated company                                                     |                             |        
|                                      | Write-off
  and write-down of investments in
       investee companies and available-for-sale
  securities          |                             | 2,493  
|                                      | Write-down
  of investment in an associated company                                                                 |                             |        
|                                      | Interest on
  long-term note payable                                                                                |                             | 236    
|                                      | Interest on
  long-term loans - net                                                                                 |                             | (603   
|                                      | Revaluation
  of long-term loan                                                                                     |                             | (408   
|                                      | Interest on
  convertible long-term loans from related parties                                                      |                             | 20     
|                                      | Deferred
  income taxes - net                                                                                       |                             | 1,754  
|                                      | Decrease
  (increase) in short-term investments                                                                     |                             | (8,235 
|                                      | Changes in
  operating asset and liability items:                                                                   |                             |        
|                                      | Increase in
  accounts receivable                                                                                   |                             | (6,496 
|                                      | Decrease
  (increase) in inventories                                                                                |                             | 112    
|                                      | Increase
  (decrease) in accounts payable and accruals                                                              |                             | 4,248  
|                                      | Other items
  - net                                                                                                 |                             | (8     
|                                      |                                                                                                                     |                             |        
|                                      | Net cash
  used in continuing operations                                                                            |                             | (13,579
|                                      | Net cash
  provided by discontinued operation                                                                       |                             | 7,415  
|                                      |                                                                                                                     |                             |        
|                                      | Net cash
  provided by (used in) operating activities                                                               |                             | (6,164 
|                                      |                                                                                                                     |                             |        
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                                                                     |                             |        
|                                      | Acquisition
  of assets and operations consolidated
       for the first time *                                     |                             | 771    
|                                      | Purchase of
  fixed assets                                                                                          |                             | (3,306 
|                                      | Proceeds
  from sale of fixed assets                                                                                |                             |        
|                                      | Proceeds
  from sale of investment in an associated company                                                         |                             |        
|                                      | Proceeds
  from sale of other investment                                                                            |                             | 53,886 
|                                      | Purchase of
  intangible assets                                                                                     |                             | (820   
|                                      | Restricted
  deposits                                                                                               |                             | 3,427  
|                                      | Investment
  in associated companies and other investments                                                          |                             | (3,061 
|                                      |                                                                                                                     |                             |        
|                                      | Net cash
  provided by (used in) investing activities                                                               |                             | 50,897 
|                                      |                                                                                                                     |                             |        
|                                      |                                                                                                                     |                             |        
|Subtotal -
  forward                  |                                                                                                                     | 44,733                      |        
|                                      |                                                                                                                     |                             |        
|                                      |                                                                                                                     |                             |        

F-7

---

---

(Concluded - 2)

SCITEX CORPORATION LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                              |  | Year ended
  December 31  |  
|--------------------------------------------------------------------------------------------- |  | ------------------------- | -
|                                                                                              |  |                           |  
|                                                                                              |  | 2003                      |  
|                                                                                              |  |                           |  
|                                                                                              |  | U.S. dollars in thousands |  
|                                                                                              |  |                           |  
|Subtotal -
  brought forward                                                                  |  | 44,733                    |  
|                                                                                              |  |                           |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                         |  |                           |  
|Increase
  in long-term liabilities                                                           |  | 612                       |  
|Receipt
  of Convertible long-term loans from related parties                                 |  | 933                       |  
|Discharge
  of long-term liabilities                                                          |  | (666                      | )
|Repayment
  of long-term note payable                                                         |  | (18,759                   | )
|Increase
  in short-term bank credit - net                                                    |  | 8,194                     |  
|                                                                                              |  |                           |  
|                                                                                              |  |                           |  
|Net
  cash provided by (used in) financing activities                                         |  | (9,686                    | )
|                                                                                              |  |                           |  
|                                                                                              |  |                           |  
|NET INCREASE (DECREASE) IN CASH AND CASH
       EQUIVALENTS                                   |  | 35,047                    |  
|                                                                                              |  |                           |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                |  | 17,814                    |  
|                                                                                              |  |                           |  
|                                                                                              |  |                           |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                      |  | 52,861                    |  
|                                                                                              |  |                           |  
|*   Acquisition of assets and operations
  consolidated
            for the first
  time:     |  |                           |  
|Assets
  and liabilities at the date of acquisition:                                          |  |                           |  
|Deficiency
  in working capital (excluding cash
                      and
  cash equivalents) |  | 4,754                     |  
|Fixed
  assets - net                                                                          |  | (4,447                    | )
|Goodwill
  arising on acquisition                                                             |  | (2,043                    | )
|Intangible
  assets arising on acquisition                                                    |  | (11,376                   | )
|Long-term
  loans and other liabilities                                                       |  | 6,361                     |  
|Minority
  interests in subsidiary at date of
                 acquisition                    |  | 7,522                     |  
|                                                                                              |  |                           |  
|Cash
  received (paid)                                                                        |  | 771                       |  
|                                                                                              |  |                           |  
|                                                                                              |  |                           |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
       INFORMATION:                                      |  |                           |  
|                                                                                              |  |                           |  
|Interest
  paid                                                                               |  | 4,166                     |  
|                                                                                              |  |                           |  
|                                                                                              |  |                           |  
|Income
  taxes paid                                                                           |  | 2,652                     |  
|                                                                                              |  |                           |  

Supplementary
information on investing activities not involving cash flows - as to the additional investment in an
associated company in December 2002, see note 4b.

The accompanying notes are an integral part of the
financial statements.

F-8

---

---

SCITEX CORPORATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL:

| | a. | Nature of
  operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | Scitex Corporation Ltd.
  (the Company) is an Israeli corporation, which through its subsidiaries
  operates in one segment  wide format digital printing. The subsidiaries
  develop, manufacture and market industrial digital inkjet printing
  solutions mainly to the
  graphic arts, packaging and textile markets as well as related services
  and consumable products. As of the end of 2003, the Company (through its
  wholly-owned subsidiary) operated also in the high-speed digital printing
  segment, which was classified as discontinued operation, see b below. In
  addition, the Company holds interest in other companies that develop digital
  printing solution to industrial applications.                                     
| |    | Amounts provided in these
  notes to the consolidated financial statements pertain to continuing
  operations - unless otherwise indicates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | b. | Sale of the
  High-Speed Digital Printing segment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | On November 25, 2003, the
  Company entered into an agreement according to which it will sell
  substantially all of the assets, liabilities and operations of its indirect
  wholly-owned subsidiary Scitex Digital Printing Inc. (SDP) related to its
  High-Speed Digital Printing Business, including most of the distribution
  channels that served SDP, to Eastman Kodak Company (Kodak), for $ 250
  million in cash. Pursuant to the agreement, a $25 million was held in escrow.
  $15 million out of the above escrow amount was released in February 2004 to
  SDPs parent company (SDC) account, and the remaining $10 million will be
  held for up to two years and will be used for indemnification liabilities
  under the agreement.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The assets, net of
  liabilities sold are distinguishable as a component of the Company and
  classified as Assets or Liabilities of discontinued operation in accordance
  with Statement of Financial Accounting Standards No. 144 (SFAS 144),
  Accounting for the Impairment on Disposal of Long-Lived Assets of the
  Financial Accounting Standards Board of the United States (FASB). Direct
  costs to transact the sale were comprised of, but not limited to, broker
  commissions, legal and title transfer fees and closing costs, which will be
  expensed upon the completion of the transaction.                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The closing of the
  transaction occurred on January 5, 2004. As a result of the transaction, the
  Company is expected to record a net gain of approximately $ 60 million,
  approximately $ 52 million of which will be included in the statement of
  operations for the first quarter of 2004, and approximately $ 8 million of
  which were recognized in the fourth quarter of 2003 as a tax benefit related
  to expected utilization of carryforward tax losses including capital losses
  and is recorded under income from discontinued operation.                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | Operating
  results of SDP have been reported in these financial statements as
  discontinued operations in accordance with SFAS 144 and the Company has reclassified
  the results of operations, the assets and liabilities of the component to be
  disposed for the prior period in accordance with provisions of SFAS 144.                                                                                                                                                                                                                                                                                                                                                                                                                              

F-9

---

---

SCITEX CORPORATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 1 - GENERAL(continued):

| | 1) | The assets
  and liabilities of SDP classified as discontinued operation in the
  Consolidated Balance Sheets, are as follows:
| | -- | ------------------------------------------------------------------------------------------------------------------------------

| |                                                                                                 |  | December
  31               |        
| | ----------------------------------------------------------------------------------------------- |  | --------------------------- | -------
| |                                                                                                 |  |                             |        
| |                                                                                                 |  | 2003                        |        
| |                                                                                                 |  |                             |        
| |                                                                                                 |  | U.S.
  dollars in thousands |        
| |                                                                                                 |  |                             |        
| | A s s e t s                                                                                     |  |                             |        
| | Current assets:                                                                                 |  |                             |        
| | Cash
  and Short-term investments                                                               |  |                             | 16,056 
| | Trade
  and other receivables                                                                   |  |                             | 68,811 
| | Inventories                                                                                     |  |                             | 40,506 
| | Deferred
  income taxes                                                                         |  |                             | 36,229 
| |                                                                                                 |  |                             |        
| | T
  o t a l current assets                                                                      |  |                             | 161,602
| |                                                                                                 |  |                             |        
| |                                                                                                 |  |                             |        
| | Investment and other non-current assets                                                         |  |                             | 2,040  
| |                                                                                                 |  |                             |        
| | Property, plant and equipment, net of
  accumulated
            depreciation and
  amortization |  |                             | 26,223 
| |                                                                                                 |  |                             |        
| | Goodwill                                                                                        |  |                             | 19,730 
| | Other intangible assets, net of accumulated
  amortization                                      |  |                             | 904    
| |                                                                                                 |  |                             |        
| | T
  o t a l assets                                                                              |  |                             | 210,499
| |                                                                                                 |  |                             |        
| |                                                                                                 |  |                             |        
| | Liabilities                                                                                     |  |                             |        
| |                                                                                                 |  |                             |        
| | Current liabilities                                                                             |  |                             | 31,935 
| |                                                                                                 |  |                             |        
| | Long-term liabilities:                                                                          |  |                             |        
| | Deferred
  income taxes                                                                         |  |                             | 3,883  
| | Other                                                                                           |  |                             | 1,548  
| |                                                                                                 |  |                             |        
| | T
  o t a l liabilities                                                                         |  |                             | 37,366 
| |                                                                                                 |  |                             |        

| | 2) | Revenues and
  net income from the discontinued operations of SDP are as follow:
| | -- | --------------------------------------------------------------------------------

| |                               |  | Year ended
  December 31    |        
| | ----------------------------- |  | --------------------------- | -------
| |                               |  |                             |        
| |                               |  | 2003                        |        
| |                               |  |                             |        
| |                               |  | U.S.
  dollars in thousands |        
| |                               |  |                             |        
| |                               |  |                             |        
| |                               |  |                             |        
| | REVENUES                      |  |                             | 170,113
| | COST OF REVENUES              |  |                             | 101,721
| |                               |  |                             |        
| | GROSS PROFIT                  |  |                             | 68,392 
| | OTHER OPERATION EXPENSES      |  |                             | 56,300 
| |                               |  |                             |        
| | OPERATING INCOME              |  |                             | 12,092 
| | FINANCIAL INCOME - net        |  |                             | 3,970  
| | OTHER LOSSES - net            |  |                             | (390   
| |                               |  |                             |        
| | INCOME BEFORE TAXES ON INCOME |  |                             | 15,672 
| | TAXES ON INCOME               |  |                             | (4,371 
| |                               |  |                             |        
| | NET INCOME FOR THE YEAR       |  |                             | 20,043 
| |                               |  |                             |        

F-10

---

---

SCITEX CORPORATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:

| | a. | General:                                                                                                                                                                                                                                                   
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                            
| |    | 1)                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    | 2)                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    | 3)                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                            
| | b. | Principles of consolidation                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                            
| |    | The
  consolidated financial statements include the accounts of the Company and its
  subsidiaries. Intercompany balances and transactions have been eliminated in
  consolidation. Unrealized profits from intercompany sales have also been
  eliminated.

F-11

---

---

SCITEX CORPORATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

| | c. | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company
  and its subsidiaries consider all highly liquid investments, with an original
  maturity of three months or less at time of investment, that are not
  restricted as to withdrawal or use, to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | d. | Investments in marketable securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Trading
  securities which are carried at fair market value with unrealized gains and
  losses, are included in financial income (expenses) - net.  Trading securities are presented in the
  balance sheet under short-term investments.                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Other marketable
  securities consist of equity securities classified as available-for-sale
  securities and are presented in the balance sheet under other investments
  and non-current assets. 
  Available-for-sale securities are carried at fair market value with
  unrealized gains and losses, and are reported as a separate item under other
  comprehensive income (loss). Realized gains and losses and declines in value
  that are considered as other than temporary in nature on available-for-sale
  securities are included under other loss - net - see also note 5(b).             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | e. | Other non-marketable investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | These
  investments are carried at cost, net of write-down for decrease in value,
  which is not of a temporary nature.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | f. | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Inventories
  are valued at the lower of cost or market. Cost is determined as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Raw-materials
  - on the moving average basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Finished
  products and products in process - on basis of production costs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | g. | Investments in associated companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Associated
  companies are companies over which significant influence is exercised, but
  which are not consolidated subsidiaries, and are accounted for by the equity
  method, net of write-down for decrease in value, which is not of a temporary
  nature.  The excess of cost of
  investment in associated companies over the Companys share in their net
  assets at date of acquisition (excess of cost of investment) represents
  amounts attributed to know-how and technology.  The excess of cost of investment is amortized over a period of
  5 years, commencing in the year of acquisition.

F-12

---

---

SCITEX CORPORATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

|NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES(continued):
|----------------------------------------------------
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    

|                                 |  | %                  
|-------------------------------- |  | -------------------
|                                 |  |                    
|Machinery
  and equipment        |  | 10-33
  (mainly 20)
|Building                         |  | 2.5                
|Office
  furniture and equipment |  | 6-33
  (mainly 20) 
|Motor
  vehicles                 |  | 15-25
  (mainly 15)

| |    | Leasehold
  improvements are amortized by the straight-line method over the term of the
  lease or the estimated useful life of the improvements, whichever is shorter.                                                                                                                                                                                                                                                          
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | i. | Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | On January
  1, 2002 the Company adopted FAS No. 142 Goodwill and Other Intangible
  Assets.  Under FAS 142, goodwill is
  no longer being amortized but tested for impairment at least annually.                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Prior to
  January 1, 2002, goodwill was amortized on a straight-line basis, over
  periods of 7-15 years.                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company
  identified two reporting units that consisted of its operating segments: wide
  format digital printing and high-speed digital printing  which was
  classified as discontinued operation (see also note 1b). The Company has
  utilized expected future discounted cash flows to determine the fair value of
  the reporting units and whether any impairment of goodwill existed  as of
  the date of adoption.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company
  has performed its annual goodwill impairment test during the fourth quarter
  of 2003. No impairment of goodwill resulted from the annual review performed
  in 2003.                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | j. | Other intangible assets                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Other
  intangible assets  which consist
  mainly of technology, are presented at cost and are amortized by the
  straight-line method over a period of 5-6 years.                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | These
  intangible assets are presented net of write-down in value which is other
  than temporary, see also note 8.                                                                                                                                                                                                                                                                                                             

F-13

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES(continued):

| | k. | Impairment in value of long-lived assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The company
  has adopted FAS 144 Accounting for the Impairment or Disposal of Long-Lived
  Assets (FAS 144) effective January 1, 2002. FAS 144 requires that
  long-lived assets, to be held and used by an entity be reviewed for
  impairment whenever events or changes in circumstances indicate that the
  carrying amount of the assets may not be recoverable. Under FAS 144, if
  the sum of the expected future cash flows (undiscounted and without interest
  charges) of the long-lived assets is less than the carrying amount of such
  assets, an impairment loss would be recognized, and the assets would be
  written down to their estimated fair values.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The adoption
  of FAS 144 - on January 1, 2002 - did not have any material impact on the
  consolidated financial position and consolidated results of operations of the
  Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | l. | Deferred income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | 1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | 2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | 3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | 4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | m. | Comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | In addition
  to net loss, other comprehensive income (loss) includes unrealized gains and
  losses on available-for-sale securities, currency translation adjustments of
  non-dollar currency financial statements of investee companies and gains and
  losses on certain derivative instruments designated for cash-flow hedge.                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | n. | Treasury shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Company
  shares held by the Company, are presented as a reduction of shareholders
  equity, at their cost to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-14

---

---

SCITEX
CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

| | o. | Revenue recognition:                                                                                                                                                                                                       
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                            
| |    | 1)                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                            
| |    | 2)                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                            
| |    | 3)                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                            
| |    | 4)                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                            
| | p. | Research and development costs, net                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                            
| |    | Research and
  development costs are charged to income as incurred. Royalty-bearing grants
  received from governments for approved projects are recognized as a reduction
  of expenses as the related costs are incurred.
| |    |                                                                                                                                                                                                                            
| | q. | Advertising                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                            
| |    | These costs
  are charged to income as incurred.                                                                                                                                                                           
| |    |                                                                                                                                                                                                                            
| | r. | Shipping and handling costs                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                            
| |    | Shipping and
  handling costs are classified as a component of marketing expenses.                                                                                                                                         
| |    |                                                                                                                                                                                                                            
| | s. | Allowance for doubtful accounts                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                            
| |    | The
  allowance for doubtful accounts is determined as a percentage of specific
  debts doubtful of collection.                                                                                                            

