---

---

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 20-F/AAMENDMENT NO. 1

|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, 2004

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, 2004:

# 38,066,363 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.

x Yes     
o No

Indicate
by check mark which financial statement item the Registrant has elected to follow.

o Item 17     
x Item 18



---

---



# EXPLANATORY NOTE

Pursuant
to Rule 12b-15 under the Securities Exchange Act of 1934, Scitex Corporation Ltd. (the
Company, Scitex or we) hereby amends its Annual
Report on Form 20-F for the fiscal year ended December 31, 2004, as filed with the U.S.
Securities and Exchange Commission on June 30, 2005 (the Original Filing), by
setting forth in Item 18 a Report of Independent Registered Public Accounting Firm of
Frazier & Deeter, LLC ("Auditor's Report") relating to the financial statements of Scitex Vision America, Inc., our indirect majority owned
subsidiary, that was inadvertently omitted from the Original Filing.

This
amendment also includes as Exhibit 14(a)(4) a consent of the Independent Registered Public Accounting Firm of
Frazier & Deeter, LLC to the
inclusion of their Auditors Report in this Annual Report on Form 20-F/A. The
consent was inadvertently omitted from the Original Filing.

This
amendment also amends the list of Exhibits in Item 19 and in the Exhibit Index to reflect
the addition of the consent of Frazier & Deeter, LLC and the filing of new
certifications by each of the Chief Executive Officer and the Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, and the furnishing of new
certifications by each of the Chief Executive Officer and the Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Other
than for the purpose of amending the information referred to above, this Amendment No. 1
does not, and does not purport to, amend, update or restate the information in any other
item of the Original Filing or reflect any events that have occurred after the date on
which such Annual Report was filed.

# ITEM 18. FINANCIAL
STATEMENTS

Scitex is filing as part of this
Annual Report:

| | consolidated
audited financial statements (and related Schedule II) of Scitex for the year ended
December 31, 2004; and
|- | -----------------------------------------------------------------------------------------------------------------------

| | consolidated
audited financial statements of Objet for the year ended December 31, 2004.
|- | ----------------------------------------------------------------------------------------

|                                                                                                    |       
|--------------------------------------------------------------------------------------------------- | ------
|
|
|
|
|Index to the Financial Statements of the Registrant:                                                | Page  
|Report of Independent Registered Public Accounting Firm relating to Scitex                          | F2    
|Consolidated Balance Sheets at December 31, 2004 and 2003                                           | F3-F4 
|Consolidated Statements of Operations                                                              
|for the Three Years ended December 31, 2004                                                         | F5    
|Consolidated Statements of Changes in Shareholders' Equity                                         
|for the Three Years ended December 31, 2004                                                         | F6    
|Consolidated Statements of Cash Flows                                                              
|for the Three Years ended December 31, 2004                                                         | F7-F8 
|Notes to Consolidated Financial Statements                                                          | F9-F52
|                                                                                                    |       
|Index to the Financial Statements Schedules of the Registrant                                      
|Report of Independent Registered Public Accounting Firm relating to Financial Statement Schedule    | S-1   
|Schedule II - Valuation and Qualifying Accounts                                                     | S-2   
|                                                                                                    |       
|Associated Companies                                                                               
|Report of Independent Registered Public Accounting Firm relating to Jemtex for the year ended      
|December 31, 2004                                                                                   | J1    
|Report of Independent Registered Public Accounting Firm relating to and consolidated financial     
|statements of Objet for the year ended December 31, 2004                                            | O1-O20
|Report of Independent Registered Public Accounting Firm relating to Scitex Vision America, Inc. for
|the year ended December 31, 2004                                                                    | V1    

2

---

---



# ITEM 19. EXHIBITS

|1.1 |  | Memorandum
of Association of the Registrant. (1)
|--- |  | ------------------------------------------------

|1.2 |  | Amended
and Restated Articles of Association of the Registrant. (2)
|--- |  | -------------------------------------------------------------------

|3 |  | Voting
Agreement, dated December 1, 1980, by and among Discount Investment Corporation Ltd., PEC
             Israel Economic Corporation and Clal Electronics Industries Ltd. (3)
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4(a)(1) |  | Agreement
dated November 20, 2001 between Dundee Securities Corporation and the Registrant. (4)
|------- |  | -----------------------------------------------------------------------------------------------

|4(a)(2) |  | Asset
Purchase Agreement, dated November 24, 2003, between Eastman Kodak Company, the
             Registrant, Scitex Digital Printing, Inc. and Scitex Development Corp. (5)
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4(a)(3) |  | Agreement,
dated June 5, 2003, by and among Dundee Securities Corporation, Raymond James
             Ltd. and the Registrant. (6)
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|4(a)(4) |  | Agreement,
dated August 11, 2003, by and among Dundee Securities Corporation, Raymond James Ltd.
             and the Registrant. (7)
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------

|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. (8)
|------- |  | ---------------------------------------------------------------------

|4(c)(4) |  | The
Scitex 2001 Stock Option Plan (as amended, 2003). (9)
|------- |  | ---------------------------------------------------------

|4(c)(5) |  | The
Scitex 2003 Share Option Plan. (10)
|------- |  | ---------------------------------------

|4(d)(1) |  | Services
Agreement dated November 1, 2001, between Clal and the Registrant (as amended, 2004).
             (11)
|------- |  | ----------------------------------------------------------------------------------------------------------------

|4(d)(2) |  | Share
Exchange Agreement, dated December 22, 2002, by and among the Registrant, Scitex Vision
             Ltd. and Aprion Digital Ltd. (12)
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|4(d)(3) |  | Services
Agreement, dated March 1, 2004, between Discount Investment Corporation Ltd. and the
             Registrant. (13)
|------- |  | ---------------------------------------------------------------------------------------------------------------------------

|8 |  | List
of Subsidiaries of the Registrant. (14)
|- |  | --------------------------------------------

|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 Independent Registered Public Accounting Firm relating to Registrant. (14)
|-------- |  | -------------------------------------------------------------------------------------

|14(a)(2) |  | Consent
of Independent Registered Public Accounting Firm relating to Jemtex InkJet Printing
             Ltd. (14)
|-------- |  | ------------------------------------------------------------------------------------------------------------------

3

---

---



|14(a)(3) |  | Consent
of Independent Registered Public Accounting Firm relating to Objet Geometries Ltd. (14)
|-------- |  | -----------------------------------------------------------------------------------------------

|14(a)(4) |  | Consent
of Independent Registered Public Accounting Firm relating to Scitex Vision America, Inc.
|-------- |  | ------------------------------------------------------------------------------------------------

---

|(1) | Incorporated
by reference to Exhibit 1.1 to our Annual Report on Form 20-F for                the
fiscal year ended December 31, 2000, filed June 29, 2001.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated
by reference to Exhibit 1.2 to our Annual Report on Form 20-F for                the
fiscal year ended December 31, 2003, filed June 30, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated
by reference to Exhibit 10.h to our Registration Statement on Form                F-1
filed May 26, 1983 (File No. 2-82743).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated
by reference to Exhibit 4(a)(4) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2001, filed July 1, 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated
by reference to Exhibit 4(a)(2) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated
by reference to Exhibit 4(a)(3) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated
by reference to Exhibit 4(a)(4) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated
by reference to Appendix B to our Proxy Statement filed under the                cover of
a Current Report on Form 6-K filed April 1, 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated
by reference to Exhibit (d)(4) to our Tender Offer Statement on                Schedule
TO filed May 14, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated
by reference to Appendix B to our Proxy Statement filed under the                cover of
a Current Report on Form 6-K filed December 3, 2003.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Incorporated
by reference to Exhibit 4(d)(1) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated
by reference to Exhibit 4(d)(2) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2002, filed June 19, 2003.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Incorporated
by reference to Exhibit 4(d)(3) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Incorporated
by reference to Exhibits 8, 14(a)(1), 14(a)(2) and 14(a)(3),                respectively,
to our Annual Report on Form 20-F for the fiscal year ended                December 31,
2004, filed June 30, 2005.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

---

---



# SCITEX CORPORATION LTD.

2004 CONSOLIDATED
FINANCIAL STATEMENTS



---

---



# SCITEX CORPORATION LTD.

2004 CONSOLIDATED FINANCIAL
STATEMENTS

TABLE OF CONTENTS

|                                                          | Page      
|--------------------------------------------------------- | ----------
|
|
|
|
|                                                          |           
|REPORT OF INDEPENDENT REGISTERED PUBLIC   ACCOUNTING FIRM | F-2       
|CONSOLIDATED FINANCIAL STATEMENTS:                       
|Balance sheets                                            | F-3 - F-4 
|Statements of operations                                  | F-5       
|Statements of shareholders' equity                        | F-6       
|Statements of cash flows                                  | F-7 - F-8 
|Notes to financial statements                             | F-9 - F-52

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



---

---



---

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

# REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders of SCITEX
CORPORATION LTD.

We have audited the consolidated balance
sheets of Scitex Corporation Ltd. (the Company) and its subsidiaries as of
December 31, 2004 and 2003 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, 2004. 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 subsidiaries, which statements reflect total assets of $18,550,000
at December 31, 2004, and total revenues of $31,277,000 for the year then ended. 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, 2004 and 2003
is $124,000 and $3,328,000, respectively, and the Companys share in losses of which
is $1,418,000, $5,637,000 and $4,106,000 in 2004, 2003 and 2002, respectively. Those
financial statements were audited by other independent registered public accounting firms
whose reports thereon have been furnished to us, and our opinion expressed herein, insofar
as it relates to the amounts included for these companies, is based solely on the reports
of the other independent registered public accounting firms.