F-15

---

---

SCITEX
CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

| | t. | Stock based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The Company
  and its subsidiaries account for employee stock based compensation in
  accordance with Accounting Principles Board Opinion No. 25 Accounting for
  Stock Issued to Employees (APB 25) and related interpretations. Under APB
  25 compensation cost for employee stock option plans is measured using the
  intrinsic value based method of accounting, and is amortized by the
  straight-line method against income, over the expected service period.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | FAS 123
  Accounting for Stock-Based Compensation, establishes a fair value based
  method accounting for employee stock options or similar equity instruments,
  and encouraged adoption of such method for stock compensation plans. However,
  it also allows companies to continue to account for those plans the
  accounting treatment prescribed by APB 25.                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The
  following table illustrates the effect on net income (loss) and earning
  (loss) per share assuming the Company and its subsidiaries had applied the
  fair value recognition provisions of FAS 123 to stock-based employee
  compensation:                                                                                                                                                                                                                          

| |                                                                                                                                 |  | Year ended
  December 31                   |  
| | ------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | -
| |                                                                                                                                 |  |                                            |  
| |                                                                                                                                 |  | 2003                                       |  
| |                                                                                                                                 |  |                                            |  
| |                                                                                                                                 |  | $ in thousands (except for per share data) |  
| |                                                                                                                                 |  |                                            |  
| |                                                                                                                                 |  |                                            |  
| | Net loss
  from continuing operations - as reported                                                                             |  | (18,656                                    | )
| | Add: stock
  based employee compensation expenses,
       included in reported net loss from continuing
       operations       |  | -,-                                        |  
| | Deduct:
  stock based employee compensation
       expenses determined under fair value method                                  |  | (1,018                                     | )
| |                                                                                                                                 |  |                                            |  
| | Pro-forma
  net loss from continuing operations                                                                                 |  | (19,674                                    | )
| |                                                                                                                                 |  |                                            |  
| | Net income
  from discontinued operations - as reported                                                                         |  | 20,043                                     |  
| | Add: stock
  based employee compensation expenses,
       included in reported net income from
  discontinued
       operations |  | -,-                                        |  
| | Deduct:
  stock based employee compensation
       expenses determined under fair value method                                  |  | (1,305                                     | )
| |                                                                                                                                 |  |                                            |  
| | Pro-forma
  net income from discontinued operations                                                                             |  | 18,738                                     |  
| |                                                                                                                                 |  |                                            |  
| | Pro-forma net
  loss                                                                                                            |  | (936                                       | )
| |                                                                                                                                 |  |                                            |  
| | Basic and
  diluted earning (loss) per share - as reported:                                                                     |  |                                            |  
| | Continuing
  operations                                                                                                         |  | (0.43                                      | )
| | Discontinuing
  operations                                                                                                      |  | 0.46                                       |  
| |                                                                                                                                 |  |                                            |  
| | Net
  income (loss)                                                                                                             |  | 0.03                                       |  
| |                                                                                                                                 |  |                                            |  
| | Pro-forma
  earning (loss) per share :                                                                                          |  |                                            |  
| | Continuing
  operations                                                                                                         |  | (0.46                                      | )
| | Discontinuing
  operations                                                                                                      |  | 0.44                                       |  
| |                                                                                                                                 |  |                                            |  
| | Net
  loss                                                                                                                      |  | (0.02                                      | )
| |                                                                                                                                 |  |                                            |  

F-16

---

---

SCITEX
CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES(continued):

| | u. | Earnings (loss) per share (EPS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | Basic EPS
  are computed based on the weighted average number of shares outstanding
  during each year excluding the treasury stock held by the Company. Diluted
  EPS reflects the increase in the weighted average number of shares
  outstanding that would result from the assumed exercise of options,
  calculated using the treasury-stock-method (in 2003, 2002 and 2001) such
  effect was not included since it would have been anti-dilutive). In addition,
  diluted EPS does not reflect options granted by subsidiaries to be exercised
  to the subsidiaries shares and convertible loans, since their effect would
  have been anti-dilutive.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | v. | Derivatives and hedging activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The Company
  has adopted FAS 133 Accounting for derivative instruments and hedging
  activities. FAS 133, as amended, establishes accounting and reporting
  standards for derivatives and for hedging activities. Under FAS 133, all
  derivatives are recognized on the balance sheet at their fair value. On the
  date that the Company enters into a derivative contract, it designates the
  derivative, for accounting purposes, as:                                                                                                                                                                                                               
| |    | (1) Hedging
  instrument, or (2) Non-hedging instrument.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | For
  derivative financial instruments that are designated and qualify as a cash
  flow hedge, the effective portions of changes in fair value of the derivative
  are recorded in other comprehensive income (loss), and are recognized in the
  statement of operations when the hedged item affects earnings. Ineffective
  portions of changes in the fair value of cash flow hedges are recognized in
  earnings. Changes in the fair value of derivatives that do not qualify for
  hedge accounting are recognized in earnings.                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | w. | First time application of the equity method in respect of an
  investment previously accounted for under the cost method                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | As of
  December 31, 2003, the Company holds approximately 23.47% of Objet Geometries
  Ltd. (Objet) outstanding shares and 23.09% on a fully diluted basis.
  Through December 31, 2001, the Company accounted for this investment under
  the cost method. Commencing January 2002, the Company changed
  its method of accounting for this investment from the
  cost method to the equity method as required by APB 18 (The equity method of
  accounting for investments in common stock).                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The
  consolidated financial statements for the year 2001 have been adjusted
  retroactively to reflect the adoption of the equity method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-17

---

---

SCITEX CORPORATION
LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES(continued):

| |  | The effect
  of such adjustments on the consolidated statements of operations in the year
  ended December 31, 2001 was as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------

| |                                         |  | As
  previously
  reported |          | Effect of
  restatement |   | As reported
  in these
  financial
  statements |  
| | --------------------------------------- |  | -------------------------- | -------- | ----------------------- | - | ----------------------------------------------- | -
| |                                         |  |                            |          |                         |   |                                                 |  
| |                                         |  | $ in
  thousands           |         
| |                                         |  |                            |         
| |                                         |  |                            |          |                         |   |                                                 |  
| | Share in losses of associated companies |  |                            | (64,763  | )                       |   | (2,744                                          | )
| |                                         |  |                            |          |                         |   |                                                 |  
| | Net loss                                |  |                            | (250,276 | )                       |   | (2,744                                          | )
| |                                         |  |                            |          |                         |   |                                                 |  
| | Loss per share - basic and diluted      |  | $                          | (5.82    | )                       | $ | (0.06                                           | )
| |                                         |  |                            |          |                         |   |                                                 |  

| | x. | Recently issued accounting pronouncements:
| | -- | ------------------------------------------
| |    |                                           
| |    | 1.                                        

F-18

---

---

SCITEX
CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES(continued):

|                                    |    | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | In December
  2003, the FASB issued SFAS No. 132 (revised 2003), Employers Disclosures
  about Pensions and Other Postretirement Benefits, an amendment of FASB
  Statements No. 87, 88 and 106, and a revision of FASB Statement No. 132 (FAS
  132 (revised 2003)) . This Statement revises employers disclosures about
  pension plans and other postretirement benefit plans. It does not change the
  measurement or recognition of those plans. The new rules require additional
  disclosures about the assets, obligations, cash flows, and net periodic
  benefit cost of defined benefit pension plans and other postretirement
  benefit plans. Part of the new disclosures provisions are effective for 2003
  calendar year-end financial statements, and accordingly have been applied by
  the Company in these consolidated financial statements. The rest of the
  provisions of FAS 132, which have a later effective date, are currently being
  evaluated by the Company.
|----------------------------------- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                    |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                    | y. | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                    |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                    |    | Certain
  comparative figures have been reclassified to conform to the current year
  presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                    |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|NOTE 3 - ACQUISITIONS OF BUSINESSES
|                                   
|                                    | a. | Scitex Vision Ltd. (hereafter  Scitex Vision) was
  formed by the Company and other investors during 1999 under the name Aprion
  Digital Ltd. Upon the formation of Scitex Vision, the Company transferred to
  Scitex Vision the activity of its Advanced Printing Products Division, in
  consideration for Scitex Vision shares, warrants and convertible note in the
  amount of $ 20,000,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                    |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                    |    | In the
  second quarter of 2001, the Company exercised all of the warrants that were
  granted by Scitex Vision, in consideration for $ 2,500,000, and in the third
  quarter converted the note into Scitex Vision preferred shares. The excess of
  cost of investments over the Companys share in Scitex Visions net assets at
  dates of transactions, in total amount of approximately $ 5,000,000, was
  attributed to technology to be amortized over five years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                    |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                    |    | At December
  31, 2002, the Company held approximately 43% of Scitex Visions outstanding
  shares and the balance of the investment, accounted for under the equity
  method, was zero.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                    |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                    |    | On January
  1, 2003, the Company sold all of its shares in its then wholly owned
  subsidiary - Scitex Vision International Ltd. (then known as Scitex Vision
  Ltd.) (hereafter - SV international), to Scitex Vision, the Companys then
  associated company, in exchange for additional preferred shares in Scitex
  Vision. Subsequent to the transaction, the Company holds approximately 75% of
  Scitex Visions outstanding shares. The transaction was accounted for, by the
  Company, as a sale of 25% in SV international and as acquisition of
  additional shares in Scitex Vision. The fair value of the transaction was
  approximately $ 9 million. As a result, the Company recognized a net capital
  gain of $ 289,000 under Other expenses - net ($ 3,774,000 capital gain
  resulting from the sale of a portion in SV international, net of $ 3,485,000
  of dilution loss relating to Scitex Visions preferred shares anti-dilution
  mechanism triggered by the transaction). In addition, the Company recognized
  a capital surplus of $ 3,485,000 under Beneficial conversion feature relating
  to convertible preferred shares issued by Scitex Vision in its shareholders
  equity.

F-19

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 3 - ACQUISITIONS OF BUSINESSES(continued):

| |  | This
  acquisition was accounted for under the purchase method. As a result of the
  transaction the Company recorded technology and goodwill of approximately
  $ 14.8 million and approximately $ 2 million, respectively, of which
  approximately $ 3.8 million was credited to minority interest. The technology
  is being amortized over 6 years.                                                                                                                                                                
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Commencing
  on January 2003 Scitex Visions financial statements are consolidated with
  those of the Company.                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Here after
  are certain unaudited proforma combined statements of operations data for the
  year ended December 31, 2002 as if the acquisition of additional shares in
  Scitex Vision occurred on January 1, 2002, after giving effect to purchase
  accounting adjustments. The proforma financial information is not necessarily
  indicative of the combined results that would have been attained had the
  acquisition take place at the beginning of 2002, nor is it necessarily
  indicative of future results:

| |                                                                             |  | Year ended
  December 31,                             |  
| | --------------------------------------------------------------------------- |  | ----------------------------------------------------- | -
| |                                                                             |  |                                                       |  
| |                                                                             |  | 2002                                                  |  
| |                                                                             |  |                                                       |  
| |                                                                             |  | (Unaudited)                                           |  
| |                                                                             |  |                                                       |  
| |                                                                             |  | U.S.
  dollars in thousands
  (except per share data) |  
| |                                                                             |  |                                                       |  
| | Revenues                                                                    |  |                                                       |  
| |                                                                             |  |                                                       |  
| | Net loss
  from continuing operations                                       |  |                                                       |  
| |                                                                             |  |                                                       |  
| | Net loss                                                                    |  |                                                       |  
| |                                                                             |  |                                                       |  
| | Loss per
  share for continuing
            operation - basic
  and diluted |  |                                                       | $
| |                                                                             |  |                                                       |  
| | Net loss per
  share - basic and diluted                                    |  |                                                       | $
| |                                                                             |  |                                                       |  

| |    | As to
  lawsuits filed in connection with this transaction see note 10b(1).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | b. | In April
  2002, SV international acquired some assets and operations from Siantec SARL
  (Siantec) and its shareholders in consideration of $ 2,470,000, of which
  $ 1,860,000 was allocated to technology and $ 610,000 to non-compete covenant.
  Those intangible assets were originally amortized according to a 6-year
  amortization rate (as to an impairment of the acquired intangibles, see note
  8). This acquisition was made in order to obtain the advanced technology in
  the subsidiarys products. As part of the transaction additional maximum royalties
  payment of up to $ 10,000,000 is to be paid conditional upon sales of systems
  and ink based on Siantecs technology. The payment of $ 1,000,000 of the total
  amount is limited to a 5-year period, and the balance of $ 9,000,000 is with
  no time limitation. As of December 31, 2003, no additional payment was made
  due to this transaction.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | c. | In March
  2001, SV international acquired the ink technology, other assets and
  operations from the Techno Ink manufacturing (PTY) Ltd. (Tech Ink) for an
  aggregate consideration of $ 2,860,000. The technology is amortized over 6
  years. The agreement provides for additional payments to Tech Ink of up to a
  maximum of approximately $ 5,500,000, based on the achievement of specified
  financial targets, such as reduction in manufacturing costs, during the
  period from 2001 to 2006. As of December 31, 2003, the total amount recorded
  to goodwill due to this agreement is $ 2,441,000, of which $ 1,258,000 was
  recorded during 2003.                                                                                                                                                                                                                                                                     

F-20

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 - INVESTMENTS IN ASSOCIATED COMPANIES:

| | a. | An
  investment in Jemtex Ink Jet Ltd. (Jemtex), accounted for by the equity
  method, amounted to $ 1,303,000 ($ 2,560,000  including convertible loan and
  debentures as described below) and $ 4,703,000 as of December 31, 2003 and
  2002, respectively. In December 2002, the Company signed a share purchase
  agreement with Jemtex, according to which, the Company invested additional
  $ 2,400,000 in three equal quarterly installments of $ 800,000 each. The first
  installment and an advance of $ 250,000 on the last payment were made in
  December 2002. The additional $ 1,350,000 was transferred in February and May
  2003. The excess of cost of investment over the Companys share in Jemtex
  net assets at the date of transaction in the amount of $ 1,371,000 was
  attributed to technology to be amortized over five years.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In addition,
  Jemtex granted to the Company for no additional consideration, warrants to
  purchase (1) 3,181 preferred shares of Jemtex at an exercise price of
  $ 251.467 per share, exercisable until January 2, 2004, and (2) 3,181
  preferred shares of Jemtex at an exercise price of $ 251.467 per share
  exercisable until March 31, 2005. An amount of $ 51,000 was allocated to the
  said warrants out of the total above-mentioned investment of $ 2,400,000.                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In August
  2003, the Company exercised the warrants to purchase 3,181 preferred shares
  of Jemtex at an exercise price of $ 251.467 per share, exercisable until
  January 2, 2004, and in lieu of 3,181 preferred shares was issued an interest
  bearing note convertible (principal and interest) into preferred B shares or
  a more senior class of shares, as determined by the Company, in the amount of
  $ 800,000.                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In November
  and December 2003, the Company granted to Jemtex advance payments on account
  of convertible debentures of $ 100,000 and $ 350,000, respectively. See note
  16b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | As of
  December 31, 2003, the Companys ownership interest in Jemtex is
  approximately 49.8% and approximately 47.8% on a fully diluted basis.
  However, commencing the third quarter of 2003, the Company is the sole
  financier of Jemtex losses and accordingly is its full share in Jemtex
  losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | b. | As to the
  investment in Objet and its first time application of the equity method, see
  note 2w. The balance of this investment as of December 31, 2003 is
  approximately $ 767,000, following an additional investment of approximately
  $ 460,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-21

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5 - OTHER INVESTMENTS AND NON-CURRENT ASSETS:

| | a. | Composed as follows:
| | -- | --------------------

| |                                     |  | December
  31,   | 
| | ----------------------------------- |  | ---------------- | 
| |                                     |  |                  | 
| |                                     |  | 2003             | 
| |                                     |  |                  | 
| |                                     |  | $ in
  thousands | 
| |                                     |  |                  | 
| | Investment
  in Creo (see b. below) |  | -,-              | 
| | Other
  investments (see c. below)  |  | 1,301            | 
| | Non-current assets                  |  | -,-              | 
| |                                     |  |                  | 
| |                                     |  | 1,301            | 
| |                                     |  |                  | 

| | b. | Creo                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | In June and
  August 2003, the Company sold all of its remaining holdings in Creo Inc.
  (hereafter - Creo) shares for a net total consideration of $ 54,000,000 and
  recorded a gain of approximately $ 3,000,000. The investment in Creo shares
  was accounted for as shares available for sale, and following the sale of the
  shares the Company realized an amount of approximately $ 750,000 recorded
  during 2003 to Other Comprehensive Income in its shareholders equity. Until
  December 2001 the investment in Creo was accounted for using the equity
  method. The Companys share in the losses of Creo in 2001 amounted to
  $ 60,183,000. In 2002, due to extended decline in fair market value, it was
  determined that the impairment in value of the investment was other than
  temporary. Consequently, the accumulated unrealized loss of  $ 22,283,000, which was charged to other
  loss - net in the statement of operation.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | c. | Other
  investments represent investments in non-marketable securities in companies
  operating in the digital printing and digital imaging industry, in which the
  Company does not exercise significant influence, and which are stated at
  cost, net of a write-down for decrease in value which is not of a temporary
  nature, in the amount of $ 1,301,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    | In 2003, due
  to an extended decline in fair value of an other than temporary nature, the
  Company recorded an accumulated loss in the amount of $ 2,493,000 that was
  charged to other loss - net in the statement of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-22

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

| | Grouped by
  major classifications, the assets are composed as follows:
| | -----------------------------------------------------------------------

| |                                                           |  | December
  31    |  
| | --------------------------------------------------------- |  | ---------------- | -
| |                                                           |  |                  |  
| |                                                           |  | 2003             |  
| |                                                           |  |                  |  
| |                                                           |  | $ in
  thousands |  
| |                                                           |  |                  |  
| | Machinery
  and equipment                                 |  | 4,567            |  
| | Building                                                  |  | 424              |  
| | Leasehold
  improvements                                  |  | 4,606            |  
| | Office
  furniture and equipment                          |  | 5,209            |  
| | Motor
  vehicles                                          |  | 16               |  
| |                                                           |  |                  |  
| |                                                           |  | 14,822           |  
| | Less -
  accumulated depreciation
       and amortization |  | (5,618           | )
| |                                                           |  |                  |  
| |                                                           |  | 9,204            |  
| |                                                           |  |                  |  

|                  | Depreciation
  and amortization of property, plant and equipment from continuing operations
  totaled $ 3,558,000, $ 2,250,000 and $ 2,204,000 in 2003, 2002 and 2001,
  respectively.
|----------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  |                                                                                                                                                                                       
|NOTE 7 - GOODWILL
|                  |                                                                                                                                                                                       
|                  | a.                                                                                                                                                                                    

| |                                     |  | $ in
  thousands |      
| | ----------------------------------- |  | ---------------- | -----
| |                                     |  |                  |      
| |                                     |  |                  |      
| | Balance as
  of January 1, 2002*    |  |                  | 988  
| | Goodwill
  acquired during the year |  |                  | 1,183
| |                                     |  |                  |      
| | Balance as
  of December 31, 2002   |  |                  | 2,171
| | Goodwill
  acquired during the year |  |                  | 3,301
| |                                     |  |                  |      
| | Balance as
  of December 31, 2003   |  |                  | 5,472
| |                                     |  |                  |      

| | * | In 2001 the
  Company recognized a goodwill impairment charge in the amount of $ 1,925,000,
  see also note 8. This impairment was due to an evaluation that was performed
  by a third party appraiser, due to the significant decrease in the production
  of certain products based on the technology mentioned in note 8. The
  impairment was made in accordance with the provisions of FAS No. 121
  Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
  to be Disposed of.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-23

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 7 - GOODWILL
(continued):

| | b. | The
  following table illustrates the Companys results adjusted to eliminate the
  effect of goodwill amortization expense, including goodwill with respect of
  an associated company accounted for by the equity method:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                                                                  |  | Year ended
  December 31                   |  
| | -------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | -
| |                                                                                                                                  |  |                                            |  
| |                                                                                                                                  |  | 2003                                       |  
| |                                                                                                                                  |  |                                            |  
| |                                                                                                                                  |  | $ in thousands (except for per share data) |  
| |                                                                                                                                  |  |                                            |  
| | Net loss
  from continuing operations - as reported                                                                              |  | (18,656                                    | )
| | Add
  back:  Goodwill amortization related
  to
                         continuing
  operations                                 |  |                                            |  
| | Goodwill
  amortization included in
                         Share
  in losses of an associated
                         Company |  |                                            |  
| |                                                                                                                                  |  |                                            |  
| | Net loss
  from continuing operations - adjusted                                                                                 |  | (18,656                                    | )
| |                                                                                                                                  |  |                                            |  
| | Net income
  from discontinued operation - as reported                                                                           |  | 20,043                                     |  
| | Add
  back:  Goodwill amortization related
  to
                     discontinued
  operation                                    |  |                                            |  
| |                                                                                                                                  |  |                                            |  
| | Net income
  from discontinued operation- adjusted                                                                               |  | 20,043                                     |  
| |                                                                                                                                  |  |                                            |  
| | Pro-forma
  net income (loss)                                                                                                    |  | 1,387                                      |  
| |                                                                                                                                  |  |                                            |  
| | Basic and
  diluted loss per share  as reported                                                                                 |  |                                            |  
| | Continuing
  operations                                                                                                          |  | (0.43                                      | )
| | Discontinued
  operation                                                                                                         |  | 0.46                                       |  
| |                                                                                                                                  |  |                                            |  
| |                                                                                                                                  |  | 0.03                                       |  
| |                                                                                                                                  |  |                                            |  
| | Pro-forma
  loss per share  adjusted                                                                                            |  |                                            |  
| | Continuing
  operations                                                                                                          |  | (0.43                                      | )
| | Discontinued
  operation                                                                                                         |  | 0.46                                       |  
| |                                                                                                                                  |  |                                            |  
| |                                                                                                                                  |  | 0.03                                       |  
| |                                                                                                                                  |  |                                            |  

NOTE 8 - OTHER INTANGIBLE ASSETS:

| | Composed as
  of December 31, 2003 and 2002, as follows:
| | --------------------------------------------------------

| |                                            |  | December
  31    |  
| | ------------------------------------------ |  | ---------------- | -
| |                                            |  |                  |  
| |                                            |  | 2003             |  
| |                                            |  |                  |  
| |                                            |  | $ in
  thousands |  
| |                                            |  |                  |  
| | Gross
  carrying amount:                   |  | 48,239           |  
| | Accumulated
  amortization and impairment: |  | (30,212          | )
| |                                            |  |                  |  
| | Amortized
  balance                        |  | 18,027           |  
| |                                            |  |                  |  

| | * See note
  3a regarding technology acquired during 2003.                                                                                                                          
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                     
| | Amortization
  expense in respect of intangible assets relating to the continuing operation
  totaled $ 5,871,000, $ 2,944,000 and 7,752,000 in 2003, 2002 and 2001,
  respectively.

F-24

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8 - OTHER INTANGIBLE ASSETS(continued):

| | Estimated
  amortization expense for the following years, subsequent to December 31,
  2003:
| | --------------------------------------------------------------------------------------------

| |                            |  | $ in
  thousands |      
| | -------------------------- |  | ---------------- | -----
| |                            |  |                  |      
| | Year ending
  December 31: |  |                  |      
| | 2004                       |  |                  | 5,067
| | 2005                       |  |                  | 4,686
| | 2006                       |  |                  | 3,747
| | 2007                       |  |                  | 2,255
| | 2008                       |  |                  | 2,255

|                                          | In January
  2001, SV international acquired the intellectual property related to the
  manufacturing of inks compatible with its machines from Magic Inks B.V. for
  consideration of $ 2,887,000. This intangible asset is amortized over 6 years.
  As to an impairment of the acquired intangible asset see below.                                                                                                                                                                                                                                
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                          | In 2001 and
  2003 the financial statements include a write-down charge due to the
  impairment of technology and know-how in a subsidiary, in the amounts of
  $ 13,061,000 and $ 2,967,000, respectively. These impairments followed an
  evaluation performed by a third party appraiser, due to the significant
  decrease in the production of certain products based on the above-mentioned
  technologies. The impairment calculation in 2001 and 2003 was prepared in
  accordance with the provisions of SFAS 121 and SFAS 144, respectively.
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTE 9 - EMPLOYEE RIGHTS UPON RETIREMENT:
|                                         
|                                          | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                          | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                          | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                          | d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                          | e.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F-25

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES:

| | a. | Commitments:
| | -- | ------------
| |    |             
| |    | 1)          
| |    |             
| |    |             
| |    |             
| |    |             
| |    |             
| |    |             
| |    |             
| |    |             
| |    |             
| |    | 2)          
| |    |             
| |    |             
| |    |             
| |    |             

| |                            |  | $ in thousands |      
| | -------------------------- |  | -------------- | -----
| |                            |  |                |      
| | Year ending
  December 31: |  |                |      
| | 2004                       |  |                | 2,005
| | 2005                       |  |                | 1,899
| | 2006                       |  |                | 1,751
| | 2007                       |  |                | 1,711
| | 2008                       |  |                | 1,711
| | 2009
  and thereafter      |  |                | 2,317

| |  |  | Most of the
  rental payments for the Israeli premises are payable in Israeli currency,
  partially linked to the Israeli CPI, to the dollar or both to the dollar and
  the U.S. CPI.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |                                                                                                                                                                                       
| |  |  | Rental
  expense relating to continuing operations totaled $ 2,449,000, $ 1,158,000 and
  $ 1,163,000 in 2003, 2002 and 2001, respectively.                                           

F-26

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES(continued):

| |    | 3)                      | Commencing
  November 1, 2001, the Companys headquarters are located on the premises
  of one of its major shareholders. The Company obtains the services of certain
  executives and other staff as well as certain services from the shareholder,
  for which the Company pays amounts based on formulas determined in the agreement
  between the Company and the shareholder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | ----------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                         | Expenses due
  to the said agreement totaled $ 518,000, $ 445,000 and $ 92,000 in 2003, 2002
  and 2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | b. | Contingent liabilities:
| |    |                        
| |    | 1)                      | In October
  2003, a minority shareholder of Scitex Vision filed a
  NIS 14 million (approximately $ 3.1 million) lawsuit against
  the Company, Scitex Vision and others, including certain other shareholders
  of Scitex Vision (among them, the Companys two main shareholders) and the
  directors of Scitex Vision in the period relevant for the lawsuit (three of
  whom are present or former office holders of the Company). The lawsuit was
  brought in connection with the transaction to combine the operations of SV
  international and Scitex Vision that was completed in January 2003. In
  particular, the lawsuit alleges that the terms of the transaction and the
  manner in which it was effected prejudiced the rights of the plaintiff as a
  minority shareholder. At this time, the Company and Scitex Vision are unable
  to assess the outcome of this matter, while they intend to defend it
  vigorously. No provision was recorded for this matter in these financial
  statements.
| |    |                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                         | In November
  2003, the same minority shareholder sent a demand letter to Scitex Vision,
  whereby it demanded that Scitex Vision will file a lawsuit against the
  Company and others (including Scitex Visions directors), alleging breach of
  fiduciary duties, misrepresentations and misleading in connection with the
  Companys undertaking to transfer $ 15 million to SV international as part of
  the aforesaid transaction. In January 2004, Scitex Vision rejected these
  demands. In the event that the minority shareholder decides to commence a
  derivative action, it is not possible at this stage in time to predict the
  outcome of such legal proceedings. No provision was recorded for this matter
  in these financial statements.                                                                                                                                                                                                                                                     
| |    |                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                         | In
  December 2003, the same minority shareholder filed a separate motion
  against the Company, Scitex Vision and two other shareholders of Scitex
  Vision (including one of the Companys principal shareholders), in connection
  with a rights offering that was completed in July 2003. In particular, the
  motion alleges that the reorganization of Scitex Visions share capital that
  was affected in conjunction with the rights offering was invalid and
  prejudiced the rights of the minority shareholder. In light of its arguments,
  the plaintiff requested the court to order the respondents to provide
  information and documents with respect to the reorganization of Scitex Visions
  share capital.                                                                                                                                                                                                                                                                                     
| |    |                         | At this
  stage in time, it is not possible to predict the outcome of this particular
  matter. No provision was recorded for this matter in these financial
  statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-27

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES(continued):

| |  | 2) | In January
  2003 a subsidiary has received a letter from the legal advisors of a service
  provider claiming compensation in the amount of approximately $ 845,000. The letter
  of demand alleges that the subsidiary has a contractual relationship with
  this service provider. At this time it is not possible to assess the outcome
  of this matter, and the subsidiary intends to defend it vigorously. No
  provision was recorded for this matter in the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | 3) | In July 2000
  a monetary claim in the amount of approximately $ 413,000 against the Company
  was filed with the district court in Jerusalem. In this lawsuit it was
  claimed that a machine the Company sold to the plaintiff did not function as
  promised by the Company. In April 2000, the Company sold substantially all of
  the assets, liabilities and operations related to its Digital PrePrint
  business to Creo. Therefore, defense is being handled by Creo. In the opinion
  of the Companys management, since this lawsuit is in the framework of an
  indemnification agreement with Creo, it will have minimal effect on the
  Company, if any. Therefore no provision was recorded for this matter.                                                                                                                                                                                                                                                                                                                                             
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | 4) | In October
  2002 the liquidator of a company, which the Company had an investment in,
  which was fully written-off during 2001, filed a lawsuit against directors
  and other executives of this company. Among the defendants is a former
  executive of the Company, for which the Company had directors insurance.
  Under the insurance, the maximum amount which the Company might have to pay
  is approximately $ 100,000. The Company is vigorously contesting this lawsuit.
  Management believes that the chances the Company will have to pay the said amount
  are low. Therefore no provision was recorded for this matter.                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | 6) | In
  December 2003, three minority shareholders of Objet, a company in which
  the Company has a 23.47% interest, filed an approximate
  NIS 7.8 million (approximately $ 1.75 million) lawsuit against
  Objet, certain of its shareholders, including the Company, and certain of
  Objets directors. The lawsuit alleges that the defendants acted in a manner
  that prejudiced the rights of the minority shareholders, and breached Objets
  obligations to such shareholders. Among the remedies being sought by the said
  minority shareholders are compensation, restitution (with linkage and
  interest) of the investment amount, or repurchase of the plaintiffs shares
  in Objet, and a demand for changes to the terms of certain convertible loans
  made to Objet by certain of the defendants including the Company. At this
  time the Companys attorneys are still evaluating the claim, and neither
  Objet nor the Company is able to give any realistic assessment as to the outcome
  of this matter, therefore no provision was recorded.
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | 7) | In 1997, a
  lawsuit was filed against the Company in Germany, which suit was also
  defended by a third party, claiming $ 5 million (together with interest
  since 1997) in relation to a purported guarantee which would have required
  the acquisition by the Company of additional shares in a company now in
  liquidation. Following prolonged negotiations, it is probable that this
  lawsuit will be settled by both the Company and the third party in equal shares
  paying significantly lesser amount than the original claim, and in respect of
  which the Company recorded a provision.                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-28

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES(continued):

|                                |    | 8)             | Claims have
  been filed against the Company and its subsidiaries in the ordinary course of
  business. The Company and its subsidiaries intend to defend themselves
  vigorously against those claims. Management does not expect that the Company
  will incur substantial expenses in respect thereof; therefore, no provision
  has been made for the claims.                                                                                  
|------------------------------- | -- | -------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    | 9)             | As to
  contingent royalties, see note 3a and note 3b.                                                                                                                                                                                                                                                                                                                                                                                             
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    | 10)            | As to tax
  assessments of two of the Companys subsidiaries, see note 12h.                                                                                                                                                                                                                                                                                                                                                                        
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                | c. | Guarantees    
|                                |    |               
|                                |    | 1)             | In
  connection with a bank loan received by SV international, the Company granted
  a guarantee in favor of the bank. As of December 31, 2003 the total amount
  guaranteed is approximately $ 1,333,000.                                                                                                                                                                                                                                         
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    | 2)             | Scitex
  Vision granted guarantees in favor of its premises lessor suppliers, certain
  of its customers and suppliers and a government institution. As of December
  31, 2003, the guarantees outstanding are as follows:                                                                                                                                                                                                                         
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    |                | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    |                | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    |                | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    |                | d.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|NOTE 11 - SHAREHOLDERS EQUITY:
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                | a. | Share capital:
|                                |    |               
|                                |    | 1)             | The
  Companys shares are traded on NASDAQ and on the Tel Aviv Stock Exchange
  (TASE).                                                                                                                                                                                                                                                                                                                                                         
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    |                | On December
  31, 2003 the Companys share closed on NASDAQ and the Tel Aviv Stock Exchange
  at approximately $ 5.06 and $ 5.04, respectively.                                                                                                                                                                                                                                                                                                    
|                                |    |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                |    | 2)             | The number
  of shares stated as issued and outstanding - 43,467,388 shares at
  December 31, 2003 and 2002 - includes 448,975 shares repurchased by the
  Company (treasury shares, see note 2n) and held by a trustee for the benefit
  of employees within the framework of the Companys share option plans. These
  shares, until purchased by employees pursuant to a share option plan, bear no
  voting rights or rights to cash dividends.

F-29

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 11 - SHAREHOLDERS EQUITY
(continued):

| | b. | Share incentive and stock option plans:
| | -- | ---------------------------------------
| |    |                                        
| |    | 1)                                     
| |    |                                        
| |    | 2)                                     
| |    |                                        
| |    | 3)                                     
| |    |                                        
| |    | 4)                                     
| |    |                                        
| |    | 5)                                     
| |    |                                        
| |    |                                        
| |    |                                        
| |    |                                        
| |    |                                        

F-30

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE
11 - SHAREHOLDERS EQUITY (continued):

| |  | 6) | The options
  granted under the Companys plans are exercisable for the purchase of shares
  as follows:
| |  | -- | --------------------------------------------------------------------------------------------------------

| |                                     |  | December
  31       |        
| | ----------------------------------- |  | ------------------- | -------
| |                                     |  |                     |        
| |                                     |  | 2003                |        
| |                                     |  |                     |        
| |                                     |  | Number of
  options |        
| |                                     |  |                     |        
| | At balance
  sheet date             |  |                     | 978,732
| | During the
  first year thereafter  |  |                     | 8,334  
| | During the
  second year thereafter |  |                     |        
| |                                     |  |                     |        
| |                                     |  |                     |        
| |                                     |  |                     | 987,066
| |                                     |  |                     |        

| |  | 7) | A summary of
  the status of the Companys plans at December 31, 2003, 2002 and 2001,
  and changes during the years ended on those dates, is presented below:
| |  | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                   |  | Year ended
  December 31 |          
|-------------------------------------------------- |  | ------------------------ | ---------
|                                                   |  |                          |          
|                                                   |  | 2003                     |          
|                                                   |  |                          |          
|                                                   |  | Number                   |          
|                                                   |  |                          |          
|                                                   |  |                          |          
|                                                   |  |                          |          
|Options
  outstanding at 
       beginning of year |  |                          | 1,252,492
|Changes
  during the year:                         |  |                          |          
|Granted  - at fair value                           |  |                          |          
|Forfeited
  and canceled                           |  |                          | (265,426 
|                                                   |  |                          |          
|Options
  outstanding at end of year               |  |                          | 987,066  
|                                                   |  |                          |          
|Options
  exercisable at end of year               |  |                          | 978,732  
|                                                   |  |                          |          
|Options
  available for future awards              |  |                          | 1,900,000
|                                                   |  |                          |          

| |  |  |  | The weighted
  average fair value of options granted during 2001 is $ 2.76.                                                                                              
| |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | The fair
  value of each option grant is estimated on the date of grant using the
  Black-Scholes option-pricing model with the following weighted average
  assumptions:

|                                        |  | Year ended
  December 31 |     
|--------------------------------------- |  | ------------------------ | ----
|                                        |  |                          |     
|                                        |  | 2001                     |     
|                                        |  |                          |     
|Dividend
  yield per share - in dollars |  |                          | -,- 
|                                        |  |                          |     
|Expected
  volatility                   |  |                          | 58  
|                                        |  |                          |     
|Risk-free
  interest rate               |  |                          | 4.0 
|                                        |  |                          |     
|Expected
  life - in years              |  |                          | 2.00
|                                        |  |                          |     

F-31

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 11 - SHAREHOLDERS EQUITY (continued):

| |  | 8) | The
  following table summarizes information about options under the Companys
  plans outstanding at December 31, 2003:
| |  | -- | ------------------------------------------------------------------------------------------------------------------------

| | Options outstanding        |    | Options exercisable                            | 
| | -------------------------- | -- | ---------------------------------------------- | 
| |                            |    |                                                | 
| | Range of
  exercise prices |    | Number
  outstanding at
  December 31, 
  2003 | 
| |                            |    |                                                | 
| | $                          |    |                                                | 
| |                            |    |                                                | 
| | 8.00                       | to | 8.99                                           | 
| | 9.00                       | to | 9.99                                           | 
| | 10.00                      | to | 10.99                                          | 
| | 11.00                      | to | 11.99                                          | 
| | 12.00                      | to | 12.99                                          | 
| |                            |    |                                                | 
| | 8.00                       | to | 12.99                                          | 
| |                            |    |                                                | 

| |  | 9)  | An award in
  1999, whereby 50 % of 300,000 options awarded in earlier years to a related
  party, with an exercise price of $ 14.75 per option, were re-priced to
  an exercise price of $ 11.69 per option (the then market price per
  share), accompanied by a waiver of the remaining 50 %. Such options were
  exercisable from 1999 and are exercisable until June 2004. The fair value of
  each option granted was $ 3.21. In accordance with FIN 44, the re-priced
  options are accounted for under variable plan accounting. Under this method
  of accounting, increases in the fair market value of the underlying shares
  result in non-cash compensation charges to the statement of operations. At December 31,
  2003, 2002 and 2001, the market price of the underlying shares was below
  $ 11.69 (the exercise price of the options), thus, no compensation cost
  has been charged with respect to these options. Future periods may reflect
  charges depending on the fair market price of the underlying shares.
| |  | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | 10) | Stock option plans of subsidiaries:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |     | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-32

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 11 - SHAREHOLDERS EQUITY (continued):

| |  |  |    | None of
  these options were exercised and during 2002 all of the outstanding options
  were waived by the respective grantees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | In April
  2002 all of this subsidiarys options were canceled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | In September
  2003, the subsidiarys board of directors approved an employee stock option
  plan (hereafter - the plan), whereunder options to purchase up to 13,179,544
  ordinary shares of the subsidiary are to be granted to employees, directors
  and consultants of the subsidiary without consideration. Each option can be
  exercised to purchase one ordinary share of NIS 0.01 par value of the
  subsidiary.                                                                                                                                                                                                                                              
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | Immediately
  upon exercise, the ordinary shares purchased in exercise of the option will
  have the same rights as of the subsidiarys other ordinary shares. Any option
  not exercised within 10 years from allotment date will expire, unless
  extended by the board of directors of the subsidiary.                                                                                                                                                                                                                                                                                                                                                                
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | At December
  31, 2003, there were 12,531,041 options outstanding subject to the 2003 plan,
  of which 6,079,265 were vested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | All options
  were granted at an exercise price of $ 0.4052, which management determined is
  not less than the fair value of an ordinary share in the date of grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | The weighted
  fair value of options granted by the subsidiary during 2003 is $ 0.14.
  The fair value of each option grant is estimated on the date of grant using
  the Black-Scholes option-pricing model with the following weighted average
  assumptions: dividend yield per share is nil, expected volatility of 48%,
  risk-free interest rate of 2.2%, expected life of 3 years.                                                                                                                                                                                                                                                                                
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | During 2003,
  no options were exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | In addition,
  approximately 193,474 options to purchase ordinary shares of the subsidiary
  are held by former directors of the acquired subsidiary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | b) | In
  consideration of a credit line received by an acquired subsidiary a total
  amount of 56,180 options were granted to a bank in 2002 and are exercisable
  in to ordinary shares of the acquired subsidiary in exercise price set at
  $8.90 per share. The fair value of the warrant granted to the bank calculated
  as of December 31, 2003, was immaterial.                                                                                                                                                                                                                                                                                                      
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | c) | On
  December 6, 2001, the Board of Directors of a United States subsidiary
  approved an employee share option plan (the US Subsidiary Plan). Pursuant
  to the US Subsidiary Plan, 2,600,000 shares of Common Stock of the subsidiary
  are reserved for issuance upon the exercise of 2,600,000 options to be
  granted to some of the subsidiarys employees.                                                                                                                                                                                                                                                                                                      
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  |    | During 2001,
  the subsidiary had granted 957,000 options to employees under the US
  Subsidiarys Plan, at an exercise price per share of $ 6.00. During
  2002, the subsidiary granted additional 366,000 options on identical
  conditions to those grants in 2001, and 66,000 options were forfeited. During
  2003, the subsidiary granted additional 143,000 options on identical conditions
  to those grants in 2001, and no option were forfeited. The options vest as
  follows: 25 % one year from the grant date and thereafter 6.25 % on the last
  day of every third calendar month. Any option not exercised within 10 years
  of grant date will expire.