We conducted our audits in accordance
with standards of the Public Company Accounting Oversight Board (United States of America)
and with 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 registered public accounting firms provide a reasonable basis for
our opinion.

In our opinion, based on our audits
and the reports of the other independent registered public accounting firms, 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, 2004 and 2003 and the consolidated results of operations, changes in
shareholders equity and cash flows for each of the three years in the period ended
December 31, 2004, in conformity with accounting principles generally accepted in the
United States of America.

|                                                                        |                                               
|----------------------------------------------------------------------- | ----------------------------------------------
|
|
|
|
|Tel-Aviv, Israel                                                        | /s/ Kesselman & KesselmanKesselman & Kesselman
|May 2, 2005, except for Note 16d, as to which the date is June 28, 2005 | Certified Public Accountants (Isr.)           

F - 2

---

---



SCITEX CORPORATION LTD.CONSOLIDATED BALANCE SHEETS

|                                                                  | December 31
|----------------------------------------------------------------- | -----------
|
|
|
|
|A s s e t s                                                       |            
|CURRENT ASSETS:                                                   |            
|Cash and cash equivalents                                         |            
|Short-term investments                                            |            
|Restricted deposit                                                |            
|Trade receivables                                                 |            
|Other receivables                                                 |            
|Deferred income taxes                                             |            
|Inventories                                                       |            
|Current assets of discontinued operation                          |            
|                                                                  |            
|T o t a l  current assets                                         |            
|                                                                  |            
|INVESTMENTS AND OTHER NON-CURRENT                                 |            
|ASSETS:                                                           |            
|Associated companies                                              |            
|Restricted deposit                                                |            
|Other investments and prepaid expenses                            |            
|Funds in respect of employee rights upon retirement               |            
|                                                                  |            
|                                                                  |            
|                                                                  |            
|PROPERTY, PLANT AND EQUIPMENT, net of                             |            
|accumulated depreciation and amortization (note 6)                |            
|GOODWILL (note 7)                                                 |            
|OTHER INTANGIBLE ASSETS, net of accumulated amortization (note 8) |            
|NON-CURRENT ASSETS OF DISCONTINUED OPERATION                      |            
|                                                                  |            
|                                                                  |            
|                                                                  |            
|                                                                  |            

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

F - 3

---

---



|                                                        | December 31
|------------------------------------------------------- | -----------
|
|
|
|
|Liabilities and shareholders' equity                    |            
|CURRENT LIABILITIES:                                    |            
|Short-term bank credit                                  |            
|Current maturities of long-term loans                   |            
|Trade payables                                          |            
|Income taxes payable                                    |            
|Accrued and other liabilities                           |            
|Current liabilities related to discontinued operation   |            
|                                                        |            
|T o t a l  current liabilities                          |            
|                                                        |            
|LONG-TERM LIABILITIES:                                  |            
|Loans, net of current maturities:                       |            
|Banks                                                   |            
|Other                                                   |            
|Liability for employee rights upon retirement (note 9)  |            
|Long-term liabilities related to discontinued operation |            
|                                                        |            
|T o t a l   long-term liabilities                       |            
|                                                        |            
|                                                        |            
|LONG-TERM LOANS FROM RELATED PARTIES                    |            
|CONVERTIBLE INTO SHARES OF A SUBSIDIARY                 |            
|COMMITMENTS AND CONTINGENT LIABILITIES (note 10)        |            
|T o t a l   liabilities                                 |            
|                                                        |            
|MINORITY INTEREST                                       |            
|                                                        |            
|SHAREHOLDERS' EQUITY (note 11):                         |            
|Share capital - ordinary shares of NIS 0.12 par value   |            
|(authorized: December 31, 2004 and 2003 -               |            
|48,000,000 shares; issued and outstanding:              |            
|December 31, 2004 and 2003 - 43,467,388 shares)         |            
|Capital surplus                                         |            
|Accumulated other comprehensive loss                    |            
|Deferred stock compensation                             |            
|Accumulated deficit                                     |            
|Treasury shares, at cost (December 31, 2004 and 2003 -  |            
|5,401,025 shares and 448,975 shares respectively)       |            
|                                                        |            
|T o t a l  shareholders' equity                         |            
|                                                        |            
|                                                        |            
|                                                        |            

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

F - 4

---

---



SCITEX CORPORATION LTD.CONSOLIDATED STATEMENTS
OF OPERATIONS

|                                                      | Year ended December 31
|----------------------------------------------------- | ----------------------
|
|
|
|REVENUES:                                             |                       
|Products                                              |                       
|Supplies                                              |                       
|Services                                              |                       
|                                                      |                       
|T o t a l  revenues                                   |                       
|                                                      |                       
|COST OF REVENUES:                                     |                       
|Cost of products                                      |                       
|Cost of supplies                                      |                       
|Cost of services                                      |                       
|                                                      |                       
|T o t a l  cost of revenues                           |                       
|                                                      |                       
|GROSS PROFIT                                          |                       
|RESEARCH AND DEVELOPMENT COSTS, net                   |                       
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES          |                       
|AMORTIZATION OF INTANGIBLE ASSETS                     |                       
|IMPAIRMENT OF OTHER INTANGIBLE ASSETS                 |                       
|RESTRUCTURING CHARGES                                 |                       
|                                                      |                       
|OPERATING LOSS                                        |                       
|FINANCIAL EXPENSES, net                               |                       
|OTHER INCOME (LOSS), net                              |                       
|                                                      |                       
|LOSS BEFORE TAXES ON INCOME                           |                       
|TAXES ON INCOME (note 12)                             |                       
|SHARE IN LOSSES OF ASSOCIATED COMPANIES               |                       
|MINORITY INTERESTS IN A SUBSIDIARY                    |                       
|                                                      |                       
|NET  LOSS FROM CONTINUING OPERATIONS                  |                       
|NET INCOME FROM DISCONTINUED OPERATION                |                       
|                                                      |                       
|NET INCOME (LOSS)                                     |                       
|                                                      |                       
|EARNING (LOSS) PER SHARE ("EPS") - BASIC AND DILUTED: |                       
|Continuing operations                                 |                       
|Discontinued operation                                |                       
|                                                      |                       
|                                                      |                       
|                                                      |                       
|WEIGHTED AVERAGE NUMBER OF SHARES                     |                       
|USED IN COMPUTATION OF EPS (in thousands):            |                       
|Basic                                                 |                       
|                                                      |                       
|Diluted                                               |                       
|                                                      |                       