F-33

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 11 - SHAREHOLDERS EQUITY
(continued):

| |    |                                                                                                                                                                                  |  | The weighted
  fair value of options granted by the subsidiary during 2003 is $ 3.99. The
  fair value of each option grant is estimated on the date of grant using the
  Black-Scholes option-pricing model with the following weighted average
  assumptions: dividend yield per share is nil, expected volatility of zero,
  risk-free interest rate range from 4.25% to 5.44%, expected life of 10 years.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                  |  | The weighted
  fair value of options granted by the subsidiary during 2002 is $ 3.24. The
  fair value of each option grant is estimated on the date of grant using the
  Black-Scholes option-pricing model with the following weighted average assumptions:
  dividend yield per share is nil, expected volatility of zero, risk-free
  interest rate range from 5.29% to 5.44%, expected life of 10 years.
| |    |                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                  |  | The weighted
  fair value of options granted by the subsidiary during 2001 is $ 3.25. The
  fair value of each option grant is estimated on the date of grant using the
  Black-Scholes option-pricing model with the following weighted average
  assumptions: dividend yield per share is nil, expected volatility of zero,
  risk-free interest rate of 5.29%, expected life of 10 years.                 
| |    |                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                  |  | As of
  December 31, 2003, 607,750 options were exercisable.                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                  |  | At December
  31, 2003, had all options been exercised, the Companys share in the equity
  of the US subsidiary would have decreased from 100% to approximately 93%.
  Subsequent to December 31, 2003, the Company sold the operations of the US
  subsidiary and all options under the US Subsidiary Plan were cancelled. See
  also note 1b.                                                             
| |    |                                                                                                                                                                                 
| | c. | Retained earnings                                                                                                                                                               
| |    |                                                                                                                                                                                 
| |    | Dividends
  are declared and paid in dollars (except to shareholders of record with an
  address in Israel, with respect to whom payment is made in Israeli currency
  (NIS)).

NOTE 12 - TAXES ON INCOME:

| | a. | The Company and its Israeli subsidiary:
| | -- | ---------------------------------------
| |    |                                        
| |    | 1)                                     
| |    |                                        
| |    |                                        
| |    |                                        
| |    |                                        
| |    |                                        
| |    |                                        

F-34

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 12 - TAXES ON INCOME (continued):

| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | In the event
  of distribution of cash dividends out of income which was tax exempt as
  above, the Israeli subsidiary would have to pay the 25% tax in respect of the
  amount distributed.                                                                                                                                                                                                                                                                                                                                                                                  
| |  | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | The Israeli
  subsidiary intends to permanently reinvest the amounts of tax-exempt income
  in the foreseeable future, and not to cause distribution of such dividends.                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Accelerated
  depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | The Israeli
  subsidiary is entitled to claim accelerated depreciation for five tax years
  commencing in the first year of operation of each asset, in respect of
  machinery and equipment used by the approved enterprise.                                                                                                                                                                                                                                                                                                                                                 
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Conditions
  for entitlement to the benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | The
  entitlement to the above benefits is conditional upon the Israeli
  subsidiarys fulfilling the conditions stipulated by the law, regulations
  published hereunder and the instruments of approval for the specific
  investments in the approved enterprise. In the event of failure to comply
  with these conditions, the benefits may be cancelled and the Israeli
  subsidiary may be required to refund the amount of the benefits, in whole or
  in part, with the addition of linkage differences to the Israeli consumer
  price index (CPI) and interest.
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | 2) | Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (hereafter - the Inflationary Adjustments Law)                                                                                                                                                                                                                                                                                                                                                                                            
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |    | Under this
  law, results for tax purposes are measured in real terms, in accordance with
  the changes in the Israeli CPI, or in the exchange rate of the dollar for a
  foreign investors company. The Company and its Israeli subsidiaries
  elected to measure their results on the basis of the changes in the Israeli
  CPI.                                                                                                                                                                                                       
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |    | Paragraph 9 (f)
  of FAS 109, Accounting for Income Taxes, prohibits the recognition of
  deferred tax liabilities or assets that arise from differences between the
  financial reporting and tax bases of assets and liabilities that are measured
  from the local currency into dollars using historical exchange rates, and
  that result from changes in exchange rates or indexing for tax purposes.
  Consequently, the abovementioned differences were not reflected in the
  computation of deferred tax assets and liabilities.
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | 3) | Tax benefits
  under the Law for the Encouragement of Industry (Taxation), 1969                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |    | The Israeli
  subsidiary is an industrial company as defined by this law and as such is
  entitled to certain tax benefits, mainly accelerated depreciation of
  machinery and equipment, as prescribed by regulations published under the
  Inflationary Adjustments Law, and the right to claim public issuance expenses
  and amortization of patents and other intangible property rights as a
  deduction for tax purposes.                                                                                                          
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | 4) | Tax rates applicable in Israel
  to income not derived from an approved enterprise                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |    | Income not
  eligible for the approved enterprise benefits mentioned in (1) above is
  taxed at the regular rate of 36%.                                                                                                                                                                                                                                                                                                                                                                                                                  

F-35

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 12 - TAXES ON INCOME (continued):

| | b. | Non-Israeli subsidiaries                                                                                                                                                                                                                                                                                                            
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                     
| |    | The
  non-Israeli subsidiaries are taxed under the laws of their countries of
  residence.                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                     
| | c. | Carryforward tax losses and deductions                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                     
| |    | Carryforward
  tax losses and deductions of the Company and its subsidiaries, including
  capital losses and losses from realization of marketable securities
  approximated $ 500 million at December 31, 2003. Most of the carryforward
  amounts are available indefinitely with no expiration date.                             
| |    |                                                                                                                                                                                                                                                                                                                                     
| | d. | Reform of the Israeli tax system                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                     
| |    | In 2002,
  Amendment to the Israeli Tax ordinance (No. 132), 2002 (the Israeli Tax
  Reform Law) was published. The Israeli Tax reform Law comprehensively
  reforms certain parts of the Israeli tax system and entered into effect on
  January 1, 2003, although certain provisions thereof will be applied from
  later dates.
| |    | The Israeli
  subsidiaries expects that the implementation of the Israeli tax reform will
  not have a material effect on its tax status and liabilities thereof.                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                     
| | e. | Deferred income taxes:                                                                                                                                                                                                                                                                                                              

| |                                                                                                                                              |  | December
  31    |         
| | -------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | --------
| |                                                                                                                                              |  |                  |         
| |                                                                                                                                              |  | 2003             |         
| |                                                                                                                                              |  |                  |         
| |                                                                                                                                              |  | $ in
  thousands |         
| |                                                                                                                                              |  |                  |         
| | Computed in
  respect of the following:                                                                                                      |  |                  |         
| | Allowance
  for doubtful accounts and 
            other provisions                                                                          |  |                  | 1,512   
| | Carryforward
  tax losses and credits                                                                                                        |  |                  | 168,620 
| | Inventories                                                                                                                                  |  |                  | 1,440   
| | Investments                                                                                                                                  |  |                  | 9,364   
| | Accrued
  liabilities and deferred income                                                                                                    |  |                  | 1,173   
| | Property,
  plant and equipment                                                                                                              |  |                  | 60      
| | Intangible
  assets                                                                                                                          |  |                  | 2,927   
| |                                                                                                                                              |  |                  |         
| |                                                                                                                                              |  |                  | 185,096 
| | L
  e s s - valuation allowance (attributed 
            mainly to loss
  carryforwards and expenses 
            deductible upon
  payment) |  |                  | (184,984
| |                                                                                                                                              |  |                  |         
| |                                                                                                                                              |  |                  | 112     
| |                                                                                                                                              |  |                  |         
| | Deferred
  income taxes are included in the 
       balance sheets as follows:
       Non-current assets                                     |  |                  | 112     
| |                                                                                                                                              |  |                  |         

F-36

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 12 - TAXES ON INCOME
(continued):

| | f. | Loss before taxes on income from continuing operation:
| | -- | ------------------------------------------------------

| |                                            |  | Year ended
  December 31 |        
| | ------------------------------------------ |  | ------------------------ | -------
| |                                            |  |                          |        
| |                                            |  | 2003                     |        
| |                                            |  |                          |        
| |                                            |  | $ in
  thousands         |        
| |                                            |  |                          |        
| | The Company
  and its Israeli subsidiaries |  |                          | (23,616
| | Non-Israeli
  subsidiaries                 |  |                          | 9,453  
| |                                            |  |                          |        
| |                                            |  |                          | (14,163
| |                                            |  |                          |        

| | g. | Taxes on income included in the statements
  of operations - from continuing operation:
| | -- | ---------------------------------------------------------------------------------------
| |    |                                                                                        
| |    | 1)                                                                                     

| |                           |  | Year ended
  December 31 |      
| | ------------------------- |  | ------------------------ | -----
| |                           |  |                          |      
| |                           |  | 2003                     |      
| |                           |  |                          |      
| |                           |  | $ in
  thousands         |      
| |                           |  |                          |      
| | Current:                  |  |                          |      
| | Israeli                   |  |                          | (404 
| | Non-Israeli               |  |                          | 1,052
| |                           |  |                          |      
| |                           |  |                          | 648  
| |                           |  |                          |      
| | Deferred,
  see e. above: |  |                          |      
| | Israeli                   |  |                          | 1,866
| | Non-Israeli               |  |                          | (112 
| |                           |  |                          |      
| |                           |  |                          | 1,754
| |                           |  |                          |      
| |                           |  |                          | 2,402
| |                           |  |                          |      

F-37

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 12 - TAXES ON INCOME
(continued):

| |  | 2) | Following is
  a reconciliation of the theoretical tax expense, assuming all income is taxed
  at the regular tax rate applicable to Israeli corporations (see a(4) above)
  and the actual tax expense:
| |  | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                                                                                       |  | Year ended
  December 31 |        
| | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | -------
| |                                                                                                                                                       |  |                          |        
| |                                                                                                                                                       |  | 2003                     |        
| |                                                                                                                                                       |  |                          |        
| |                                                                                                                                                       |  | $ in
  thousands         |        
| |                                                                                                                                                       |  |                          |        
| | Income
  (loss) before taxes on income                                                                                                                |  |                          | (14,163
| |                                                                                                                                                       |  |                          |        
| | Theoretical
  tax expense (tax benefit) on
       the above amount                                                                                    |  |                          | (5,099 
| | Effect of
  lower tax rate for
       approved enterprises                                                                                          |  |                          |        
| |                                                                                                                                                       |  |                          |        
| |                                                                                                                                                       |  |                          | (5,099 
| | Increase
  (decrease) in taxes resulting from
       different tax rates - net                                                                        |  |                          | (6,670 
| | Increase in
  taxes resulting from
       permanent differences                                                                                       |  |                          | 838    
| | Change in
  valuation allowance                                                                                                                       |  |                          | 61,731 
| | Changes in
  deferred taxes resulting from
       carryforward tax losses                                                                             |  |                          | (49,970
| | Increase in
  taxes resulting from prior years                                                                                                        |  |                          | 1,950  
| | Increase
  (decrease) in taxes arising
       from differences between non-dollar
       currencies income and dollar
       income - net, and other* |  |                          | (378   
| |                                                                                                                                                       |  |                          |        
| | Taxes on
  income in the consolidated
       statements of operations                                                                                 |  |                          | 2,402  
| |                                                                                                                                                       |  |                          |        

| | * | Resulting
  mainly from the difference between the changes in the Israeli CPI (the basis
  for computation of taxable income of the Company and its Israeli
  subsidiaries, see a(2) above) and the changes in the exchange rate of Israeli
  currency relative to the dollar.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | h. | Tax assessments
| | -- | ---------------
| |    |                
| |    | 1)             
| |    |                
| |    | 2)             

F-38

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 12 - TAXES ON INCOME
(continued):

|                                                     |    | 3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | During 2002,
  a couple of the Companys subsidiaries received tax assessments for which the
  Companys management believes, based on its consultants advice, sufficient
  provision was accrued. During 2003, one of those subsidiaries consented to an
  assessment by the Israeli authorities for the years 1996-2001 for
  approximately $ 2.1 million, of which approximately $ 1.8 million will be
  payable in 24 monthly installments commencing April 2004. This assessment was
  finally signed and settled in January 2004. Sufficient provision was
  previously accrued in connection with the assessment.
|---------------------------------------------------- | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                     |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NOTE 13 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:
|                                                     |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                     | a. | Foreign exchange risk management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                     |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                     |    | The Company
  and its subsidiaries operate internationally, which gives rise to significant
  exposure to market risks, mainly from changes in foreign exchange rates.
  Derivative financial instruments (hereafter - derivatives) were utilized by a
  subsidiary to reduce these risks. The Company did not hold or issue
  derivative financial instruments for trading purposes.                                                                                                                                                                                                           
|                                                     |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                     |    | Commencing
  2003, a subsidiary purchases forward-exchange contracts as hedges of certain
  anticipated sales and related costs denominated in foreign currencies. The
  subsidiary enters into these contracts to protect itself against the risk
  that the eventual dollar-net-cash inflows resulting from
  direct-foreign-export sales and related costs will be adversely affected by
  changes in exchange rates. These contarcts are not qualified for hedge
  accounting under FAS 133. Accordingly gains and losses for these
  forward-exchange contracts are recognized in earnings.
|                                                     |    | As of
  December 31, 2003 the provision for losses deriving from forward-exchange
  contracts amounted to approximately $ 556,000 and is classified as accrued
  liability.                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                     |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                     | b. | Concentrations of credit risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                     |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                     |    | At
  December 31, 2003 and 2002, the Company and its subsidiaries held cash
  and cash equivalents, most of which were deposited with major Israeli,
  European and U.S. banks. Substantially, all of the marketable securities held
  by the Company are debt securities of the U.S. Treasury and highly rated
  corporations. The Company considers the inherent credit risks to be remote.                                                                                                                                                                                                   
|                                                     |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                     |    | Most of the
  subsidiaries sales are made in the United States, Latin America, Europe and
  in the Far East, to a large number of customers. Consequently, the
  exposure to concentrations of credit risks relating to individual customer
  receivables is limited. The subsidiary performs ongoing credit evaluations of
  its customers and generally does not require collateral; however, with
  respect of certain sales to customers in emerging economies, the subsidiary
  requires letters of credit. The accounts include sufficient allowance for
  doubtful accounts.            

F-39

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 13 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued):

|                                                         | c.                | Fair value of financial instruments                                                                                                                                                                                                                                                                                     
|-------------------------------------------------------- | ----------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                         |                   |                                                                                                                                                                                                                                                                                                                         
|                                                         |                   | The
  financial instruments of the Company and its subsidiaries consist mainly of
  cash and cash equivalents, short-term investments, long-term investments,
  current and long-term liabilities.                                                                                                                      
|                                                         |                   |                                                                                                                                                                                                                                                                                                                         
|                                                         |                   | In view of
  their nature, the fair value of the financial instruments included in working
  capital is usually identical or close to their carrying amount. The fair
  value of long-term liabilities also approximates their carrying value, since
  they bear interest at rates close to the prevailing market rates.
|                                                        
|NOTE 14 - SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:
|                                                         |                  
|                                                         | Balance
  sheets:

| |    |                                                                                                                                                 |  | December
  31    |       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------
| |    |                                                                                                                                                 |  |                  |       
| |    |                                                                                                                                                 |  | 2003             |       
| |    |                                                                                                                                                 |  |                  |       
| |    |                                                                                                                                                 |  | $ in
  thousands |       
| |    |                                                                                                                                                 |  |                  |       
| | a. | Allowance for doubtful accounts (as included
       in trade receivables) - the change in allowance
       for doubtful is composed as follows: |  |                  |       
| |    | Balance
  at beginning of year                                                                                                                  |  |                  | 2,957 
| |    | Addition
  to allowance                                                                                                                         |  |                  | 1,233 
| |    | Write-off
  of bad debts                                                                                                                        |  |                  |       
| |    |                                                                                                                                                 |  |                  |       
| |    |                                                                                                                                                 |  |                  | 4,190 
| |    |                                                                                                                                                 |  |                  |       
| | b. | Inventories:                                                                                                                                    |  |                  |       
| |    | Components
  of systems and materials                                                                                                           |  |                  | 5,413 
| |    | Work
  in process                                                                                                                               |  |                  | 1,183 
| |    | Finished
  products                                                                                                                             |  |                  | 15,979
| |    |                                                                                                                                                 |  |                  |       
| |    |                                                                                                                                                 |  |                  | 22,575
| |    |                                                                                                                                                 |  |                  |       
| | c. | Accrued and other liabilities:                                                                                                                  |  |                  |       
| |    | Payroll
  and related expenses                                                                                                                  |  |                  | 3,863 
| |    | Accrued
  royalties and sales commissions                                                                                                       |  |                  | 2,514 
| |    | Deferred
  revenue                                                                                                                              |  |                  | 5,308 
| |    | Provision
  for warranty*                                                                                                                       |  |                  | 2,293 
| |    | Advances
  from customers                                                                                                                       |  |                  | 2,516 
| |    | Other                                                                                                                                           |  |                  | 9,183 
| |    |                                                                                                                                                 |  |                  |       
| |    |                                                                                                                                                 |  |                  | 25,677
| |    |                                                                                                                                                 |  |                  |       
| | *  | The changes
  in the balance during the year:                                                                                                   |  |                  |       
| |    | Balance
  at beginning of the year                                                                                                              |  |                  | 2,018 
| |    | Payments
  made under the warranty                                                                                                              |  |                  | (3,383
| |    | Product
  warranties issued for new sales                                                                                                       |  |                  | 3,658 
| |    | Changes
  in accrual in respect of 
            pre-existing
  warranties                                                                       |  |                  |       
| |    |                                                                                                                                                 |  |                  |       
| |    | Balance at
  end of year                                                                                                                        |  |                  | 2,293 
| |    |                                                                                                                                                 |  |                  |       

F-40

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 14 - SUPPLEMENTARY FINANCIAL STATEMENT
INFORMATION (continued):

| | d. | Short-term credit and long-term loans:
| | -- | --------------------------------------
| |    |                                       
| |    | 1)                                    
| |    |                                       
| |    |                                       
| |    |                                       
| |    |                                       
| |    |                                       
| |    |                                       
| |    |                                       
| |    |                                       
| |    |                                       
| |    | 2)                                    
| |    |                                       
| |    |                                       
| |    |                                       
| |    | 3)                                    

| |       |  | 2003             |       | 2002 | 
| | ----- |  | ---------------- | ----- | ---- | 
| |       |  |                  |       |      | 
| |       |  | $ in
  thousands |      
| |       |  |                  |      
| |       |  |                  |       |      | 
| | Banks |  |                  | 1,633 |      | 
| | Other |  |                  | 969   |      | 
| |       |  |                  |       |      | 
| |       |  |                  | 2,602 |      | 
| |       |  |                  |       |      | 

| |  | 4) | Long-term
  loans:
| |  | -- | ------------------
| |  |    |                   
| |  |    | a)                

| |                             |  | 2003             |       | 2002 | 
| | --------------------------- |  | ---------------- | ----- | ---- | 
| |                             |  |                  |       |      | 
| |                             |  | $ in
  thousands |      
| |                             |  |                  |      
| | Second year                 |  |                  | 1,928 |      | 
| | Third year                  |  |                  | 1,252 |      | 
| | Fourth year                 |  |                  | 1,252 |      | 
| | Fifth year
  and thereafter |  |                  | 2,191 |      | 
| |                             |  |                  |       |      | 
| |                             |  |                  | 6,623 |      | 
| |                             |  |                  |       |      | 

F-41

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 14 - SUPPLEMENTARY FINANCIAL STATEMENT
INFORMATION (continued):

| |  |  | b) | The
  long-term loans from banks are denominated in dollars, bear interest of three
  month Libor + 1.75 % to Libor + 2.25 % per annum (as of December 31, 2003 -
  2.9 % to 3.4 %, respectively).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | c) | In 2000,
  ScitexVision entered into a collaboration agreement (hereafter - the
  agreement) with a European leading supplier (hereafter - the supplier) to the
  textile, paper and plastic printing industry, for developing inks for
  printing on textile. Pursuant to the agreement, the supplier shall pay
  ScitexVision certain royalties on sales of ink for use with ScitexVisions
  textile printing machines. As of December 31, 2003, no such sales have been
  made.                                                                                                                                                                                                        
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  |    | Following
  the agreement, Scitex Vision received from the supplier a long-term
  convertible loan of $ 5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  |    | The loan
  received on December 27, 2000, and bore 6% annual interest. The loan should
  have been interest free if the milestones described in the agreement were
  met.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  |    | According to
  the original terms of the loan, the loan and the accumulated interest might
  have been converted by the supplier, at any time during the last three months
  of the loan period, which ended on December 11, 2003, into ordinary shares of
  Scitex Vision at a conversion price based on the fair value of such shares,
  less 15%. According to the agreement if the supplier chooses to request the
  repayment of the loan, the repayment shall be made by setting-off the loan
  and any interest accrued thereon against royalties due to Scitex Vision in a
  subsequent period. The remainder of the loan, if it exists, shall be repaid
  in cash to the supplier.
| |  |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  |    | On December
  30, 2003 an addendum to the agreement was signed, according to which, the
  original terms of the loan were changed such that the principal of the loan
  is interest free and payable in four annual installments in the following
  years subsequent to December 31, 2003:                                                                                                                                                                                                                                                                                                                                                                                                 

| |                      | December 31 |                            
| | -------------------- | ----------- | ---------------------------
| |                      |             |                            
| |                      |             | 2003                       
| |                      |             |                            
| |                      |             | U.S. dollars in
  thousands
| |                      |             |                            
| |                      |             |                            
| | Current
  maturities |             |                            
| |                      |             |                            
| |                      |             |                            
| | Second year          |             |                            
| | Third year           |             |                            
| | Fourth year          |             |                            
| |                      |             |                            
| |                      |             |                            
| |                      |             |                            
| |                      |             |                            
| |                      |             |                            

| |  |  |  | Scitex
  Vision has the right to offset royalties due to Scitex Vision against the
  amount due, on the next agreed installment.                                                                                                                                                                                                                                                                                                                                                                  
| |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |  |  | As a result
  of the above-mentioned change in terms, the company has recorded the loan
  based on its present value ($ 4,592,000) using the interest rate, which is
  applicable to such loans as of the date of change in terms. The difference
  between the present value and the nominal value of the loan, in the total
  amount of $ 408,000, as well as all interest accrued through December 30,
  2003, in the total amount of $ 904,000, were credited to financial expenses
  - net.

F-42

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 14 - SUPPLEMENTARY FINANCIAL STATEMENT
INFORMATION (continued):

| | 5) | Convertible
  long-term loans from related parties:                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | In July
  2003, two of the Companys shareholders granted to the Companys subsidiary
  convertible loans in the amount of approximately $ 933,000, bearing interest
  equal to the greater of Libor + 1% (as of December 31, 2003 - 2.1%) or rate
  of change of the Israeli CPI per annum. The loans are payable in one
  installment at the end of a five year period if no conversion occurs before
  the end of the repayment period.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The loans
  and the accumulated interest may be converted into the ordinary shares of the
  subsidiary at any time with an exercise price of $ 0.4052 per share, which
  equals the fair value of the subsidiarys ordinary shares at the date of
  grant of the loans.                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | According to
  the loans agreements, an automatic conversion shall occur upon certain
  events. In addition, the lenders were granted with warrants representing 25%
  of the loan amount, to purchase ordinary shares at an exercise price of
  $ 0.4052 per share.                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | The Company
  recorded an original discount of $ 98,500 in respect of the amounts allocated
  to these warrants out of the total above-mentioned loans of $ 933,000. This
  amount is amortized to the interest expense over the maximum term of the
  loans, which is 5 years.                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    | Pursuant to
  the conversion terms, whereby the lenders were guaranteed beneficial
  conversion features, the Company recorded an original discount of $ 98,500,
  which represents the difference between the loan allocated amount and the
  amount payable. This amount is amortized to the interest expense over the
  maximum term of the loans, which is 5 years.                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                           

| | e. | Note payable issued to an investee company                                           
| | -- | -------------------------------------------------------------------------------------
| |    |                                                                                      
| |    | The note was
  denominated in dollars and was repaid in one payment on April 4, 2003.

F-43

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 14 - SUPPLEMENTARY FINANCIAL STATEMENT
INFORMATION (continued):

| | Statements of operations:
| | -------------------------

| |    |                                                                                                                           |  | Year ended
  December 31 |       
| | -- | ------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------
| |    |                                                                                                                           |  |                          |       
| |    |                                                                                                                           |  | 2003                     |       
| |    |                                                                                                                           |  |                          |       
| |    |                                                                                                                           |  | $ in
  thousands         |       
| |    |                                                                                                                           |  |                          |       
| | f. | Research and development costs - net:                                                                                     |  |                          |       
| |    | Expenses
  incurred                                                                                                       |  |                          | 11,537
| |    | L
  e s s  royalty-bearing
            participations
  from the
            Government of
  Israel                      |  |                          | 467   
| |    |                                                                                                                           |  |                          |       
| |    |                                                                                                                           |  |                          | 11,070
| |    |                                                                                                                           |  |                          |       
| |    |                                                                                                                           |  |                          |       
| | g. | Selling, general and administrative
       expenses:                                                                      |  |                          |       
| |    | Selling*                                                                                                                  |  |                          | 20,192
| |    | General
  and administrative**                                                                                            |  |                          | 15,147
| |    |                                                                                                                           |  |                          |       
| |    |                                                                                                                           |  |                          | 35,339
| |    |                                                                                                                           |  |                          |       
| |    | *   Including:                                                                                                            |  |                          |       
| |    | Advertising
  costs                                                                                                       |  |                          | 609   
| |    |                                                                                                                           |  |                          |       
| |    | ** Including:                                                                                                             |  |                          |       
| |    | Related
  party                                                                                                           |  |                          | 518   
| |    |                                                                                                                           |  |                          |       
| |    | Net
  change in allowance for 
                 doubtful
  accounts and direct 
                 write-off
  of bad debts |  |                          | 698   
| |    |                                                                                                                           |  |                          |       

| | h. | Restructuring charges
| | -- | ---------------------
| |    |                      
| |    | 1.                   
| |    |                      
| |    | 2.                   

F-44

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 14 - SUPPLEMENTARY FINANCIAL STATEMENT
INFORMATION (continued):

| |    |                                                                                                                             |  | Year ended
  December 31 |       
| | -- | --------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------
| |    |                                                                                                                             |  |                          |       
| |    |                                                                                                                             |  | 2003                     |       
| |    |                                                                                                                             |  |                          |       
| |    |                                                                                                                             |  | $ in
  thousands         |       
| |    |                                                                                                                             |  |                          |       
| | i. | Financial expenses - net:                                                                                                   |  |                          |       
| |    | Interest
  income                                                                                                           |  |                          | 249   
| |    | Gain
  on trading marketable securities - net                                                                               |  |                          | 3     
| |    | Interest
  expense on long-term loans                                                                                       |  |                          |       
| |    | from
  banks                                                                                                                |  |                          | (1,981
| |    | from
  related parties                                                                                                      |  |                          | (20   
| |    | from
  others                                                                                                               |  |                          | 603   
| |    | Bank
  charges                                                                                                              |  |                          | (276  
| |    | Revaluation
  of long-term loan                                                                                             |  |                          | 408   
| |    | Other
  (including foreign exchange 
            transaction
  losses - net)                                                |  |                          | (1,637
| |    |                                                                                                                             |  |                          |       
| |    |                                                                                                                             |  |                          | (2,651
| |    |                                                                                                                             |  |                          |       
| |    |                                                                                                                             |  |                          |       
| | j. | Other income (loss) - net:                                                                                                  |  |                          |       
| |    | Loss
  from change in percentage of 
            holding of an
  associated company                                         |  |                          |       
| |    | Write-down
  of available-for-sale securities                                                                               |  |                          |       
| |    | Gain
  from sale of a portion in a subsidiary                                                                               |  |                          | 3,774 
| |    | Share
  in beneficial conversion feature of 
            convertible
  preferred shares issued by a 
            subsidiary |  |                          | (3,485
| |    | Write-off
  and write-down of investments 
            in investee
  companies                                              |  |                          | (2,493
| |    | Gain
  (loss) from sale of investments in 
            associated and
  investee companies                                  |  |                          | 2,822 
| |    | Other                                                                                                                       |  |                          | 169   
| |    |                                                                                                                             |  |                          |       
| |    |                                                                                                                             |  |                          | 787   
| |    |                                                                                                                             |  |                          |       

| | k. | Earnings income (loss) per share:                                                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                              
| |    | The net loss
  and the weighted average number of shares used in computation of basic and
  diluted earnings per share for the years ended December 31, 2003, 2002 and
  2001 are as follows:

| |  |                                                                                                                              |  | Year ended
  December 31 |       
| |  | ---------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------
| |  |                                                                                                                              |  |                          |       
| |  |                                                                                                                              |  | 2003                     |       
| |  |                                                                                                                              |  |                          |       
| |  |                                                                                                                              |  | $ in
  thousands         |       
| |  |                                                                                                                              |  |                          |       
| |  | Net
  income (loss) used in the computation
            of basic and
  diluted earnings per share                            |  |                          | 1,387 
| |  |                                                                                                                              |  |                          |       
| |  | Weighted
  average number of
            shares used in
  the computation of
            basic earnings
  (loss) per share   |  |                          | 43,018
| |  | Add
  - net additional shares from the
            assumed exercise
  of the Companys
            stock options             |  |                          | -,-   
| |  |                                                                                                                              |  |                          |       
| |  | Weighted
  average number of
            shares used in
  the computation of
            diluted earnings
  (loss) per share |  |                          | 43,018
| |  |                                                                                                                              |  |                          |       

F-45

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 15 - SEGMENT INFORMATION:

| | a. | General:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Prior to the
  sale of SDPs operations, as described in note 1b, the Company had been
  operating in two reportable segments.                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Following
  the transaction the Company operates only in the wide-format digital
  printing. The Subsidiaries, develop, manufacture and market industrial
  digital inkjet printing solutions mainly to the graphic arts, packaging
  and textile markets as well as related services and consumable products. As
  to the sale of the high-speed digital printing segment, classified as discontinued
  operation, see note 1b. In addition, the Company holds interest in other
  companies that develop digital printing solution to industrial applications.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | b. | Geographical information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | 1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                              |  | Year ended
  December 31 |        
| | ---------------------------- |  | ------------------------ | -------
| |                              |  |                          |        
| |                              |  | 2003                     |        
| |                              |  |                          |        
| |                              |  | $ in
  thousands         |        
| |                              |  |                          |        
| |                              |  |                          |        
| | North
  America (mostly USA) |  |                          | 19,650 
| | Mexico                       |  |                          | 15,178 
| | Europe:                      |  |                          |        
| | West                         |  |                          | 25,313 
| | East                         |  |                          | 11,580 
| | Far East                     |  |                          | 12,460 
| | Other
  countries            |  |                          | 18,699 
| |                              |  |                          |        
| |                              |  |                          | 102,880
| |                              |  |                          |        

| |  | 2) | Following are data relating to property, plant and
  equipment, net, relating to continuing operations, by geographical area in
  which the assets are located:
| |  | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                           |  | December
  31    |      
| | ------------------------- |  | ---------------- | -----
| |                           |  |                  |      
| |                           |  | 2003             |      
| |                           |  |                  |      
| |                           |  | $ in
  thousands |      
| |                           |  |                  |      
| | Israel                    |  |                  | 6,154
| | North and
  South America |  |                  | 802  
| | Europe                    |  |                  | 1,152
| | South Africa              |  |                  | 949  
| | Asia                      |  |                  | 147  
| |                           |  |                  |      
| |                           |  |                  | 9,204
| |                           |  |                  |      

F-46

---

---

SCITEX CORPORATION LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

NOTE 16 - SUBSEQUENT
EVENTS

| | a. | In January
  2004, the Board of Directors of the Company announced a planned distribution
  to shareholders of approximately $2.75 per share (a total of approximately
  $118 million), applying a portion of the net proceeds from the SDP sale.
  Distributions to shareholders will be subject to applicable withholding
  taxes. The cash distribution to shareholders is subject to the satisfaction
  of certain conditions, including the approval of Companys shareholders and
  of the Israeli District Court. There can be no assurance if and when such
  conditions will be satisfied.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | b. | In February
  2004, the Company has entered into an agreement with the IRS to resolve a
  U.S. federal income tax audit of its U.S. subsidiaries for the years 1992
  through 1996. Under the terms of the agreement, the Company agreed to an
  assessment of $5.7 million of additional federal income taxes for these years
  to resolve the remaining proposed IRS assessment of an additional $29.6
  million of federal income taxes (as described in note 12h(2)).                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | When added
  to a previous partial agreed assessment by the IRS for $10.6 million of
  federal income taxes, the Companys total additional federal income taxes for
  these years as a result of the IRS audit will be $16.3 million. This amount
  does not include interest and additional state income taxes that will result
  from the agreement with the IRS. The Company is currently working to
  determine such amounts.                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company
  had previously made advance payments to the IRS of $21.5 million for federal
  income taxes relating to the audit period and had established reserves for
  additional liabilities arising out of the audit. At this stage, after initial
  review, the Company estimates that the final additional cash cost of the IRS
  audit (taking into consideration the $16.3 million of assessment, state taxes
  and interest thereon, and after application of the $21.5 million advance
  payment), will be in the range of $7 to $14 million.                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The
  Companys management believes, based on its consultants advice, that
  sufficient provision for this matter is included in accrued liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | c. | In February
  2004, the Company concluded a $1.5 million investment in Jemtex in
  consideration for convertible debentures, which may be repaid at the option
  of Jemtex until the end of June 2004. Out of the above amount, $0.45 million
  were transferred to Jemtex on account of the investment (see note 4a).
  Following this investment, the Company effectively holds approximately 73% of
  Jemtex issued share capital on an as converted basis.                                                                                                                                  

---

---

---

F-47



---

---

# Report of Independent
Accountants on 
Financial Statement
Schedule

To the Board of Directors
of Scitex Corporation Limited.

Our audits of the consolidated financial
statements referred to in our report dated March 1, 2004 appearing in the 2003 Annual
Report to the Shareholders of Scitex Corporation Limited also included an audit of the
Financial Statement Schedule II Valuation and Qualifying Accounts  listed in
this Form 20-F. In our opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.

|                                       | /s/ Kesselman
  & Kesselman                                  
|-------------------------------------- | -------------------------------------------------------------
|                                       |                                                              
|Tel-Aviv, Israel
        March 1, 2004 | Kesselman
  & Kesselman
  Certified Public Accountants (Isr.)



---

---

SCITEX CORPORATION LTD.
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS 
Three years
ended December 31, 2003 
(U.S. $ in thousands)

|Column A                         | Column B | Column C | Column D | Column E
|-------------------------------- | -------- | -------- | -------- | --------
|
|
|
|
|Allowance for doubtful accounts: |          |          |          |         
|Year ended December 31, 2003     |          |          |          | 2,957   
|                                 |          |          |          |         
|Year ended December 31, 2002     |          |          |          | 1,620   
|                                 |          |          |          |         
|Year ended December 31, 2001     |          |          |          | 1,098   
|                                 |          |          |          |         
|Valuation allowance for deferred |          |         
|tax assets:                      |          |         
|Year ended December 31, 2003     |          |          |          | 123,253 
|                                 |          |          |          |         
|Year ended December 31, 2002     |          |          |          | 94,877  
|                                 |          |          |          |         
|Year ended December 31, 2001     |          |          |          | 18,028  
|                                 |          |          |          |         
|Provision for warranty:          |          |         
|Year ended December 31, 2003     |          |          |          | 2,018   
|                                 |          |          |          |         
|Year ended December 31, 2002     |          |          |          | 2,577   
|                                 |          |          |          |         
|Year ended December 31, 2001     |          |          |          | 1,738   
|                                 |          |          |          |         

---

---

JEMTEX
INK JET PRINTING LTD.

# FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003



---

---

# JEMTEX INK JET
PRINTING LTD.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003

# IN U.S. DOLLARS

# TABLE OF CONTENTS

|                                                  | Page  
|------------------------------------------------- | ------
|
|
|
|
|Report of Independent Auditors                    | 1     
|Balance Sheets                                    | 2 - 3 
|Statements of Operations                          | 4     
|Statements of Changes in Shareholders' Deficiency | 5     
|Statements of Cash Flows                          | 6     
|Notes to the Financial Statements                 | 7 - 17



---

---

# REPORT OF
INDEPENDENT AUDITORS

# To the shareholders
of

# JEMTEX INK JET PRINTING
LTD.

We have audited the accompanying
balance sheet of Jemtex Ink Jet Printing Ltd. (the Company) as of
December 31, 2003 and the related statement of operations, changes in shareholders
deficiency and cash flow for the year 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 auditing standards generally accepted in the 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 the companys management, as well as evaluating the overall financial
statement presentation. We believe that our audits and provide a reasonable basis for our
opinion.