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) | Accumulated
deficit | Deferred Stock
Compensation | Treasury
shares | Total
shareholders'
equity
|----------------------------------------------------------------------------------- | ------------- | --------------- | --------------------------------------------- | ------------------- | --------------------------- | --------------- | --------------------------
|
|
|
|
|BALANCE AT JANUARY 1, 2002                                                          |               |                 |                                               | 6,205               |                             |                 | 364,619                   
|CHANGES DURING THE YEAR ENDED DECEMBER 31, 2002:                                    |               |                
|Net loss                                                                            |               |                 |                                               |                     |                             |                 |                           
|Other comprehensive income (loss), net, in respect of:                              |               |                
|Currency translation adjustments                                                    |               |                 |                                               |                     |                             |                 |                           
|Available-for-sale securities                                                       |               |                 |                                               |                     |                             |                 |                           
|Derivative instruments designated for cash flow hedge                               |               |                 |                                               |                     |                             |                 |                           
|                                                                                    |               |                 |                                               |                     |                             |                 |                           
|Total comprehensive loss                                                            |               |                 |                                               |                     |                             |                 |                           
|                                                                                    |               |                 |                                               |                     |                             |                 |                           
|BALANCE AT DECEMBER 31, 2002                                                        |               |                 |                                               | 6,205               |                             |                 | 364,619                   
|CHANGES DURING THE YEAR ENDED DECEMBER 31, 2003:                                    |               |                
|Net Income                                                                          |               |                 |                                               |                     |                             |                 |                           
|Other comprehensive loss, in respect of currency translation       adjustments      |               |                 |                                               |                     |                             |                 |                           
|                                                                                    |               |                 |                                               |                     |                             |                 |                           
|Total comprehensive income                                                          |               |                 |                                               |                     |                             |                 |                           
|                                                                                    |               |                 |                                               |                     |                             |                 |                           
|Share in beneficial conversion feature relating to convertible                      |               |                
|preferred shares issued by Scitex Vision (see note 3b)                              |               |                 |                                               |                     |                             |                 | 3,485                     
|                                                                                    |               |                 |                                               |                     |                             |                 |                           
|BALANCE AT DECEMBER 31, 2003                                                        |               |                 |                                               | 6,205               |                             |                 | 368,104                   
|CHANGES DURING THE YEAR ENDED DECEMBER 31, 2004:                                    |               |                
|Net income                                                                          |               |                 |                                               |                     |                             |                 |                           
|Other comprehensive income, in respect of:                                          |               |                
|Available-for-sale securities                                                       |               |                 |                                               |                     |                             |                 |                           
|Realization of currency translation adjustments                                     |               |                 |                                               |                     |                             |                 |                           
|                                                                                    |               |                 |                                               |                     |                             |                 |                           
|Total comprehensive income                                                          |               |                 |                                               |                     |                             |                 |                           
|                                                                                    |               |                 |                                               |                     |                             |                 |                           
|Cash distribution                                                                   |               |                 |                                               |                     |                             |                 | (89,837                   
|Deferred stock compensation related to options granted to       employees           |               |                 |                                               |                     |                             |                 | 545                       
|Amortization of deferred stock compensation from options granted       to employees |               |                 |                                               |                     |                             |                 |                           
|Treasury shares                                                                     |               |                 |                                               |                     |                             |                 |                           
|                                                                                    |               |                 |                                               |                     |                             |                 |                           
|BALANCE AT DECEMBER 31, 2004                                                        |               |                 |                                               | 6,205               |                             |                 | 278,812                   
|                                                                                    |               |                 |                                               |                     |                             |                 |                           

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
|--------------------------------------------------------------------- | ----------------------
|
|
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                 |                       
|Net income (loss)                                                     |                       
|Net income from discontinued operation                                |                       
|                                                                      |                       
|Net loss from continuing operations                                   |                       
|Adjustments to reconcile net loss from continuing operations          |                       
|to net cash provided by (used in) operating activities:               |                       
|Income and expenses not involving cash flows:                         |                       
|Minority interests in a subsidiary                                    |                       
|Provision for doubtful accounts                                       |                       
|Share in losses of associated companies , net                         |                       
|Depreciation and amortization                                         |                       
|Impairment of goodwill and other intangible assets                    |                       
|Restructuring charges                                                 |                       
|Loss (gain) on disposal of fixed assets                               |                       
|Gain from sale of interest in a subsidiary                            |                       
|Share in beneficial conversion feature of convertible                 |                       
|preferred shares issued by a subsidiary                               |                       
|Amortization of deferred stock compensation                           |                       
|Settlement in respect of acquired technology                          |                       
|Gain from issuance of shares by an associated company                 |                       
|Long-term prepaid expenses                                            |                       
|Write-off and write-down of investments in                            |                       
|investee companies and available-for-sale securities                  |                       
|Gain from waiver of loan                                              |                       
|Interest on long-term loans                                           |                       
|Revaluation of long-term loan                                         |                       
|Deferred income taxes, net                                            |                       
|Loss (gain) from sale of available-for-sale securities                |                       
|Changes in operating asset and liability items:                       |                       
|Decrease (Increase) in trade and other receivables                    |                       
|Decrease (increase) in inventories                                    |                       
|Decrease in accounts payable and accruals                             |                       
|Other items, net                                                      |                       
|                                                                      |                       
|Net cash used in continuing operations                                |                       
|Net cash provided by (used in) discontinued operation                 |                       
|                                                                      |                       
|Net cash provided by (used in) operating activities                   |                       
|                                                                      |                       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                 |                       
|Acquisition of assets and operations consolidated for the first time* |                       
|Acquisition of available for sale marketable securities               |                       
|Proceeds from sale of marketable securities                           |                       
|Purchase of fixed assets                                              |                       
|Proceeds from sale of fixed assets                                    |                       
|Proceeds from settlement in respect of acquired Technology            |                       
|Proceeds from sale of investment in discontinued operations           |                       
|Proceeds from sale of other investment                                |                       
|Purchase of goodwill and intangible assets                            |                       
|Restricted deposits                                                   |                       
|Investment in associated companies and other investments              |                       
|                                                                      |                       
|Net cash provided by (used in) investing activities                   |                       
|                                                                      |                       

F - 7

---

---



(Concluded  2)

SCITEX CORPORATION LTD.CONSOLIDATED
STATEMENTS OF CASH FLOWS

|                                                                        | Year ended December 31
|----------------------------------------------------------------------- | ----------------------
|
|
|
|
|Subtotal - brought forward                                              |                       
|                                                                        |                       
|                                                                        |                       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                   |                       
|Receipt of long-term loans                                              |                       
|Purchase of treasury shares                                             |                       
|Cash distribution                                                       |                       
|Issuance of Convertible long-term loans and warrants to related parties |                       
|Repayment of long-term loans and other liabilities                      |                       
|Increase (decrease) in short-term bank credit , net                     |                       
|                                                                        |                       
|Net cash provided by (used in) financing activities                     |                       
|                                                                        |                       
|NET INCREASE (DECREASE) IN CASH AND CASH                                |                       
|EQUIVALENTS                                                             |                       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                          |                       
|                                                                        |                       
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                |                       
|                                                                        |                       
|                                                                        |                       
|* 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)                                                   |                       
|Fixed assets, net                                                       |                       
|Goodwill arising from acquisition                                       |                       
|Investment in associated company                                        |                       
|Intangible assets arising from acquisition                              |                       
|Long-term loans and other liabilities                                   |                       
|Minority interests in subsidiary at date of                             |                       
|acquisition                                                             |                       
|                                                                        |                       
|Cash received (paid)                                                    |                       
|                                                                        |                       
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW                                    |                       
|INFORMATION:                                                            |                       
|Interest paid                                                           |                       
|                                                                        |                       
|Income taxes paid                                                       |                       
|                                                                        |                       

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 two segments:
| | ---------------------------------------------------------------------------------------------------------------------------

| | 1) | Wide
Format digital printing  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.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | Continuous
inkjet industrial digital printing  develop, manufacture and           market of
continuous inkjet based digital printers for the industrial printing           ceramic
tiles and textile markets.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition, the Company holds minority interest in other companies that develop digital
printing solution to industrial applications and Internet related imaging products.
Amounts provided in these notes to the consolidated financial statements pertain to
continuing operations  unless otherwise indicated.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | Sale
of the High-Speed Digital Printing segment
| | -- | -----------------------------------------------

| | On
November 25, 2003, the Company entered into an agreement according to which it would 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 (in addition $12
million were retained at SDP following the transaction). 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  wholly owned
subsidiary) account, and the remaining $10 million would be held in escrow for up to two
years and will be used for indemnification liabilities under the agreement. $5 million
out of the above remaining $10 million escrow, amount was released in January 2005 to SDPs
account The remaining $5M is scheduled to be released in the beginning of 2006, in
accordance with the applicable terms associated thereto. These amounts are presented as
restricted deposit (long and short-term, in equal shares) in the companys balance
sheet as of December 31, 2004.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
closing of the transaction took place on January 5, 2004. As a result of the transaction,
the Company recorded a net gain of approximately $60 million, approximately $52 million
which are included in the statement of operations in 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 9

---

---



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

|NOTE 1 |  | GENERAL(continued):
|------ | - | -------------------

| | Operating
results of SDP have been reported in these financial statements as discontinued
operations in accordance with SFAS 144 and the Company has reclassified its results of
operations, and the related assets and liabilities for the prior period in accordance
with provisions of SFAS 144.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|                                                         | December 31
|-------------------------------------------------------- | -----------
|
|
|
|
|A s s e t s                                              |            
|Current assets:                                          |            
|Cash and Short-term investments                          |            
|Trade and other receivables                              |            
|Inventories                                              |            
|Deferred income taxes                                    |            
|                                                         |            
|T o t a l  current assets                                |            
|                                                         |            
|                                                         |            
|Investment and other non-current assets                  |            
|Property, plant and equipment, net of accumulated        |            
|depreciation and amortization                            |            
|Goodwill                                                 |            
|Other intangible assets, net of accumulated amortization |            
|                                                         |            
|T o t a l  non-current assets                            |            
|                                                         |            
|T o t a l  assets                                        |            
|                                                         |            
|Liabilities                                              |            
|Current liabilities                                      |            
|Long-term liabilities:                                   |            
|Deferred income taxes                                    |            
|Other                                                    |            
|                                                         |            
|T o t a l  Long-term liabilities                         |            
|                                                         |            
|T o t a l  liabilities                                   |            
|                                                         |            