In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2003 and the results of its operation and its
cash flow for the year then ended, in conformity with accounting principles generally
accepted in the United States.

The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1B, to the financial statements, the Company has suffered recurring
losses from operations and as of December 31, 2003 has a shareholders deficiency of
approximately $ 1.9 million. These factors, among others described in Note 1B raise
substantial doubt about the Companys ability to continue as a going concern.
Managements plans in regard to these matters are also described in Note 1B. The
financial statements do not include any adjustments to reflect the possible future effects
on the cover ability and classification of assets or the amounts and classification of
liabilities that might result from the outcome of this uncertainty.

|Tel-Aviv, IsraelFebruary 29, 2004 |  | BY: /S/ ZIV HAFT
ZIV HAFTa member of BDO
Certified Public Accountants (Isr.)
|--------------------------------- |  | ----------------------------------------------------------------------------

J - 1

---

---

# JEMTEX INK JET PRINTING LTD. BALANCE SHEETS 
(In U.S. dollars, except
share and per share data)

|                                |  | December 31
|------------------------------- |  | -----------
|
|
|
|
|ASSETS                          |  |            
|CURRENT ASSETS:                 |  |            
|Cash and cash equivalents       |  |            
|Restricted cash                 |  |            
|Receivables and prepayments     |  |            
|                                |  |            
|                                |  |            
|                                |  |            
|EQUIPMENT:                      |  |            
|Cost                            |  |            
|Less - accumulated depreciation |  |            
|                                |  |            
|                                |  |            
|                                |  |            
|LEASE DEPOSITS                  |  |            
|                                |  |            
|SEVERANCE PAY FUND              |  |            
|                                |  |            
|                                |  |            
|                                |  |            
|Total assets                    |  |            
|                                |  |            

The accompanying notes are an
integral part of the financial statements.

J - 2

---

---

# JEMTEX INK JET PRINTING LTD.

|                                                                           |  | December 31
|-------------------------------------------------------------------------- |  | -----------
|
|
|
|
|LIABILITIES AND SHAREHOLDERS' DEFICIENCY                                   |  |            
|CURRENT LIABILITIES:                                                       |  |            
|Accounts payable and accrued expenses                                      |  |            
|Convertible promissory note                                                |  |            
|Deferred revenues                                                          |  |            
|                                                                           |  |            
|                                                                           |  |            
|                                                                           |  |            
|LONG-TERM LIABILITIES:                                                     |  |            
|Long-term loan                                                             |  |            
|Convertible promissory notes                                               |  |            
|Accrued severance pay                                                      |  |            
|                                                                           |  |            
|                                                                           |  |            
|                                                                           |  |            
|Total liabilities                                                          |  |            
|                                                                           |  |            
|COMMITMENTS AND CONTINGENT LIABILITIES                                     |  |            
|                                                                           |  |            
|SHAREHOLDERS' DEFICIENCY:                                                  |  |            
|Share capital -                                                            |  |            
|Ordinary shares of NIS 0.01 par value:                                     |  |            
|Authorized: 11,831,100 shares as of December 31, 2003;                     |  |            
|Issued: 2,700,100 shares; Outstanding - 27,001 shares                      |  |            
|Series A preferred shares of NIS 0.01 par value:                           |  |            
|Authorized and issued: 1,510,800 shares as of December 31, 2003;           |  |            
|Outstanding - 15,108 shares                                                |  |            
|Series B preferred shares of NIS 0.01 par value:                           |  |            
|Authorized: 1,590,600 shares as of December 31, 2003;                      |  |            
|Issued: 954,388 shares as of December 31, 2003; Outstanding - 9,544 shares |  |            
|Deferred shares of NIS 0.01 par value:                                     |  |            
|Authorized, issued and outstanding: 67,500 shares                          |  |            
|Additional paid-in capital                                                 |  |            
|Accumulated deficit                                                        |  |            
|                                                                           |  |            
|Total shareholders' deficiency                                             |  |            
|                                                                           |  |            
|Total liabilities and shareholders' deficiency                             |  |            
|                                                                           |  |            

|February 29, 2004
Date of approval of thefinancial statements | 
Dr. Meyer WekslerManaging Director | 
Yahel ShacharMember of the Board of Directors
|--------------------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------------------------

J - 3

---

---

# JEMTEX INK JET PRINTING LTD. 
STATEMENTS OF OPERATIONS 
(In U.S. dollars)

|                                               |  | Year ended
|---------------------------------------------- |  | ----------
|
|
|
|
|Revenues                                       |  |           
|Costs and expenses:                            |  |           
|Product development costs, net                 |  |           
|Marketing, general and administrative expenses |  |           
|                                               |  |           
|Operating loss                                 |  |           
|Financial expenses, net                        |  |           
|                                               |  |           
|Net loss                                       |  |           
|                                               |  |           

The accompanying notes are an
integral part of the financial statements.

J - 4

---

---

# JEMTEX INK JET PRINTING
LTD. 
STATEMENTS OF CHANGES IN
SHAREHOLDERS DEFICIENCY 
(In U.S. dollars, except
share data)

|                                                        | Ordinary shares | Series A
Preferred shares | Series B
Preferred shares | Deferred shares | Additional |   |   
|------------------------------------------------------- | --------------- | ------------------------- | ------------------------- | --------------- | ---------- | - | --
|
|
|
|
|Balance as of January 1, 2003                           |                 |                           |                           | 2,700,100       |            |   | 86
|                                                        |                 |                          
|Receipt on account of Series  B Preferred shares issued |                 |                           |                           | -               |            |   | - 
|Net loss                                                |                 |                           |                           | -               |            |   | - 
|                                                        |                 |                           |                           |                 |            |   |   
|                                                        |                 |                           |                           |                 |            |   |   
|Balance as of December 31, 2003                         |                 |                           |                           | 2,700,100       |            | $ | 86
|                                                        |                 |                           |                           |                 |            |   |   
|                                                        |                 |                           |                           |                 |            |   |   

The accompanying notes are an
integral part of the financial statements.

J - 5

---

---

# JEMTEX INK JET PRINTING LTD. 
STATEMENTS OF CASH FLOWS 
(In U.S. dollars)

|                                                                            | Year ended
31.12.2003
|--------------------------------------------------------------------------- | ---------------------
|
|
|
|
|Cash flows from operating activities:                                       |                      
|Net loss                                                                    |                      
|Adjustments to reconcile net loss to net cash used in operating activities: |                      
|Depreciation                                                                |                      
|Interest accrued on long-term loans                                         |                      
|                                                                            |                      
|Changes in assets and liabilities:                                          |                      
|Accrued severance pay, net                                                  |                      
|Decrease (increase) in receivables and prepayments                          |                      
|Decrease in inventories                                                     |                      
|Decrease (increase) in lease deposits                                       |                      
|Decrease in accounts payables, accrued expenses and deferred revenues       |                      
|                                                                            |                      
|Net cash used in operating activities                                       |                      
|                                                                            |                      
|Cash flows from investing activities:                                       |                      
|Acquisition of equipment                                                    |                      
|Decrease in restricted cash                                                 |                      
|                                                                            |                      
|Net cash used in investing activities                                       |                      
|                                                                            |                      
|Cash flows from financing activities:                                       |                      
|Proceeds from shares issued                                                 |                      
|Proceeds from convertible promissory notes                                  |                      
|                                                                            |                      
|Net cash provided by financing activities                                   |                      
|                                                                            |                      
|Decrease in cash and cash equivalents                                       |                      
|Cash and cash equivalents at the beginning of the year                      |                      
|                                                                            |                      
|Cash and cash equivalents at the end of the year                            |                      
|                                                                            |                      
|Non-cash activity:                                                          |                      
|Conversion of convertible promissory note to additional paid-in capital     |                      
|                                                                            |                      

The accompanying notes are an
integral part of the financial statements.

J - 6

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

NOTE 1  GENERAL:

|A. | The
Company commenced its operations in October 1995 and is engaged in the
          development of products in the field of ink jet printing technology.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|B. | As
of December 31, 2003, the Company has an accumulated deficit of approximately           $ 12,401
thousand and shareholders deficiency of approximately           $ 1,923
thousand. In 2003, the Company has negative cash flows from           operations in the
amount of approximately $ 2,722 thousand. The Company           does not yet
generate sufficient revenues from its operations to fund its           activities and is
therefore dependent on additional financing from outside           services. These
factors raise substantial doubt about the Companys ability           to continue as
a going concern.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
2003, a term sheet was signed with the Companys principal shareholder, whereby the
shareholder committed to provide $ 1.5 million to the Company in the form of convertible
promissory notes. The closing of the said agreement was at February 11, 2004. Through
February all the proceeds were transferred to the company (see Note 8).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 2 
SIGNIFICANT ACCOUNTING POLICIES:

The financial statements have been
prepared in accordance with accounting principles generally accepted in the United States
(GAAP). The significant accounting policies, followed in the preparation of
the financial statements, on a consistent basis, are:

|A. | Use
of estimates:
|-- | -----------------

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

J - 7

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 2  SIGNIFICANT
ACCOUNTING POLICIES (Cont.):

|B. | Financial
statements in U.S. dollars:
|-- | -------------------------------------

| | The
accompanying financial statements have been prepared in U.S. dollars, as the currency of
the primary economic environment in which the operations of the Company are
conducted is the U.S. dollar. Substantially, all of the Companys sales
are made outside Israel and are made in U.S. dollars. A substantial portion of
the costs of the Company are incurred in U.S. dollars. Thus, the functional and reporting
currency of the Company is the U.S. dollar.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Transactions
and balances originally denominated in U.S. dollars are presented at their original
amounts. Transactions and balances in other currencies are remeasured into U.S. dollars,
in accordance with the principles prescribed in Statement of Financial Accounting
Standards (SFAS) No. 52 of the Financial Accounting Standards Board (FASB)
of the United States. Accordingly, items have been remeasured as follows: Monetary items
 at the current exchange rate at the balance sheet date.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Non-monetary
items  at historical exchange rates.
| | --------------------------------------------------

| | Expenditure
items  at the exchange rates current as of the date of recognition of those items
(excluding depreciation and other items deriving from non-monetary items).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
exchange gains and losses from the aforementioned remeasurement are reflected in the
statement of operations in financing expenses, and were immaterial to date.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
representative rate of exchange of the New Israeli Shekel (NIS) at December 31, 2003 was
$1.00 = NIS 4.379 (2002 = NIS 4.737).
| | ----------------------------------------------------------------------------------------------------------------------------------

|C. | Cash
and cash equivalents:
|-- | --------------------------

| | Cash
and cash equivalents include highly liquid investments including deposits in banks with
original maturities of three months or less.
| | -----------------------------------------------------------------------------------------------------------------------------------------

|D. | Equipment:
|-- | ----------

| | Equipment
is stated at cost, net of accumulated depreciation and amortization. Depreciation and
amortization are computed by the straight-line method over the estimated useful lives of
the assets (three to ten years).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

J - 8

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 2  SIGNIFICANT
ACCOUNTING POLICIES (Cont.):

|E. | Product
development expenses:
|-- | -----------------------------

| | Product
development expenses, net of participations by the Office of the Chief Scientist of the
Ministry of  Industry and Trade of the State of Israel, are charged to operations, as
incurred.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|F. | Fair
value of financial instruments:
|-- | ------------------------------------

| | The
carrying value of all financial instruments potentially subject to valuation risk
(principally consisting  of cash and cash equivalents) approximate their fair value.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|G. | Concentrations
of credit risk:
|-- | ------------------------------

| | Financial
instruments that potentially subject the Company to concentrations of credit risk consist
principally  of cash and cash equivalents.
| | ----------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
and cash equivalents are invested in major banks in Israel. Management believes that the
financial  institutions that hold the Companys investments are financially sound
and, accordingly, minimal credit risk  exists with respect to these investments.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has no off-balance-sheet concentration of credit risk such as foreign exchange
contracts, option  contracts or other foreign hedging arrangements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|H. | Severance
pay:
|-- | --------------

| | The
liability for severance pay is calculated pursuant to Israeli severance pay law based on
the most recent salary of the Israeli employees multiplied by the number of years of
employment, as of the balance sheet date. Employees are entitled to one months
salary for each year of employment or a portion thereof. The Companys liability for
all of its employees is fully provided by monthly deposits with insurance policies and by
an accrual. The value of these policies is recorded as an asset in the Companys
balance sheet. The deposited funds include profits accumulated up to the balance sheet
date. The deposited funds may be withdrawn only upon the fulfillment of the obligation
pursuant to Israeli severance pay law or labor agreements. The value of the deposited
funds is based on the cash surrendered value of these policies, and include immaterial
profits. Severance expense, net for the years ended December 31, 2003 $15,044.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

J - 9

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 2  SIGNIFICANT
ACCOUNTING POLICIES (Cont.):

|I. | Impairment
of long-lived assets:
|-- | --------------------------------

| | The
Company applies SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS  144). According to SFAS 144, long-lived assets
are reviewed for impairment when events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Determination of  recoverability
is based on an estimate of undiscounted future cash flows resulting from the use of the
asset  and its eventual disposition. In the event that such cash flows are not expected
to be sufficient to recover  the carrying amount of the assets, the assets are written
down to their estimated fair values.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|J. | Stock-based
compensation:
|-- | -------------------------

| | The
Company has elected to follow Accounting Principles Board Opinion No. 25 (APB No. 25),
Accounting for Stock Issued to Employees and the FASB Interpretation No. 44,
Accounting for Certain Transactions Involving Stock Compensation in
accounting for its employee stock option plans. According to APB No. 25, compensation
expense is measured under the intrinsic value method, whereby compensation expense is
equal to the excess, if any of the fair value of the share at the date of grant of the
award over the exercise price. Compensation expense is recorded over the vesting period
on a straight-line basis. The Company provides the disclosures required by Statement of
Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation (SFAS
No. 123) and SFAS No. 148, Accounting for Stock  Based Compensation
 Transition and Disclosure.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
SFAS No. 123 the fair value of each option grant is estimated on the date of grant using
the minimum value option-pricing model with the following weighted-average assumptions
used for grants in 2003; (1) expected life of the option of 2.5 years; (2) dividend yield
of 0%; (3) risk-free interest rate of 1%. Had compensation cost for the Companys
stock option plans been determined based on the fair value at the grant dates for all
awards, the effect on the Companys net loss would have been immaterial.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|K. | Revenue
recognition:
|-- | --------------------

| | Revenues
from product sales are recognized upon shipment when no right of return exists, or, if
applicable, and the end of the evaluation period, and when collectibility is probable.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

J - 10

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 2  SIGNIFICANT
ACCOUNTING POLICIES (Cont.):

|L. | Income
taxes:
|-- | -------------

| | The
Company accounts for income taxes in accordance with Statement of Financial Accounting
Standard No. 109, Accounting for Income Taxes (SFAS No. 109).
SFAS No. 109 prescribes the use of the liability method whereby deferred tax asset and
liability account balances are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to reverse. The
Company provides a valuation allowance, if necessary, to reduce deferred tax assets to
their estimated realizable value.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 3  CASH AND
CASH EQUIVALENTS:

|                          | Interest
rate | December 31
2003
|------------------------- | ------------- | ----------------
|
|
|
|
|Short-term bank deposits: |               |                 
|In NIS                    |               |                 
|In U.S. dollar            |               |                 
|Cash                      |               |                 
|                          |               |                 
|                          |               |                 
|                          |               |                 

# NOTE 4  RECEIVABLES
AND PREPAYMENTS:

|                              | December 31
2003
|----------------------------- | ----------------
|
|
|
|
|Office of the Chief Scientist |                 
|Government authorities        |                 
|Employees *                   |                 
|Other                         |                 
|                              |                 
|                              |                 
|                              |                 

*Including $ 17,127 to shareholder,
who is also an emploee.

J - 11

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 5 
EQUIPMENT:

|                                         | Equipment | Computers | Leasehold
improvements | Total  
|---------------------------------------- | --------- | --------- | ---------------------- | -------
|
|
|
|
|Cost:                                    |           |           |                        |        
|Balance as of January 1, 2003            |           |           | $                      | 120,831
|                                         |           |          
|Additions                                |           |           |                        | 4,564  
|                                         |           |           |                        |        
|Balance as of December 31, 2003          |           |           |                        | 125,395
|                                         |           |           |                        |        
|Accumulated depreciation:                |           |          
|                                         |           |          
|Balance as of January 1, 2003            |           |           |                        | 62,846 
|                                         |           |          
|Additions                                |           |           |                        | 12,049 
|                                         |           |           |                        |        
|Balance as of December 31, 2003          |           |           |                        | 74,895 
|                                         |           |           |                        |        
|                                         |           |           |                        |        
|Depreciated cost as of December 31, 2003 |           |           | $                      | 50,500 
|                                         |           |           |                        |        
|Depreciated cost as of December 31, 2002 |           |           | $                      | 57,985 
|                                         |           |           |                        |        
|Annual rates of depreciation             |           |           |                        | 7%-20% 
|                                         |           |           |                        |        

# NOTE 6  ACCOUNTS
PAYABLE AND ACCRUED EXPENSES:

|                               | December 31
2003
|------------------------------ | ----------------
|
|
|
|
|Suppliers                      |                 
|Employees and related expenses |                 
|Accrued vacation               |                 
|Other                          |                 
|                               |                 
|                               |                 
|                               |                 

J - 12

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 7  LONG-TERM
LOAN:

| | December 31
2003
| | ----------------
|
|
|
|
| |                 
| |                 

A loan of $ 500,000 is due to
the former parent company. The loan bears interest at the rate of LIBOR and is
repayable out of future net profits in 10 annual installments of $ 50,000,
including the accrued interest, but not in excess of 10% of the Companys annual net
income.

# NOTE 8 
CONVERTIBLE PROMISSORY NOTES:

In August 2003, the Company issued to
a shareholder a convertible promissory note in the amount of $ 799,917, bearing interest
at the rate of LIBOR +0.75%. The note is due on August 31, 2007, and is convertible at the
option of the holder, at any time during the term of the note and the accrued interest,
into Preferred B shares, representing a price per share of $ 2.51467, and subject to
certain adjustments in accordance with the Share Purchase Agreement (dated December 9,
2002) with the same shareholder. According to the agreement and upon its execution, a
warrant to purchase 318,100 Preferred B shares of the Company was cancelled (see also Note
10c).

In addition, in 2003, the Company
issued the same shareholder promissory notes in the amount of $ 450,000 which are
deemed an advance to the Company on account of proceeds to be invested by the shareholder
(the investment agreement) based on a term sheet signed between the
shareholder and the Company (see Note 1b).

On February 11, 2004 the investment
agreement for a total of $1,500,000 was signed and accordingly the Company issued to the
shareholder an additional promissory note in the amount of $ 1,050,000.The amount of
the convertible promissory notes will bear annual interest of LIBOR+2%, mature five years
from date of issuance and will be prepayable at the sole discretion of the Company until
June 30, 2004. The notes will be convertible to Series C Preferred shares, commencing July
1, 2004 and ending at the maturity date at a price per share of $ 0.60.

J - 13

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 9 
COMMITMENTS AND CONTINGENT LIABILITIES:

|A. | The
Companys plant is located in the Lod North Industrial Zone, Israel. The
plant is leased for a period of five years ending on June 30, 2005 with options
to extend the lease for up to additional four years. Minimum future rental
payments expected under operating leases in effect as of December 31, 2003, are
approximately as follows:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|     | 
|---- | 
|
|
|
|
|2004 | 
|2005 | 
|     | 
|     | 
|     | 
|     | 

|B. | In
connection with its research and development, the Company received and
               accrued participation payments from the Office of the Chief Scientist of
the                Ministry of Industry and Trade in Israel in the total amount of
approximately                $ 2,955,000. In return for the Government of Israels
participation,                the Company is committed to pay royalties at a rate of 3%
 5% of sales of                the developed products, up to 100% of the amount of
grants received (for grants                received under programs approved subsequent to
January 1, 2000  100% plus                interest at LIBOR). The Companys
total commitment for royalties payable                with respect to future sales, based
on Government participations received or                accrued, net of royalties paid or
accrued, totaled approximately                $ 2,937,000, as of December 31, 2003.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|C. | A
venture capital fund (the VC) has negotiated in 1999 to invest in
               the Company. No agreement was reached and no investment was executed by
the VC.                Following the failed negotiations, the VC has demanded damages and
other demands                of the Company. The Company rejects these demands and
believes they are with no                basis whatsoever, and accordingly no provision
for these demands is included in                these financial statements.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|D. | The
company has a lien on some office equipment in favor of the equipments
               supplier in the amount of $ 15,800.
|-- | -----------------------------------------------------------------------------------------------------------------------------

J - 14

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 10 
SHAREHOLDERS DEFICIENCY:

|A. | In
2003, the Company adopted an Option Plan which provides for the grant by the
          Company of options to purchase up to an aggregate of 426,100 Ordinary shares to
          officers, directors key employees, etc. The plan will expire eight years after
          its adoption unless terminated earlier by the Board of Directors.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of December 31, 2003, the Company granted certain employees 176,200 options (No options
were granted in previous years). The options may be exercised over a period of eight
years from the date of grant, at an exercise price of $ 2.26. The vesting period of the
options is up to four years. No compensation expense was recognized, as the exercise
price on the date of grant was greater than the market price of the underlying shares.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|B. | In
December 2002, the Company issued 954,400 Series B Preferred Shares to a
          shareholder for an aggregate purchase price of $ 2.4 million, which shall
          be paid in three equal installments. The first installment of the purchase
price           of $ 800,000 was paid in December 2002. The remaining two
installments of           $ 800,000 were received through 2003. As additional
consideration for the           shareholders investment, the Company granted two
warrants to purchase           318,100 Preferred B shares of the Company (each) at an
exercise price of           $ 2.514 per share exercisable until January 2, 2004 and
March 31, 2005,           respectively. The first warrant that was exercisable until
January 2, 2004, was           cancelled.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition, the Company issued to the shareholder a convertible, promissory note in the
amount of $ 250,000, bearing interest at the rate of LIBOR + 1.75%. The note was
canceled as part of the payment of the third installment for the Series B preferred
shares, as noted above.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|C. | In
June 2003, the Company increased its registered share capital and issued           bonus
shares to each shareholder of the Company, such that for each share           (excluding
the deferred shares), 99 additional shares of the same class of share           was
issued for no additional consideration. All shares (excluding deferred           shares)
have been adjusted to give retroactive effect to this issuance for all           periods
presented.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

J - 15

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 11 
PRODUCT DEVELOPMENT COSTS, NET:

|                                                           | Year ended
31.12.2003
|---------------------------------------------------------- | ---------------------
|
|
|
|
|Salaries and related expenses (1)                          |                      
|Subcontractors                                             |                      
|Materials                                                  |                      
|Rent and office maintenance                                |                      
|Vehicle expenses                                           |                      
|Patent applications                                        |                      
|Depreciation                                               |                      
|Other                                                      |                      
|                                                           |                      
|                                                           |                      
|Less - participations by the Office of the Chief Scientist |                      
|                                                           |                      
|                                                           |                      
|                                                           |                      
|(1) Including to shareholders                              |                      
|                                                           |                      

# NOTE 12 - MARKETING,
GENERAL AND ADMINISTRATIVE EXPENSES:

|                                                                             | Year ended
31.12.2003
|---------------------------------------------------------------------------- | ---------------------
|
|
|
|
|Salaries and related expenses (1)                                            |                      
|Professional fees                                                            |                      
|Vehicle expenses                                                             |                      
|Depreciation                                                                 |                      
|Rent and office maintenance                                                  |                      
|Other                                                                        |                      
|                                                                             |                      
|                                                                             |                      
|Less - participation by the Fund for the Encouragement of Marketing Activity |                      
|                                                                             |                      
|                                                                             |                      
|                                                                             |                      
|                                                                             |                      
|(1) Including to shareholders                                                |                      
|                                                                             |                      

J - 16

---

---

# JEMTEX INK JET PRINTING
LTD. 
NOTES TO THE FINANCIAL STATEMENTS 
(In U.S. dollars)

# NOTE 13 - TAXES ON
INCOME:

|A. | The
Company is subject to the Income Tax Law  (Inflationary  Adjustments),  1985. Under this
law, taxable income       is computed based on the changes in Israel's Consumer Price
Index.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|B. | Tax
benefits under the Law for the Encouragement of Capital Investments, 1959:
|-- | ------------------------------------------------------------------------------

| | The
Company has received the approval of the Investment  Center for an investment  program
for the Lod facility,       qualifying for "alternative  benefits" under the Law for the
 Encouragement of Capital  Investments,  1959 ("the       Law").  These  benefits
 provide the Company  with an exemption  from income taxes on income from its  "Approved
      Enterprise",  for a period of two years  followed by reduced tax rates of 25% for
an  additional  period of five       years from the first year in which there is taxable
income,  up to the earlier of twelve years from the time the       facility  was first
made  operational,  or  fourteen  years from the  issuance  of the letter of  approval.
 The       investment program was completed and a final implementation report was
submitted to the Investment Center.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|C. | As
of  December  31,  2003,  the  Company has a tax loss  carryforward  of  approximately  $
11.6  million.  The       difference between the reported loss and the tax loss
carryforward emanates mainly from nondeductible expenses.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|D. | The
Company has received final tax assessments up to 1998.
|-- | ----------------------------------------------------------

J - 17

---

---

|Jemtex Ink Jet
  Printing Ltd.
|------------------------------

FINANCIAL STATEMENTSas of December 31, 2002(UNAUDITED)

---

---

|Jemtex Ink Jet
  Printing Ltd.
|------------------------------

FINANCIAL STATEMENTS AS OF DECEMBER 31,
2002(UNAUDITED)

C O N T E N T S

|                                                  | Page       | 
|------------------------------------------------- | ---------- | 
|                                                  |            | 
|                                                  |            | 
|FINANCIAL STATEMENTS                              |            | 
|                                                  |            | 
|Balance Sheets                                    | H-2        | 
|                                                  |            | 
|Statements of Operations                          | H-3        | 
|                                                  |            | 
|Statements of Changes in Shareholders Deficiency | H-4        | 
|                                                  |            | 
|Statements of Cash Flows                          | H-5        | 
|                                                  |            | 
|Notes to the Financial Statements                 | H-6 - H-13 | 

# # # # # # # #

---

---

Jemtex Ink Jet
Printing Ltd.

BALANCE SHEETSIn U.S. dollars (except share data)

|                                                                                                                                                                                              |  |      |  | December
  31 |           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------------- | ----------
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  | Note |  | 2002          |           
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               |           
|Current
  Assets                                                                                                                                                                              |  |      |  |               |           
|Cash
  and cash equivalents                                                                                                                                                                   |  | (3)  |  |               | 432,327   
|Restricted
  cash                                                                                                                                                                             |  | (3)  |  |               | 50,100    
|Receivables
  and prepayments                                                                                                                                                                 |  | (4)  |  |               | 288,611   
|Inventories                                                                                                                                                                                   |  |      |  |               | -         
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               | 771,038   
|                                                                                                                                                                                              |  |      |  |               |           
|Fixed
  Assets                                                                                                                                                                                |  | (5)  |  |               |           
|Cost                                                                                                                                                                                          |  |      |  |               | 385,206   
|Less
  - accumulated depreciation                                                                                                                                                             |  |      |  |               | 203,971   
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               | 181,235   
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               |           
|Other
  Assets                                                                                                                                                                                |  |      |  |               | 47,792    
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               |           
|Total
  assets                                                                                                                                                                                |  |      |  |               | 1,000,065 
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               |           
|Current
  Liabilities                                                                                                                                                                         |  |      |  |               |           
|Payables
  and accrued expenses                                                                                                                                                               |  | (6)  |  |               | 728,743   
|Convertible
  promissory note                                                                                                                                                                 |  | (8)  |  |               | 252,561   
|Deferred
  revenues                                                                                                                                                                           |  |      |  |               | 88,385    
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               | 1,069,689 
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               |           
|Long-term
  Liabilities                                                                                                                                                                       |  |      |  |               |           
|Long-term
  loan                                                                                                                                                                              |  | (7)  |  |               | 571,917   
|Accrued
  severance pay, net                                                                                                                                                                  |  |      |  |               | 55,836    
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               | 627,753   
|                                                                                                                                                                                              |  |      |  |               |           
|Total
  liabilities                                                                                                                                                                           |  |      |  |               | 1,697,442 
|                                                                                                                                                                                              |  |      |  |               |           
|                                                                                                                                                                                              |  |      |  |               |           
|Shareholders
  Deficiency                                                                                                                                                                    |  |      |  |               |           
|Share
  capital                                                                                                                                                                               |  | (8)  |  |               |           
|Ordinary
  shares of NIS 0.01 par value: Authorized -
            2,701,486 shares,
  (2001 - 2,717,392); Issued and
            outstanding -
  27,001 shares in 2002 and 2001, respectively |  |      |  |               | 86        
|Series
  A preferred shares of NIS 0.01 par value:
            Authorized,
  issued and outstanding - 15,108 shares
             (2001 - same)                                                |  |      |  |               | 37        
|Series
  B preferred shares of NIS 0.01 par value:
            Authorized 15,906
  shares (2001-0); Issued and
            outstanding 9,544
  shares (2001-0)                                |  |      |  |               | 20        
|Deferred
  shares of NIS 0.01 par value: Authorized,
            Issued and
  outstanding - 67,500 shares (2001 - same)                                                                       |  |      |  |               | 225       
|Additional
  paid-in capital                                                                                                                                                                  |  |      |  |               | 8,877,186 
|Accumulated
  deficit                                                                                                                                                                         |  |      |  |               | (9,574,931
|                                                                                                                                                                                              |  |      |  |               |           
|Total
  shareholders deficiency                                                                                                                                                              |  |      |  |               | (697,377  
|                                                                                                                                                                                              |  |      |  |               |           
|Total
  liabilities and shareholders deficiency                                                                                                                                              |  |      |  |               | 1,000,065 
|                                                                                                                                                                                              |  |      |  |               |           

| |                     |  |                                      | 
| | ------------------- |  | ------------------------------------ | 
| | Dr. Meyer Weksler   |  | Yeoshua Agassi                       | 
| | Managing
  Director |  | Member
  of the Board of
  Directors | 

The accompanying notes are an integral part
of these statements

H - 2

---

---

Jemtex Ink Jet
Printing Ltd.

STATEMENTS OF OPERATIONSIn U.S. dollars

|                                                             |  |      |  | For the year endedDecember 31 |           
|------------------------------------------------------------ |  | ---- |  | ----------------------------- | ----------
|                                                             |  |      |  |                               |           
|                                                             |  | Note |  | 2002                          |           
|                                                             |  |      |  |                               |           
|                                                             |  |      |  |                               |           
|Revenues                                                     |  |      |  |                               | 1,281,115 
|Cost of Revenues                                             |  | (9)  |  |                               | 845,913   
|                                                             |  |      |  |                               |           
|Gross
  profit                                               |  |      |  |                               | 435,202   
|                                                             |  |      |  |                               |           
|                                                             |  |      |  |                               |           
|Operating expenses                                           |  |      |  |                               |           
|Research
  and development expenses, net                     |  | (10) |  |                               | 2,070,967 
|                                                             |  |      |  |                               |           
|Marketing,
  general and administrative
            expenses |  | (11) |  |                               | 497,248   
|                                                             |  |      |  |                               |           
|Total operating expenses                                     |  |      |  |                               | 2,568,215 
|                                                             |  |      |  |                               |           
|                                                             |  |      |  |                               |           
|Operating
  loss                                             |  |      |  |                               | (2,133,013
|                                                             |  |      |  |                               |           
|Financing expenses, net                                      |  |      |  |                               | (15,926   
|                                                             |  |      |  |                               |           
|Gain on agreement with former parent
      company           |  | (7)  |  |                               | -         
|                                                             |  |      |  |                               |           
|Net
  loss                                                   |  |      |  |                               | (2,148,939
|                                                             |  |      |  |                               |           

The accompanying notes are an integral part
of these statements

H - 3

---

---

Jemtex Ink Jet
Printing Ltd.

STATEMENTS OF CHANGES IN SHAREHOLDERS
DEFICIENCYIn U.S. dollars (except share data)

|                                                                         |  | Ordinary Shares      |        | Series A
  Preferred Shares |        | Series B
  Preferred Shares |        | Deferred Shares      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|------------------------------------------------------------------------ |  | -------------------- | ------ | --------------------------- | ------ | --------------------------- | ------ | -------------------- | ------ | --------------- |  | ---------------- | -- | --------------------- |  | ----- | ----- |  |  | -- | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|                                                                         |  | NIS 0.01
  par value |        | NIS 0.01
  par value        |        | NIS 0.01
  par value        |        | NIS 0.01
  par value |        | Share
  premium |  | Perpetual
  note |    | Accumulated
  deficit |  | Total |      
|Shares                                                                   |  | Amount               | Shares |                             | Amount |                             | Shares |                      | Amount | Shares          |  | Amount          
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Balance as of
     December 31, 2000                                     |  |                      | 27,001 |                             |        | 86                          |        |                      |        | 15,108          |  |                  | 37 |                       |  |       | -     |  |  | -  | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Perpetual note
  reclassified                                            |  |                      | -      |                             |        | -                           |        |                      |        | -               |  |                  | -  |                       |  |       | -     |  |  | -  | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Payment received on   behalf of Series A
     Preferred shares issued    |  |                      | -      |                             |        | -                           |        |                      |        | -               |  |                  | -  |                       |  |       | -     |  |  | -  | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Net loss                                                                 |  |                      | -      |                             |        | -                           |        |                      |        | -               |  |                  | -  |                       |  |       | -     |  |  | -  | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Balance as of
     December 31, 2001                                     |  |                      | 27,001 |                             |        | 86                          |        |                      |        | 15,108          |  |                  | 37 |                       |  |       | -     |  |  | -  | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Payment received on
     behalf of Series A
     Preferred shares issued |  |                      | -      |                             |        | -                           |        |                      |        | -               |  |                  | -  |                       |  |       | -     |  |  | -  | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Series B Preferred shares
     issued                                    |  |                      | -      |                             |        | -                           |        |                      |        | -               |  |                  | -  |                       |  |       | 9,544 |  |  | 20 | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Net loss                                                                 |  |                      | -      |                             |        | -                           |        |                      |        | -               |  |                  | -  |                       |  |       | -     |  |  | -  | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 
|Balance as of
     December 31, 2002                                     |  |                      | 27,001 |                             |        | 86                          |        |                      |        | 15,108          |  |                  | 37 |                       |  |       | 9,544 |  |  | 20 | 
|                                                                         |  |                      |        |                             |        |                             |        |                      |        |                 |  |                  |    |                       |  |       |       |  |  |    | 

(*) Net of issuance expenses of $55,176  see
Note 8.

The accompanying notes are an integral part
of these statements

H - 4

---

---

Jemtex Ink Jet Printing Ltd.

Notes to the Financial StatementsIn U.S. dollars

|                                                                                       |  | For the year endedDecember 31 |           
|-------------------------------------------------------------------------------------- |  | ----------------------------- | ----------
|                                                                                       |  |                               |           
|                                                                                       |  | 2002                          |           
|                                                                                       |  |                               |           
|                                                                                       |  |                               |           
|Cash flows from operating activities                                                   |  |                               |           
|Net
  loss                                                                             |  |                               | (2,148,939
|Adjustments
  to reconcile net loss to net cash
         used in operating activities: |  |                               |           
|Depreciation                                                                           |  |                               | 53,599    
|Interest
  accrued on long-term loans                                                  |  |                               | 8,968     
|Gain
  on agreement with former parent company                                         |  |                               | -         
|Loss
  on sale of fixed assets                                                         |  |                               | -         
|Changes
  in assets and liabilities:                                                   |  |                               |           
|Accrued
  severance pay                                                                |  |                               | 2,702     
|Decrease
  (increase) in restricted cash                                               |  |                               | 4,426     
|Decrease
  (increase) in receivables and prepayments                                   |  |                               | (96,169   
|Decrease
  (increase) in inventories                                                   |  |                               | 116,383   
|Increase
  in other assets                                                             |  |                               | (2,426    
|Decrease
  in payables, accrued
               expenses
  and deferred revenues        |  |                               | (39,122   
|                                                                                       |  |                               |           
|Net
  cash used in operating activities                                                |  |                               | (2,100,578
|                                                                                       |  |                               |           
|                                                                                       |  |                               |           
|Cash flows from investing activities                                                   |  |                               |           
|Acquisition
  of fixed assets                                                          |  |                               | (47,770   
|Proceed
  from sale of fixed assets                                                    |  |                               | -         
|                                                                                       |  |                               |           
|Net
  cash used in investing activities                                                |  |                               | (47,770   
|                                                                                       |  |                               |           
|                                                                                       |  |                               |           
|Cash flows from financing activities                                                   |  |                               |           
|Proceeds
  from shares issued, net                                                     |  |                               | 1,544,824 
|Convertible
  loan                                                                     |  |                               | 250,000   
|Short-term
  bank credit                                                               |  |                               | -         
|Long-term
  liabilities                                                                |  |                               | -         
|                                                                                       |  |                               |           
|Net
  cash provided by financing activities                                            |  |                               | 1,794,824 
|                                                                                       |  |                               |           
|                                                                                       |  |                               |           
|Decrease in cash and cash equivalents                                                  |  |                               | (353,524  
|Cash and cash equivalents at beginning of year                                         |  |                               | 785,851   
|                                                                                       |  |                               |           
|Cash and cash equivalents at end of year                                               |  |                               | 432,327   
|                                                                                       |  |                               |           

The accompanying notes are an integral part
of these statements

H - 5

---

---

Jemtex Ink Jet
Printing Ltd.

Notes to the Financial StatementsIn U.S. dollars

|Note 1  - | GENERAL
|--------- | -------
|          |        
|          | A.     
|          |        
|          | B.     
|          |        
|          | C.     
|          |        
|          | D.     