F - 10

---

---



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

|NOTE 1 |  | GENERAL(continued):
|------ | - | -------------------

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

|                              | Year ended December 31
|----------------------------- | ----------------------
|
|
|
|
|Revenues                      |                       
|Cost of revenues              |                       
|                              |                       
|Gross profit                  |                       
|Other operation expenses      |                       
|                              |                       
|Operating income              |                       
|Financial income , net        |                       
|Other expenses , net          |                       
|                              |                       
|Income before taxes on income |                       
|Taxes on income               |                       
|                              |                       
|Net income for the year       |                       
|                              |                       
|                              |                       

| | In
2004 the company recognized a gain of $51,646,000 on the said sale of SDP, see paragraph
b above.
| | ----------------------------------------------------------------------------------------------------

|NOTE 2 |  | SIGNIFICANT ACCOUNTING POLICIES:
|------ | - | --------------------------------

| | a. | General:
| | -- | --------

| | 1) | Risk
factors and concentration
| | -- | ------------------------------

| | The
Company and its subsidiaries are subject to various risks, including but not limited to:
(i) business and industry risks like product and technology development; market
acceptance of new products and continuing demand for its products; the impact of
competitive products and pricing; diversification of the business; intellectual property
protection; environmental related liabilities, changes in domestic and foreign economic
and market conditions; and timely development and release of new products by strategic
suppliers; (ii) financial risks such as currency fluctuations, credit risks, obtaining
future financing for affiliated companies, and decreases in the value of our financial
investments; and (iii) risks related to operations in Israel like political, economic and
military instability in Israel or the Middle East; and terms and conditions of tax
benefits and governmental grants. See also note 13 for financial instruments and other
risks.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 11

---

---



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

|NOTE 2 |  | SIGNIFICANT ACCOUNTING POLICIES:
|------ | - | --------------------------------

| | 2) | Functional
currency
| | -- | -------------------

| | The
U.S. dollar is the functional currency for the Company and its subsidiaries. The majority
of the sales of the Company are made in US dollars. Since the U.S. dollar is the primary
currency in the economic environment in which the foreign subsidiaries operate, monetary
accounts maintained in currencies other than the U.S. dollar (principally cash and
liabilities) are remeasured using the representative foreign exchange rate at the balance
sheet date. Operational accounts and non monetary balance sheet accounts are measured and
recorded at the rate in effect at the date of the transaction. The effects of foreign
currency remeasurement are reported in current operations and have not been material to
date.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
financial statements of a former subsidiary  classified as discontinued operation
 whose functional currency is its local currency, were translated into US dollars
in accordance with the principles set forth in Statement of Financial Accounting
Standards (FAS) No. 52 Foreign Currency Translation. The
resulting aggregate translation adjustments were presented in shareholders equity,
under accumulated other comprehensive income (loss)".
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3) | Use
of estimates in the preparation of financial statements
| | -- | -----------------------------------------------------------

| | 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 dates of the financial statements and the reported amounts of revenues and expenses
during the reporting years. Actual results could differ from those estimates.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4) | Accounting
principles
| | -- | ---------------------

| | The
consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 - 12

---

---



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

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

| | c. | 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
| | -- | ------------------------------------

| | The
company classifies its existing marketable equity and debt securities, in accordance with
the provisions of FAS 115 as available-for-sale. Investments in debt securities
classified as available-for-sale are reported at fair value with unrealized gains and
losses, net of related tax, recorded as a separate component of comprehensive income in
shareholders ́ equity until realized. Interest and amortization of premiums and
discounts for debt securities and gains and losses on securities sold are included in
financial income. For all investment securities, unrealized losses that are other than
temporary are recognized in net income. The company does not hold these securities for
speculative or trading purposes..
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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:     Raw materials on
the moving average basis.     Labor and overhead component  standard manufacturing
costs.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Inventory
valuation provision is based on specific analysis of inventory items, their aging,
obsolescence, and estimated future demand.
| | ---------------------------------------------------------------------------------------------------------------------------------------

| | 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 - 13

---

---



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

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

| | h. | Property,
plant and equipment
| | -- | -----------------------------

| | Property,
plant and equipment are carried at cost and are depreciated by the straight-line method
over their estimated useful life. Annual rates of depreciation are as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | %        
|------------------------------ | ---------
|
|
|
|
|Machinery and equipment        | Mainly 20
|Building                       | 2.5      
|Office furniture and equipment | Mainly 6 
|Computers                      | 33       
|                               |          

| | 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
| | -- | --------

| | According
to the provision of FAS No. 142 Goodwill and Other Intangible Assets,
goodwill is no longer being amortized but tested for impairment at least annually.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has completed its annual goodwill impairment test during the forth quarter of
2004. No impairment of goodwill resulted from the annual review performed in 2004, 2003
and 2002.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 impairment in value, see also note 8.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | k. | Impairment
of long-lived assets
| | -- | -------------------------------

| | FAS
144 Accounting for the Impairment or Disposal of Long-Lived Assets (FAS
144), requires that long-lived assets including certain intangible 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. As to impairment of intangible assets, see note 8.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 15

---

---



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

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

| | l. | Deferred
income taxes
| | -- | ---------------------

| | Deferred
taxes are determined utilizing the asset and liability method based on the estimated
future tax effects of differences between the financial accounting and tax bases of
assets and liabilities under the applicable tax laws. Deferred income tax provisions and
benefits are based on the changes in the deferred tax asset or tax liability from period
to period. Valuation allowances are provided for deferred tax assets when it is more
likely than not that all or a portion of the deferred tax assets will not be realized.
The Company may incur an additional tax liability in the event of an intercompany
dividend distribution by non-Israeli subsidiaries. No additional tax liability has been
provided, since the Company does not intend to distribute, in the foreseeable future,
dividends which would result in an additional tax liability.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Taxes
that would apply in the event of disposal of investments in non-Israeli subsidiaries have
not been taken into account in computing the deferred taxes, as it is the current Companys
intention to hold these investments and not to realize them.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
stated in note 12a(1)(a), upon distribution of dividends from tax-exempt income of approved
enterprises, the amount distributed will be subject to tax at the rate that would
have been applicable had the Company not been exempted from payment thereof. The amount
of the related tax is charged as an expense in the income statements. The Company intends
to permanently reinvest the amounts of tax-exempt income and does not intend to cause
dividend distribution from such income. Therefore, no deferred taxes have been provided
in respect of such tax-exempt income.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | m. | Comprehensive
income (loss)
| | -- | ---------------------------

| | In
addition to net income (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 a subsidiary and gains and losses on certain
derivative instruments designated for cash-flow hedge and unrealized losses on marketable
securities which are classified as available-for-sale under FAS 115.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | n. | Treasury
shares
| | -- | ---------------

| | Companys
shares held by the Company, are presented as a reduction of shareholders equity, at
their cost to the Company.
| | -------------------------------------------------------------------------------------------------------------------------

F - 15

---

---



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

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

| | o. | Revenue
recognition
| | -- | -------------------

| | Revenues
from sales of products and supplies are recognized when an arrangement exists, delivery
has occurred and title passed to the customer, the Companys price to the customer
is fixed or determinable and collectability is reasonably assured. With respect to
products with installation requirements, revenue is recognized when all of the above
criteria are met and installation is completed. When sales transactions include more then
one deliverable (unit of accounting) sold, the Company separates the different units of
accounting of sales with multiple deliverables (generally consists of machine and ink)
based on the objective and reliable evidence of fair value of the different elements,
which is estimated based on stand alone sale prices of the different elements and other
reliable evidence that is readily obtainable in the market from competitors, distributors
and others, in accordance with Emerging Issues Task Force (EITF) Issue 00-21,
Revenue Arrangements with Multiple Deliverables.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 when all
criteria above are met, sales of finished products to distributors are recognized as
revenue upon delivery and after title and risk pass to the distributors.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company does not grant any rights of return or cancellation to any of its clients.
Service revenue is recognized ratably over the contractual period or as services are
performed. Warranty costs are provided for at the same time as the revenues are
recognized. The annual provision for warranty costs is calculated based on expected cost
of inputs, based on historical experience.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | p. | Shipping
and handling fees and costs
| | -- | ------------------------------------

| | Amounts
billed to customers for shipping and handling costs are included in revenues in the
statements of operations. Shipping and handling costs are classified as a component of
cost of revenues.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | q. | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 16

---

---



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

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

| | r. | Advertising
costs
| | -- | -----------------

| | These
costs are charged to income as incurred.
| | ----------------------------------------------

| | s. | Allowance
for doubtful accounts
| | -- | -------------------------------

| | The
allowance for doubtful accounts is determined specifically for debts doubtful of
collection.
| | ------------------------------------------------------------------------------------------------

| | 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Proforma
information regarding net income (loss), required under FAS 123, has been determined as
if the Company and its subsidiaries had accounted for its stock options under the fair
value method of FAS 123. The fair value for their stock options was estimated at the date
of each option grant using the Black-Scholes option pricing model with the following
assumptions: in 2004 for the Company: risk-free interest rate of 3.1%; dividend yields of
zero; expected life of the options of approximately 3 years; and expected volatility of
52%. For a subsidiary for 2004 and 2003: risk-free interest rate of 3.23% to 2.3% and
2.2% respectively; dividend yields of zero in 2004 and 2003; expected life of the options
of approximately 3 years in 2004 and 2003; and expected volatility of 50% to 57% and 48%,
respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 17