The accompanying notes are an integral part
of these statements

H - 6

---

---

Jemtex Ink Jet Printing Ltd.

Notes to the Financial Statements (Cont.)In U.S. dollars

|Note 2  - | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                
|--------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                
|          | The
  financial statements are prepared under Israeli Generally Accepted Accounting
  Principles (GAAP) in Israel. As far as the Companys results of operations
  are concerned, such GAAP are practically identical to U.S. GAAP. The
  significant accounting policies, applied in the preparation of the financial
  statements on a consistent basis, are:
|          |                                                                                                                                                                                                                                                                                                                                                                
|          | A.                                                                                                                                                                                                                                                                                                                                                             
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          | B.                                                                                                                                                                                                                                                                                                                                                             
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          | C.                                                                                                                                                                                                                                                                                                                                                             
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          | D.                                                                                                                                                                                                                                                                                                                                                             
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          | E.                                                                                                                                                                                                                                                                                                                                                             
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                
|          | F.                                                                                                                                                                                                                                                                                                                                                             
|          |                                                                                                                                                                                                                                                                                                                                                                
|          |                                                                                                                                                                                                                                                                                                                                                                

H - 7

---

---

Jemtex Ink Jet Printing Ltd.

Notes to the Financial Statements (Cont.)In U.S. dollars

|Note 3  - | CASH AND CASH EQUIVALENTS
|--------- | -------------------------

| |                             |  |                     |      | December 31 |     
| | --------------------------- |  | ------------------- | ---- | ----------- | ----
| |                             |  | Interest
  rate (*) |      |             |     
| |                             |  |                     | 2002 |             | 2001
| |                             |  |                     |      |             |     
| |                             |  |                     |      |             |     
| | Short-term
  bank deposits: |  |                     |      |             |     
| | NIS                         |  | 8.7                 |      | 312,856     |     
| | In
  U.S. dollar            |  | 1.0                 |      | 100,000     |     
| |                             |  |                     |      |             |     
| | Cash                        |  |                     |      | 19,471      |     
| |                             |  |                     |      |             |     
| |                             |  |                     |      | 432,327     |     
| |                             |  |                     |      |             |     

|          | (*)                                                                                                                                                         | As of
  December 31, 2002.
|--------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------
|          |                                                                                                                                                             |                           
|          | The Company
  has registered floating charge on its bank deposits in favor of a bank in the
  amount of $50,100 and $54,526 in 2002 and 2001, respectively.
|          |                                                                                                                                                            
|Note 4  - | RECEIVABLES AND PREPAYMENTS                                                                                                                                

| |                                          |  | December
  31 | 
| | ---------------------------------------- |  | ------------- | 
| |                                          |  |               | 
| |                                          |  | 2002          | 
| |                                          |  |               | 
| |                                          |  |               | 
| | Trade
  receivables                      |  | -             | 
| | Chief
  Scientist of the State of Israel |  | 150,571       | 
| | Government
  institutions                |  | 86,651        | 
| | Employees
  (*)                          |  | 34,635        | 
| | Other                                    |  | 16,754        | 
| |                                          |  |               | 
| |                                          |  | 288,611       | 
| |                                          |  |               | 

| | (*) | Including
  $16,550 to shareholders who are also employees (2001 - $31,703)
| | --- | ---------------------------------------------------------------------------

H - 8

---

---

Jemtex Ink Jet Printing Ltd.

Notes to the Financial Statements (Cont.)In U.S. dollars

|Note 5  - | FIXED ASSETS
|--------- | ------------

|                                      |  | Equipment |  | Computers |  | Leasehold
  improvements |         | Total | 
|------------------------------------- |  | --------- |  | --------- |  | ------------------------ | ------- | ----- | 
|                                      |  |           |  |           |  |                          |         |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|COST -                                |  |           |  |           |  |                          |         |       | 
|As
  of January 1, 2002               |  | 112,445   |  | 161,237   |  |                          | 63,754  |       | 
|Acquisitions                          |  | 8,386     |  | 39,384    |  |                          | -       |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|As
  of December 31, 2002             |  | 120,831   |  | 200,621   |  |                          | 63,754  |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|ACCUMULATED 
       DEPRECIATION -    |  |           |  |           |  |                          |         |       | 
|As
  of January 1, 2002               |  | 50,895    |  | 91,573    |  |                          | 7,904   |       | 
|Provision                             |  | 11,951    |  | 35,272    |  |                          | 6,376   |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|As
  of December 31, 2002             |  | 62,846    |  | 126,845   |  |                          | 14,280  |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|NET BOOK
  VALUE -                    |  |           |  |           |  |                          |         |       | 
|As
  of December 31, 2002             |  | 57,985    |  | 73,776    |  |                          | 49,474  |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|As
  of December 31, 2001             |  | 61,550    |  | 69,664    |  |                          | 55,850  |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|                                      |  |           |  |           |  |                          |         |       | 
|ANNUAL RATES
  OF
       DEPRECIATION |  | 7%-20%    |  | 20%-33%   |  |                          | 10%-14% |       | 
|                                      |  |           |  |           |  |                          |         |       | 

|(*) | The Company
  has registered fixed charges on certain of its assets (approximately
  $15,000).
|--- | ----------------------------------------------------------------------------------------------

|Note 6  - | PAYABLES AND ACCRUED EXPENSES
|--------- | -----------------------------

| |                                  |  | December
  31 | 
| | -------------------------------- |  | ------------- | 
| |                                  |  |               | 
| |                                  |  | 2002          | 
| |                                  |  |               | 
| |                                  |  |               | 
| | Suppliers                        |  | 320,286       | 
| | Employees
  and related expenses |  | 191,674       | 
| | Accrued
  vacation               |  | 176,219       | 
| | Other                            |  | 40,564        | 
| |                                  |  |               | 
| |                                  |  | 728,743       | 
| |                                  |  |               | 

H - 9

---

---

Jemtex Ink Jet Printing Ltd.

Notes to the Financial Statements (Cont.)In U.S. dollars

|Note 7 - | LONG-TERM LOAN
|-------- | --------------

| |  |  | December 31 | 
| |  |  | ----------- | 
| |  |  |             | 
| |  |  | 2002        | 
| |  |  |             | 
| |  |  |             | 
| |  |  | 571,917     | 
| |  |  |             | 

|          | In 2001, the
  former parent company forgave the Company for a loan outstanding in the
  amount of $224,324.  A loan of
  $500,000 is still due to the former parent company.  The loan bears interest at LIBOR and is repayable out of future
  net profits at 10 annual payments of $50,000, including the accrued interest,
  but not in excess of 10% of the Companys annual net income.
|--------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          |                                                                                                                                                                                                                                                                                                                                                                                              
|Note 8  - | SHAREHOLDERS DEFICIENCY                                                                                                                                                                                                                                                                                                                                                                     
|          |                                                                                                                                                                                                                                                                                                                                                                                              
|          | A.                                                                                                                                                                                                                                                                                                                                                                                           
|          |                                                                                                                                                                                                                                                                                                                                                                                              
|          | B.                                                                                                                                                                                                                                                                                                                                                                                           
|          |                                                                                                                                                                                                                                                                                                                                                                                              
|          | C.                                                                                                                                                                                                                                                                                                                                                                                           
|          |                                                                                                                                                                                                                                                                                                                                                                                              
|          |                                                                                                                                                                                                                                                                                                                                                                                              

H - 10

---

---

Jemtex Ink Jet Printing Ltd.

Notes to the Financial Statements (Cont.)In U.S. dollars

|Note 9  - | COST OF REVENUES
|--------- | ----------------

| |                                 |  | For the year ended
  December 31 | 
| | ------------------------------- |  | -------------------------------- | 
| |                                 |  |                                  | 
| |                                 |  | 2002                             | 
| |                                 |  |                                  | 
| |                                 |  |                                  | 
| | Salaries and
  related expenses |  | 319,649                          | 
| | Components                      |  | 395,786                          | 
| | Rent and
  building maintenance |  | 48,016                           | 
| | Car expenses                    |  | 34,330                           | 
| | Other                           |  | 48,132                           | 
| |                                 |  |                                  | 
| |                                 |  | 845,913                          | 
| |                                 |  |                                  | 

|Note 10 - | RESEARCH AND DEVELOPMENT EXPENSES, NET
|--------- | --------------------------------------

| |                                                                             |  | For the year endedDecember
  31 | 
| | --------------------------------------------------------------------------- |  | ------------------------------- | 
| |                                                                             |  |                                 | 
| |                                                                             |  | 2002                            | 
| |                                                                             |  |                                 | 
| |                                                                             |  |                                 | 
| | Salaries and
  related expenses (1)                                         |  | 1,579,571                       | 
| | Subcontractors                                                              |  | 44,719                          | 
| | Materials                                                                   |  | 347,416                         | 
| | Rent and
  office maintenance                                               |  | 130,140                         | 
| | Vehicle
  expenses                                                          |  | 200,377                         | 
| | Patent
  applications                                                       |  | 15,685                          | 
| | Other                                                                       |  | 132,510                         | 
| |                                                                             |  |                                 | 
| |                                                                             |  | 2,450,418                       | 
| |                                                                             |  |                                 | 
| | Less 
  participation by the Chief Scientist
       of the State of Israel |  | 379,451                         | 
| |                                                                             |  |                                 | 
| |                                                                             |  | 2,070,967                       | 
| |                                                                             |  |                                 | 
| |                                                                             |  |                                 | 
| | (1)     Including
  to shareholders                                         |  | 205,160                         | 
| |                                                                             |  |                                 | 

H - 11

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---

Jemtex Ink Jet Printing Ltd.

Notes to the Financial Statements (Cont.)In U.S. dollars

|Note 11 - | MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES
|--------- | ----------------------------------------------

| |                                     |  | For the
  year ended
  December 31 | 
| | ----------------------------------- |  | ---------------------------------- | 
| |                                     |  |                                    | 
| |                                     |  | 2002                               | 
| |                                     |  |                                    | 
| |                                     |  |                                    | 
| | Salaries and
  related expenses (1) |  | 221,871                            | 
| | Car expenses                        |  | 29,316                             | 
| | Professional
  fees                 |  | 76,436                             | 
| | Depreciation                        |  | 7,132                              | 
| | Rent and
  office maintenance       |  | 33,557                             | 
| | Other                               |  | 128,936                            | 
| |                                     |  |                                    | 
| |                                     |  | 497,248                            | 
| |                                     |  |                                    | 
| |                                     |  |                                    | 
| | (1)     Including
  to shareholders |  | 93,598                             | 
| |                                     |  |                                    | 

|Note 12 - | COMMITMENTS AND CONTINGENT LIABILITIES
|--------- | --------------------------------------
|          |                                       
|          | A.                                    
|          |                                       
|          | B.                                    

H - 12

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---

Jemtex Ink Jet Printing Ltd.

Notes to the Financial Statements (Cont.)In U.S. dollars

|Note 12 - | COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|--------- | ----------------------------------------------
|          |                                               
|          | C.                                            
|          |                                               
|Note 13 - | TAXES ON INCOME                               
|          |                                               
|          | A.                                            
|          |                                               
|          | B.                                            
|          |                                               
|          | C.                                            

# 
#  #  #  #  #

H - 13

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---

|Chaikin, Cohen, Rubin & Gilboa.                                                                                                              
|---------------------------------------------------------------------------------------------------------------------------------------------
|Atidim
  Technology Park, Bldg. 4, 
  P.O.B. 58143 Tel-Aviv 61580, IsraelTel: 972-3-6489858 Fax: 972-3-6489946E-mail: accounting@ccrcpa.co.il
|                                                                                                                                             
|Certified Public Accountants (Isr.)                                                                                                          

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Shareholders ofObjet Geometries Ltd.

We have audited the accompanying consolidated balance sheets of Objet
Geometries Ltd., (the Company) as of December 31, 2003 and 2002 and the
related consolidated statements of operations, changes in shareholders equity
and cash flows for each of the three years in the period ended December 31,
2003. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on the financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards, including those prescribed under the Auditors Regulations
(Auditors Mode of Performance), 1973 and with the standards of the Public
Company 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 misstatements. 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 statements presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2003 and 2002 and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
2003, in conformity with accounting principles generally accepted in the United
States.

Without qualifying our opinion, we wish to draw your attention to the
following matters:

|1. | The
  Companys capital deficiency as at December 31, 2003, and the loss for the
  year then ended, amounting to approximately 4.0 million dollars and 6.2
  million dollars, respectively. The Companys continuation as a going concern
  is dependent upon additional financial support until profitability is
  achieved.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The
  financial statements do not include any adjustments relating to
  recoverability and classification of the assets and liabilities that might be
  necessary should the company be unable to continue as a going concern.                                                                                               
|   |                                                                                                                                                                                                                                                                                                                              
|2. | On December
  16, 2003 a lawsuit was filed against the Company  See Note 10E.                                                                                                                                                                                                                                               

/s/ Chaikin,
Cohen, Rubin & GilboaChaikin, Cohen,
Rubin & GilboaCertified Public Accountants (Isr.)

Tel-Aviv, February 16, 2004

O - 1

---

---

# Selected Financial Data

# (Objet Geometries Ltd.)

The following selected financial data
from the balance sheets as of December 31, 2002 and 2003 and from the related statements
of operations for each of the three years in the period ended December 31, 2003 are derived
from the audited consolidated financial statements of Objet Geometries Ltd.
(Objet), not included in this Annual Report, which have been prepared in
accordance with generally accepted accounting principles in the United States.

This selected financial data is
provided pursuant to applicable SEC rules because Scitexs equity in the income from
continuing operations before income taxes, extraordinary items and cumulative effect of a
change in accounting principle of Objet, an Israeli company in which Scitex currently
holds an approximate 23.5% interest, exceeds 10 percent (but less than 20%) of such income
of Scitex and its subsidiaries consolidated for the fiscal year ended on December 31,
2003.

|                    | December 31,
(U.S. dollars in thousands) |       
|------------------- | ---------------------------------------- | ------
|2003                | 2002                                    
|Current assets      | 4,753                                    | 5,876 
|Non current assets  | 1,482                                    | 1,479 
|Current liabilities | 9,554                                    | 15,000

|                                                             | December 31,
(U.S. dollars in thousands)
|------------------------------------------------------------ | ----------------------------------------
|2003                                                         | 2002                                    
|Gross revenue                                                | 4,966                                   
|Cost of sales                                                | 4,043                                   
|Loss from continuing operations
(before extraordinary items) | (6,228)                                 
|Net losses                                                   | (6,228)                                 

O - 2

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---

EXHIBIT INDEX

|1.1      | Memorandum of Association
  of the Registrant. (1)                                                                                                                                       
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                          
|1.2      | Amended and Restated
  Articles of Association of the Registrant.                                                                                                                        
|         |                                                                                                                                                                                          
|3.       | Voting Agreement dated
  December 1, 1980, by and among Discount Investment Corporation Ltd., PEC
  Israel Economic Corporation and Clal Electronics Industries Ltd. (2)                 
|         |                                                                                                                                                                                          
|4(a)(1)  | Agreement dated November
  20, 2001 between Dundee Securities Corporation and the Registrant. (3)                                                                                        
|         |                                                                                                                                                                                          
|4(a)(2)  | Asset Purchase Agreement
  dated November 24, 2003, between Eastman Kodak Company, the Registrant,
  Scitex Digital Printing, Inc. and Scitex Development Corp.                          
|         |                                                                                                                                                                                          
|4(a)(3)  | Agreement dated June 5,
  2003 by and among Dundee Securities Corporation, Raymond James Ltd. and the
  Registrant.                                                                      
|         |                                                                                                                                                                                          
|4(a)(4)  | Agreement dated August 11,
  2003 by and among Dundee Securities Corporation, Raymond James Ltd. and the
  Registrant.                                                                   
|         |                                                                                                                                                                                          
|4(c)(1)  | The Scitex Israel Key
  Employee Share Incentive Plan 1991. (1)                                                                                                                          
|         |                                                                                                                                                                                          
|4(c)(2)  | The Scitex International
  Key Employee Stock Option Plan 1991 (as amended, 1995). (1)                                                                                                   
|         |                                                                                                                                                                                          
|4(c)(3)  | Form of the Letter of
  Indemnification provided to office holders. (4)                                                                                                                  
|         |                                                                                                                                                                                          
|4(c)(4)  | The Scitex 2001 Stock
  Option Plan (as amended, 2003). (5)                                                                                                                              
|         |                                                                                                                                                                                          
|4(c)(5)  | The Scitex 2003 Share
  Option Plan. (6)                                                                                                                                                 
|         |                                                                                                                                                                                          
|4(d)(1)  | Services Agreement dated
  November 1, 2001, between Clal and the Registrant (as amended, 2004).                                                                                         
|         |                                                                                                                                                                                          
|4(d)(2)  | Share Exchange Agreement
  dated December 22, 2002, by and among the Registrant, Scitex Vision Ltd. and
  Aprion Digital Ltd. (7)                                                        
|         |                                                                                                                                                                                          
|4(d)(3)  | Services Agreement dated
  March 1, 2004, between Discount Investment Corporation Ltd. and the
  Registrant.                                                                             
|         |                                                                                                                                                                                          
|8        | List of Subsidiaries of
  the Registrant.                                                                                                                                                
|         |                                                                                                                                                                                          
|10(a)(2) | Year 2002 Annual Report to
  Shareholders of Creo Inc. for the fiscal year ended September 30, 2002, pages
  28 through 42 (inclusive) of which are incorporated herein by reference. (8)
|         |                                                                                                                                                                                          
|10(a)(3) | Comments by Independent
  Accountants of Creo Inc. for U.S. Readers on Canada  U.S.  Reporting Differences, dated November 12,
  2002. (9)                                              
|         |                                                                                                                                                                                          
|12.1     | Certification
  of CEO of the Registrant pursuant to Rule 13a-14(a) as adopted pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002.                                              
|         |                                                                                                                                                                                          
|12.2     | Certification
  of CFO of the Registrant pursuant to Rule 13a-14(a) as adopted pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002.                                              
|         |                                                                                                                                                                                          
|13.1     | Certification
  of CEO of the Registrant pursuant to Rule 13a-14(b), as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002.                                             
|         |                                                                                                                                                                                          
|13.2     | Certification
  of CFO of the Registrant pursuant to Rule 13a-14(b), as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002.                                             
|         |                                                                                                                                                                                          
|14(a)(1) | Consent of
  Kesselman & Kesselman, Independent Accountants of Registrant.                                                                                                               
|         |                                                                                                                                                                                          
|14(a)(2) | Consent of
  Ziv Haft, Independent Accountants of Jemtex InkJet Printing Ltd.                                                                                                            
|         |                                                                                                                                                                                          
|14(a)(3) | Consent of Independent
  Accountants of Objet Geometries Ltd.                                                                                                                            
|         |                                                                                                                                                                                          

104

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---

|14(a)(4) | Consent of KPMG LLP,
  Independent Accountants of Creo Inc.
|-------- | -----------------------------------------------------------

|   
|---
|(1)
|(2)
|(3)
|(4)
|(5)
|(6)
|(7)
|(8)
|(9)

105

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---