---

---



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

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

| | 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 its stock-based employee compensation:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                          | Year ended December 31
|--------------------------------------------------------- | ----------------------
|
|
|
|
|Net loss from continuing operations - as reported         |                       
|Add: stock based employee compensation expenses,          |                       
|included in reported net loss from continuing             |                       
|Operations (net of minority interest)                     |                       
|Deduct: stock based employee compensation                 |                       
|expenses determined under fair value method               |                       
|(net of minority interest)                                |                       
|                                                          |                       
|Pro-forma net loss from continuing operations             |                       
|                                                          |                       
|Net income from discontinued operations - as reported     |                       
|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               |                       
|(net of minority interest)                                |                       
|                                                          |                       
|Pro-forma net income from discontinued operations         |                       
|                                                          |                       
|Pro-forma net income (loss)                               |                       
|                                                          |                       
|Basic and diluted earning (loss) per share - as reported: |                       
|Continuing operations                                     |                       
|Discontinued operations                                   |                       
|                                                          |                       
|Net income (loss)                                         |                       
|                                                          |                       
|Pro-forma earning (loss) per share :                      |                       
|Continuing operations                                     |                       
|Discontinued operations                                   |                       
|                                                          |                       
|Net income (loss)                                         |                       
|                                                          |                       

F - 18

---

---



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

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

| | u. | Earning
(loss) per share (EPS)
| | -- | --------------------------------

| | Basic
EPS are computed based on the weighted average number of shares outstanding during each
year excluding the treasury shares 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 2004, 2003 and 2002
such effect was not included since it would have been anti-dilutive). In addition,
diluted EPS does not reflect options and warrants granted by subsidiaries to be exercised
to the subsidiaries shares and convertible loans, since their effect would have been
immaterial or anti-dilutive. Options exercisable to the Companys ordinary shares
not included in the EPS calculation since their effect is anti-dilutive include options
granted to employees only, see note 11.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | v. | Derivatives
and hedging activities
| | -- | ----------------------------------

| | FAS
133 Accounting for derivative instruments and hedging activities as amended,
establishes accounting and reporting standards for derivatives and for hedging
activities. Under FAS 133, all derivatives are recognized on balance sheet date at their
fair value. On the date that the Company enters into a derivative contract, it designates
the derivative, for accounting purposes, as: (1) an hedging instrument, or (2) a
non-hedging instrument. Changes in the fair value of derivatives that do not qualify for
hedge accounting are recognized in earnings. For the years ended December 31, 2004 and
2003, all derivatives used by the Company did not qualify for hedge accounting and gains
and losses thereon are recorded in financial expenses, net on the Companys
statements of operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | w. | Reclassifications
| | -- | -----------------

| | Certain
comparative figures have been reclassified to conform to the current year presentation.
| | -----------------------------------------------------------------------------------------------

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

| | FAS 123 (Revised
2004) Share-based Payment
In
December 2004, the Financial Accounting Standards Board (FASB) issued the
revised Statement of Financial Accounting Standards (FAS) No. 123, Share-Based
Payment (FAS 123R), which addresses the accounting for share-based
payment transactions in which the Company obtains employee services in exchange for (a)
equity instruments of the Company or (b) liabilities that are based on the fair value of
the Companys equity instruments or that may be settled by the issuance of such
equity instruments. This statement eliminates the ability to account for employee
share-based payment transactions using APB Opinion No. 25 and requires instead that such
transactions be accounted for using the grant-date fair value based method. This
statement will be effective as of the beginning of the first annual reporting period that
begins after June 15, 2005 for the company and its subsidiaries. Early adoption of
FAS 123R is encouraged. This Statement applies to all awards granted or modified after
the statements effective date. In addition, compensation cost for the unvested
portion of previously granted awards that remain outstanding on the statements
effective date shall be recognized on or after the effective date, as the related
services are rendered, based on the awards grant-date fair value as previously
calculated for the pro-forma disclosure under FAS 123.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 19

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---



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

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

| | The
Company estimates that the cumulative effect of adopting FAS 123R as of its adoption date
by the Company and its subsidiaries (July 1, 2005), based on the awards outstanding as of
December 31, 2004, will be immaterial. This estimate does not include the impact of
additional awards, which may be granted, or forfeitures, which may occur subsequent to
December 31, 2004 and prior to the adoption of FAS 123R. The Company expects that
upon the adoption of FAS 123R, the Company will apply the modified prospective
application transition method, as permitted by the statement. Under such transition
method, upon the adoption of FAS 123R, the Companys financial statements for
periods prior to the effective date of the statement will not be restated. The impact of
this statement on the Companys financial statements or its results of operations in
2005 and beyond will depend upon various factors, among them the Companys future
compensation strategy. Currently, The Company expects the effect of the Statement the
Companys financial statements and its results of operations in future periods to be
approximately $100,000 additional expenses per quarter (based on the options as existed
at December 31, 2004).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | FAS 151 Inventory
Costs  an amendment of ARB 43, Chapter 4
In
November 2004, the FASB issued FAS No. 151, Inventory Costs  an Amendment of
ARB 43, Chapter 4 (FAS 151). This statement amends the guidance in ARB
No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material. This
statement requires that those items be recognized as current-period charges. In addition,
this Statement requires that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. This statement
will be effective for inventory costs incurred during fiscal years beginning after June
15, 2005 (January 1, 2006 for the Company). Earlier application of FAS 151 is permitted.
The provisions of this statement shall be applied prospectively. The Company does not
expect this statement to have a material effect on the Companys financial
statements or its results of operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | FAS
153 Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29In December
2004, the FASB issued FAS No. 153, Exchanges of Non-Monetary Assets An
Amendment of APB Opinion No. 29 (FAS 153).  FAS 153 amends APB
Opinion No. 29, Accounting for Non-Monetary Transactions (Opinion 29).
The amendments made by FAS 153 are based on the principle that exchanges of non-monetary
assets should be measured based on the fair value of the assets exchanged. Further, the
amendments eliminate the exception for non-monetary exchanges of similar productive
assets and replace it with a general exception for exchanges of non-monetary assets that
do not have commercial substance. The provisions in FAS 153 are effective for
non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005
(July 1, 2005 for the Company).  Early application of the FAS 153 is permitted. The
provisions of this Statement shall be applied prospectively. The Company does not
expect the adoption of FAS 153 to have a material effect on the Companys financial
statements or its results of operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 20

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---



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

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

| | EITF Issue 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application toCertain Investments
In
March 2004, the FASB issued EITF Issue No. 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments which
provides new guidance for assessing impairment losses on debt and equity investments.
Additionally, EITF Issue No. 03-1 includes new disclosure requirements for
investments that are deemed to be temporarily impaired. In September 2004, the FASB
delayed the accounting provisions of EITF Issue No. 03-1; however, the disclosure
requirements remain effective and have been adopted by the Company in these financial
statements. The Company will evaluate the effect, if any, of EITF Issue No. 03-1
when final guidance is released.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | EITF
Issue 02-14, Whether an Investor Should Apply the Equity Method of Accounting to Investments Other
Than Common Stock
In
July 2004, the FASB issued EITF Issue No. 02-14, Whether an Investor
Should Apply the Equity Method of Accounting to Investments Other Than Common Stock.EITF
Issue No. 02-14 addresses whether the equity method of accounting applies when an
investor does not have an investment in voting common stock of an investee but exercises
significant influence through other means. EITF Issue No. 02-14 states that an
investor should only apply the equity method of accounting when it has investments in
either common stock or in-substance common stock of the investee, provided that the
investor has the ability to exercise significant influence over the operating and
financial policies of the investee. The provisions in EITF Issue No. 02-14 are
effective for reporting periods beginning after September 15, 2004 (October 1, 2004 for
the Company). The adoption of EITF 02-14 by the Company did not have any effect on the
Companys financial statements or its results of operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NOTE 3 |  | ACQUISITIONS OF BUSINESSES:
|------ | - | ---------------------------

| | a. | Scitex
Vision International Ltd.
| | -- | --------------------------------

| | 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 Ltd. (then known as Aprion Digital Ltd.), the
Companys then affiliated 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 income
(loss), 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 - 21

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---



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 (as to impairment of
such technology, see note 8)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Commencing
on January 2003 Scitex Visions financial statements are consolidated with those of
the Company.
| | -----------------------------------------------------------------------------------------------------------

| | As
to lawsuits filed in connection with this transaction see note 10b(1).
| | -------------------------------------------------------------------------

| | b. | Siantec
SARL
| | -- | ------------

| | In
April 2002, SV International acquired some of the assets and operations from Siantec SARL
(Siantec) and its shareholders for a consideration of $2,470,000 (including
transaction expenses), of which $1,860,000 was allocated to technology and $610,000 to a
non-compete covenant. The amount allocated to technology was written down during 2003. In
February 2004, as part of settlement of alleged breaches of representations and
warranties made by Siantec in the asset purchase agreement, Siantec agreed to pay SV
International $1 million out of an escrow account and to waive its rights to existing
contingent payments of up to $10 million. The payment was allocated: $610,000 as a
reversal of the non-compete covenant intangible asset and $390,000 as deduction of
impairment of intangible assets in 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c. | Techno
Ink Manufacturing (PTY) Ltd.
| | -- | -----------------------------------

| | In
March 2001, SV International acquired the ink technology, other assets and operations
from the Techno Ink Manufacturing (PTY) Ltd. (Techno Ink), for an aggregate
consideration of $2,860,000. The technology is amortized over 6 years. The agreement
provides for additional payments to Techno Ink of up to a maximum of approximately
$5,500,000, based on the achievement of specified financial targets, during the period
from 2001 to 2006 (Earn-Out). As of December 31, 2004, an additional amount
of $3,937,000 has been paid for the Earn-Out and recorded as goodwill ($1,497,000 and
$1,258,000 in the years ended December 31, 2004 and 2003, respectively).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 22

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---



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

|NOTE 4 |  | INVESTMENTS IN ASSOCIATED COMPANIES (including associated Company consolidated for
the first time in 2004):
|------ | - | -----------------------------------------------------------------------------------------------------------

| | a. | Jemtex
ink jet printing Ltd.
| | -- | ----------------------------

| | In
December 2002, the Company signed a share purchase agreement with Jemtex ink jet printing
Ltd (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 invested in Jemtex an amount of $799,917 by way of convertible
loan, bearing interest at the rate of LIBOR+0.75%. The loan 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 shares, at a price a price per share of
$2.51467, and subject to certain adjustments. According to the investment agreement and
upon is execution, the second warrant to purchase 3,181 preferred shares of Jemtex was
cancelled.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the beginning of 2004, the Company concluded a $1.5 million investment in Jemtex in
consideration for convertible loans, out of which $0.45 million were provided to Jemtex
in late 2003 and $1.05 million were provided to Jemtex in early 2004. In addition, during
2004, the Company invested an additional amount of $1.9 million by way of convertible
loans. Convertible loans and accrued interest thereon may be converted by Scitex into
preferred shares of Jemtex at any time during a 5-year period at an exercise price
reflecting the estimated fair value of the Companys shares at the date of grant of
the loans. The loans bear interest equivalent to of approximately LIBOR plus 0.75%-1%. In
the beginning of 2005, the Company invested an additional amount of $0.35 million,
substantially under the same terms and conditions of previous convertible loans.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of December 31, 2004, the Company effectively holds approximately 84% of Jemtexs
issued share capital on an as-converted basis. Jemtex has a capital deficit
and as the Company is currently the sole financier of Jemtex, it has taken full share
(100%) in Jemtex losses commencing on the third quarter of 2003 and onward.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Since
January 2004, Jemtex financial statements are consolidated with those of the Company,
since the Company effectively has the right to appoint 4 out of 6 directors and holds
majority of the shareholders voting rights.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Share
in losses of associated companies in 2004 includes $294,000 share in losses of Jemtex
prior to its consolidation.
| | -----------------------------------------------------------------------------------------------------------------------

F - 23

---

---



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

|NOTE 4 |  | INVESTMENTS IN ASSOCIATED COMPANIES (including associated Company consolidated for
the first time in 2004)(continued):
|------ | - | ----------------------------------------------------------------------------------------------------------------------

| | b. | Objet
Geometries Ltd.
| | -- | ---------------------

| | The
investment in Objet Geometries Ltd. (Objet) is accounted for under the equity
method. The balance of this investment as of December 31, 2004 is approximately $124,000,
following an additional investment of approximately $ 344,000 made in 2004 as part of a
financing round. As a result of the financing round in 2004 the company interest in Objet
was diluted to 22.9%.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Summarized
data from Objets financial statements for the years ended December 31, 2004 and
2003, is as follows:
| | ----------------------------------------------------------------------------------------------------------------

|                        | December 31,
|----------------------- | ------------
|
|
|
|
|Current assets          |             
|                        |             
|Non-current assets      |             
|                        |             
|Current liabilities     |             
|                        |             
|Non-current liabilities |             
|                        |             

|                        | Year ended December 31,
|----------------------- | -----------------------
|
|
|
|
|
|Revenues                |                        
|                        |                        
|Gross profit            |                        
|                        |                        
|Operating income (loss) |                        
|                        |                        
|Net income (loss)       |                        
|                        |                        
|                        |                        

| | Subsequent
to December 31, 2004 the Company sold all of its holdings in Objet, see also
note 16d.
| | -------------------------------------------------------------------------------------------------

|NOTE 5 |  | OTHER INVESTMENTS AND PREPAID EXPENSES:
|------ | - | ---------------------------------------

| | 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. The carrying amounts of these investments as of
December 31, 2004 and 2003 are $1,414,000 and $1,301,000, respectively. The company
evaluated these carrying values for impairment as of those dates. In 2004, there was no
impairment in value. In 2003, due to an extended decline in fair value of other than
temporary nature, the Company recorded an accumulated loss in the amount of $2,493,000
that was charged to other income (loss), net in the statement of operations.
In addition, other investments include as of December 31, 2004, $324,000 of
long-term prepaid expenses.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 24

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---



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
|------------------------------- | -----------
|
|
|
|
|Machinery and equipment         |            
|Building                        |            
|Leasehold improvements          |            
|Office furniture and equipment  |            
|Motor vehicles                  |            
|                                |            
|                                |            
|Less - accumulated depreciation |            
|and amortization                |            
|                                |            
|                                |            
|                                |            
|                                |            

| | Depreciation
and amortization of property, plant and equipment from continuing operations totaled
$2,927,000, $3,558,000 and $2,250,000 in 2004, 2003 and 2002, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NOTE 7 |  | GOODWILL
|------ | - | --------

| | The
changes in the carrying amount of goodwill in respect of the continuing operations for
the years ended December 31, 2003 and 2004, are as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------

|                                | U.S. dollars
in thousands
|------------------------------- | -------------------------
|
|
|
|
|Balance as of January 1, 2003   |                          
|Goodwill acquired               |                          
|                                |                          
|Balance as of December 31, 2003 |                          
|Goodwill acquired, see note 3c  |                          
|                                |                          
|Balance as of December 31, 2004 |                          
|                                |                          

F - 25

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---



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

|NOTE 8 |  | OTHER INTANGIBLE ASSETS:
|------ | - | ------------------------

| | Grouped
by major classifications, the acquired technology and other intangible assets are
composed as follows:
| | --------------------------------------------------------------------------------------------------------------

|                                       | December 31
|-------------------------------------- | -----------
|
|
|
|
|Gross carrying amount:                 |            
|Acquired technology                    |            
|Other intangible assets                |            
|                                       |            
|                                       |            
|                                       |            
|L e s s - accumulated amortization and |            
|impairment charges:                    |            
|Acquired technology                    |            
|Other intangible assets                |            
|                                       |            
|                                       |            
|                                       |            
|                                       |            
|                                       |            

| | Amortization
expenses totaled $6,137,000, $5,871,000, and $2,944,000 in 2004, 2003 and 2002,
respectively.
| | ----------------------------------------------------------------------------------------------------------

| | As
to the main additions to intangible assets, see notes 3 and 4.
| | -----------------------------------------------------------------

| | Estimated
amortization expense for the following years, subsequent to December 31, 2004:
| | ----------------------------------------------------------------------------------------

|                         | U.S. dollars
in thousands
|------------------------ | -------------------------
|
|
|
|
|Year ending December 31: |                          
|2005                     |                          
|2006                     |                          
|2007                     |                          
|2008                     |                          
|2009                     |                          
|2010                     |                          
|                         |                          
|                         |                          
|                         |                          

| | In
2004 and 2003 the financial statements include an impairment charge with respect to
technology and know-how in a subsidiary, in the amounts of $5,625,000 and $2,967,000,
respectively. These impairments followed an evaluation performed by a third party
appraiser, based on discounted cash flow, triggered by the significant decrease in the
production of certain products based on the above-mentioned technologies. The impairment
calculation in 2004 and 2003 was prepared in accordance with the provisions of FAS 144.
Out of the amount of impairment in 2004, $2.6 million was recorded against the minority
interests in a subsidiary since this amount is the amortized technology held by
minority shareholders of Scitex Vision, see note 3a.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 26

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---



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

|NOTE 9 |  | EMPLOYEE RIGHTS UPON RETIREMENT:
|------ | - | --------------------------------

| | a. | Israeli
labor laws and agreements require the payment of severance pay upon
               dismissal of an employee or upon termination of employment in certain
other                circumstances. The liability is based upon the length of service and
the latest                monthly salary (one months salary for each year worked),
and is mainly                funded with severance pay and pension funds and with
insurance companies                (principally with an affiliate of the two major
shareholders of the Company),                for which the Company and its Israeli
subsidiaries make monthly payments.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company records the long-term obligation as if it was payable at each balance sheet date
on an undiscounted basis.
| | ----------------------------------------------------------------------------------------------------------------------

| | b. | The
U.S. subsidiaries offer 401(k) matching plans to all eligible employees.
| | -- | ----------------------------------------------------------------------------

| | c. | Substantially
all of the European subsidiaries make contributions to pension                plans
administered by insurance companies.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------

| | d. | Severance
pay and defined contribution plan expenses totaled $760,000,                $1,523,000
and $563,000 in 2004, 2003 and 2002, respectively.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | e. | The
Company expects to pay the following future benefits to its Israeli
               employees upon their retirement at normal retirement age:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------

|                         | U.S. dollars
in thousands
|------------------------ | -------------------------
|
|
|
|
|Year ending December 31: |                          
|2005                     |                          
|2006                     |                          
|2007                     |                          
|2010                     |                          
|2013                     |                          

| | The
above amounts were determined based on recent salary rates and do not include amounts
that might be paid to employees that will cease working with the company, before their
normal retirement age or amounts to be paid to employees that their normal retirement age
extends beyond the year 2014.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 27

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---



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

|NOTE 10 |  | COMMITMENTS AND CONTINGENT LIABILITIES:
|------- | - | ---------------------------------------

| | a. | Commitments:
| | -- | ------------

| | 1) | The
Company and its subsidiaries is committed to pay royalties of 3%-5% to the
          Government of Israel on sales of products in the research and development of
          which the Government participates by way of grants, up to the amount of the
          grants received (dollar linked), plus annual interest based on the Libor,
          accruing from January 1, 1999. At the time the funding was received, successful
          development of the related projects was not assured. In the case of failure of
a           project that was partly financed by royalty-bearing grants, the Company is
not           obligated to pay any such royalties to the Israeli Government.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
December 31, 2004, the maximum contingent royalty payable is approximately $3.8 million.
Royalty expenses totaled $245,000, $128,000 and $167,000 in 2004, 2003 and 2002,
respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | The
Company is obligated to pay royalties to certain parties, based on           agreements
that allow it to use technologies developed by these parties. Such           royalties
are based on the revenues from sales of products, which incorporate           these
technologies or on quantities of such products sold. Royalty expenses           totaled
$1,316,000, $984,000 and $0 in 2004, 2003 and 2002, respectively.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3) | Operating
leases
| | -- | ----------------

| | Most
of the premises occupied by the Company and its subsidiaries are rented under various
operating lease agreements. Part of the premises in Israel were leased from an affiliate
of the two major shareholders of the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Minimum
lease payments of the Company and its subsidiaries under the above leases, at rates in
effect on December 31, 2004, are as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------

|                         | U.S. dollars
in thousands
|------------------------ | -------------------------
|
|
|
|
|Year ending December 31: |                          
|2005                     |                          
|2006                     |                          
|2007                     |                          
|2008                     |                          
|2009                     |                          
|2010 and thereafter      |                          

| | 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 $2,425,000, $2,449,000 and
$1,158,000 in 2004, 2003 and 2002, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 28

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---



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

|NOTE 10 |  | COMMITMENTS AND CONTINGENT LIABILITIES(continued):
|------- | - | --------------------------------------------------

| | 4) | Commencing
November 1, 2001 and until January 2004, the Companys           headquarters
are located on the premises of one of its major shareholders. The           Company
obtained the services of certain executives and other staff as well as           certain
services from the major shareholder, for which the Company pays amounts           based
on formulas determined in the agreement between the Company and the
          shareholder. During the first two quarters of 2004, the Companys
          headquarters are located on the premises of other major shareholder. The
Company           obtains the services of an executive as well as certain ancillary
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 agreements totaled $227,000, $518,000 and $445,000 in
2004, 2003 and 2002,           respectively. Beginning of the third quarter of 2004 the
Company has a lease           agreement with an unrelated third party.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | Contingent
liabilities:
| | -- | -----------------------

| | 1) | In
October 2003, a NIS 14 million (approximately $3.2 million) lawsuit was           filed
by a minority shareholder of a subsidiarys shareholders, against the
          Company, a subsidiary and others, mainly other shareholders of the subsidiary
          (among them, the Companys two largest shareholders, Clal and Discount)
and           the directors of the subsidiary 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 the
subsidiary           and the subsidiary International and the manner in which it was
effected           prejudiced the rights of the minority shareholder as a minority
shareholder of           the subsidiary.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2003, the minority shareholder also sent a demand letter to the subsidiary, as a
preliminary step for a derivative action, whereby the minority shareholder demanded that
the subsidiary initiate a lawsuit against the Company, a company wholly-owned by the
Subsidiary (Subsidiary International) and the subsidiary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 Subsidiary International as part of the aforesaid transaction.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2003, a separate motion was filed by the minority shareholder against the
Company, the subsidiary, and the two shareholders mentioned above, in connection with the
subsidiarys rights offering that was concluded in July 2003. In particular, the
motion alleges that the reorganization of the subsidiarys share capital that was
effected in conjunction with the rights offering was invalid and prejudiced the rights of
the minority shareholder. In light of its allegations, the minority shareholder requested
that the court order the defendants to provide information and documents with respect to
this matter.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 29

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---



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

|NOTE 10 |  | COMMITMENTS AND CONTINGENT LIABILITIES(continued):
|------- | - | --------------------------------------------------

| | In
May 2004, the minority shareholder filed another lawsuit against the Company, the
subsidiary, and the two shareholders mentioned above in connection with the subsidiarys
rights offering that was concluded in May 2004. The lawsuit generally alleges that the
terms of the transaction and the manner in which it was effected prejudiced the rights of
the minority shareholder as a minority shareholder of the subsidiary. The minority
shareholder requested the court to order that the resolutions of the subsidiarys
audit committee, board of directors and general meeting of shareholders authorizing the
transaction be annulled, and that the transaction is void.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
parties to the legal proceedings described above agreed to try to settle all of the
disputes between them by mediation and the mediation proceedings are in advance stages.
Therefore, all court proceedings were postponed. No provision was recorded for this
matter in these financial statements. (See Note 16b  subsequent Events  for
further update in this matter).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | In
January 2003 SV International has received a letter from the legal advisors           of
a service provider claiming compensation in the amount of approximately
          4,000,000 New Israeli Shekel (NIS) (approximately $928,000) arising
          from SV Internationals decision to cease using the service providers
          services. The letter of demand alleges that SV International has a contractual
          relationship with this service provider. The Company is unable to assess the
          outcome of this matter, and SV International intends to mount a vigorous
          defense. No provision was recorded in respect of this matter in these 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.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 30

---

---



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

|NOTE 10 |  | COMMITMENTS AND CONTINGENT LIABILITIES(continued):
|------- | - | --------------------------------------------------

| | 4) | In
December 2003, three minority shareholders of Objet, a company in which
          the Company has a 22.91% interest, filed an approximate 7.8 million New
          Israeli Shekels (NIS)  (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. Objet has asked for a dismissal of the case relating to one of the
          parties suing. 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. (See Note 16d  subsequent Events  for further update in
          this matter).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5) | 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.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6) | As
to tax assessments of two of the Companys subsidiaries, see note 12h.
| | -- | -------------------------------------------------------------------------

|NOTE 11 |  | SHAREHOLDERS EQUITY:
|------- | - | ---------------------

| | a. | Share
capital:
| | -- | --------------

| | 1) | The
Companys shares are traded on NASDAQ, under the symbol SCIX, and on           The
Tel Aviv Stock Exchange (TASE).
| | -- | ------------------------------------------------------------------------------------------------------------------------

| | On
December 31, 2004, the Companys share closed on NASDAQ and TASE at $5.21 and
approximately $5.14, respectively.
| | -------------------------------------------------------------------------------------------------------------------

| | 2) | The
number of shares stated as issued and outstanding  43,467,388 shares           at
December 31, 2004 and 2003  includes, at December 31, 2004           and
December 31, 2003, 5,401,025 shares and 448,975 shares, respectively,
          repurchased by the Company and held by the Company or by a trustee. These
shares           bear no voting rights or rights to cash dividends.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 31

---

---



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

|NOTE 11 |  | SHAREHOLDERSEQUITY(continued):
|------- | - | -------------------------------

| | b. | Cash
distribution and treasury stock
| | -- | ------------------------------------

| | In
2004, approximately $118 million were transferred by the Company to its shareholders
through a repurchase of shares from the shareholders and a cash distribution:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 1) | In
June 2004, the Company completed a self tender offer and purchased 4,952,050
          shares for an aggregate amount of approximately $28.1 million that represent
          $5.67 per share.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | In
July 2004, the Company distributed in cash $2.36 per ordinary share, or
          approximately $89.8 million in the aggregate, to its shareholders.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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)).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d. | Share
incentive and stock option plans
| | -- | --------------------------------------

| | 2001
and 2003 Plans
| | -------------------

| | In
December 2001, the Companys shareholders approved the adoption of the Scitex 2001
Stock Option Plan (2001 Plan), designed primarily for employees and directors
of the Company and its subsidiaries. In December 2003, the Companys shareholders
approved the adoption of the Scitex 2003 Share Option Plan (2003 Plan),
designed for employees, directors and consultants of the Company who are Israeli
residents, and also approved an increase in the aggregate number of shares reserved for
issuance under the 2001 Plan from an initial 750,000 shares to 1,900,000 shares, with all
such reserved shares being available for issuance under either the 2001 Plan or the 2003
Plan. Option awards may be granted under the 2001 Plan until November 5, 2011 and
under the 2003 Plan until November 23, 2013. 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 maximum term of an option may not exceed ten years. Each
option can be exercised to purchase one share having the same rights as other ordinary
shares of the Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
2003 Plan is designed to be governed by the terms stipulated by Section 102 of the
Israeli Income Tax Ordinance. Inter alia, these terms provide that the Company will be
allowed to claim, as an expense for tax purposes, the amounts credited to the employees
as a benefit in respect of shares or options granted under the plan. The amount allowed
as an expense for tax purposes, at the time the employee utilizes such benefit, is
limited to the amount of the benefit that is liable to tax as labor income, in the hands
of the employee; all being subject to the restrictions specified in Section 102 of the
Income Tax Ordinance.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the years ended December 31, 2003 and 2002, no options had been granted under either the
2001 plan or 2003 plan.
| | -------------------------------------------------------------------------------------------------------------------

F - 32

---

---



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

|NOTE 11 |  | SHAREHOLDERSEQUITY(continued):
|------- | - | -------------------------------

| | On
September 20, 2004, the board of directors resolved to grant two senior employees of the
Company options under the 2003 Plan to purchase an aggregate of 168,000 shares of the
Company at an exercised price of $3.70 per share. The fair value of one share at the day
of grant was $4.11. The options vest ratably over three years and are exercisable for ten
years until September 20, 2014. Any options not exercised by then will expire. In
the year 2004, the Company recorded $69,000 of deferred stock compensation for the excess
of the fair value of shares over the exercise price at the date of grant related to these
options. The deferred stock compensation is amortized over the vesting period using the
straight-line method. The compensation costs of $7,000 have been classified under general
and administrative expenses in 2004.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|                                  | December 31
|--------------------------------- | -----------
|
|
|
|
|At balance sheet date             |            
|During the first year thereafter  |            
|During the second year thereafter |            
|                                  |            
|                                  |            
|                                  |            
|                                  |            

| | A
summary of the status of the Companys plans at December 31, 2004, 2003 and
2002, and changes during the years ended on those dates, is presented below:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    | Year ended December 31
|----------------------------------- | ----------------------
|
|
|
|
|Options outstanding at              |                       
|beginning of year                   |                       
|Changes during the year:            |                       
|Granted                             |                       
|Forfeited and canceled              |                       
|                                    |                       
|Options outstanding at end of year  |                       
|                                    |                       
|Options exercisable at end of year  |                       
|                                    |                       
|Options available for future awards |                       
|                                    |                       

| | The
weighted average fair value of options granted during 2004 is $1.69.
| | ------------------------------------------------------------------------

| | 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: risk-free interest
rate of 3.1%; dividend yields of zero; expected life of the options of approximately
three years; and expected volatility of 52%.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 33

---

---



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

|NOTE 11 |  | SHAREHOLDERSEQUITY(continued):
|------- | - | -------------------------------

| | The
following table summarizes information about options under the Companys plans
outstanding at December 31, 2004:
| | --------------------------------------------------------------------------------------------------------------------

|Options outstanding | Options exercisable
|------------------- | -------------------
|
|
|
|
|3.70                |                    
|9.00 to    9.99     |                    
|10.00 to 10.99      |                    
|11.00 to 11.99      |                    
|12.00 to 12.99      |                    
|                    |                    
|                    |                    
|                    |                    

| | 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 until canceled in 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
stock-based compensation charges to the statement of operations. In June 2004, and on
December 31, 2003, 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Option
plan in a subsidiary
| | ---------------------------

| | In
September 2003, the board of directors of an Israeli subsidiary approved an employee
stock option plan (the subsidiary plan), whereunder options to purchase up to
12,985,630 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 options 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December 20, 2004, the subsidiarys board of directors decided to increase the
number of shares reserved under the subsidiary plan with additional options to purchase
up to 5,068,570 ordinary shares.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
December 31, 2004 and December 31, 2003, there were approximately 17,732,000 and
12,531,000 options, respectively, outstanding subject to the subsidiary plan, of which
8,320,000 and 6,079,265, respectively, were exercisable.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 34

---

---



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

|NOTE 11 |  | SHAREHOLDERSEQUITY(continued):
|------- | - | -------------------------------

| | Except
for 193,874 options granted at an exercise price of $4.00 per share, all options were
granted at an exercise price of $0.4052. For all grants, management determined that the
exercise price per share is not less than the estimated fair value of an ordinary share
at the date of grant, except for 4,351,360 options granted in late 2004 whereby
management estimated the fair value of one share to be $0.55. In the year 2004 the
subsidiary recorded $476,000 of deferred stock compensation for the excess of the fair
value of ordinary shares of the subsidiary over the exercise price at the date of grant
related to these options (net of minority interests). The deferred stock compensation is
amortized over the vesting period using the straight-line method. The compensation costs
of $21,000 have been classified to the income statements, under general and
administrative expenses in the year 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
weighted fair value of options granted by the subsidiary during 2004 and 2003 was $0.24
and $0.14, respectively and estimated at the date of each option grant using the
Black-Scholes option pricing model with the following assumptions: risk-free interest
rate of 3.23% to 2.3% and 2.2% respectively; dividend yields of zero in 2004 and 2003;
expected life of the options of approximately three years in both 2004 and 2003; and
expected volatility of 50% to 57% and 48%, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
2004 and 2003, no options were exercised.
| | ------------------------------------------------

|NOTE 12 |  | TAXES ON INCOME:
|------- | - | ----------------

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

| | 1) | Tax
benefits under the Israeli Law for the Encouragement of Capital           Investments,
1959 (hereafter- the law)
| | -- | --------------------------------------------------------------------------------------------------------------------

| | The
entitlement to these benefits is conditional upon the subsidiary fulfilling the
conditions stipulated by the law, regulations published thereunder and the instruments of
approval for the specific investments in approved enterprises. In the event of failure to
comply with these conditions, the benefits may be cancelled and the subsidiary may be
required to refund the amount of the benefits, in whole or in part, with the addition of
CPI linkage increments and interest. Currently, the subsidiary is in discussions with the
relevant authorities on the rights and entitlement to the below benefits, and the
entitlement of these benefits is conditioned upon the results of these discussions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 35

---

---



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

|NOTE 12 |  | TAXES ON INCOME:(continued)
|------- | - | ---------------------------

| | Tax
benefits for approved enterprises include:
| | ----------------------------------------------

| | a) | Reduced
tax rates
| | -- | -----------------

| | The
tax benefit period is seven years from the year in which such an enterprise first earns
taxable income, but not later than 2009. Income derived from the approved enterprise is
tax exempt during the first two years of the seven years tax benefit period and is
subject to a reduced tax rate of 25% during the remaining five benefit years.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the event of distribution of cash dividends from income that was tax exempt as above, the
Company would have to pay the 25% tax in respect of the amount distributed.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company intends to reinvest the amounts of tax exempt income in the foreseeable future,
and not to cause distribution of such dividends.
| | --------------------------------------------------------------------------------------------------------------------------------------------

| | b) | Accelerated
depreciation
| | -- | ------------------------

| | The
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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3) | Tax
rates
| | -- | ---------

| | The
income of the company and its Israeli subsidiaries (other than income from approved
enterprises, see b. below) is taxed at the regular rate. Through to December 31,
2004, the corporate tax was 36%. In July 2004, an amendment to the Income Tax Ordinance
was enacted. One of the provisions of this amendment is that the corporate tax rate is to
be gradually reduced from 36% to 30%, in the following manner: the rate for 2004 will be
35%, in 2005  34%, in 2006  32%, and in 2007 and thereafter  30%. The
effect of the change in the tax rates in the coming years, on the deferred tax balances
of the amendment to the law, is included in paragraph f below. Capital gains are taxed of
25%.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | Non-Israeli
subsidiaries
| | -- | ------------------------

| | The
non-Israeli subsidiaries are taxed under the laws of their countries of residence.
| | --------------------------------------------------------------------------------------

F - 36

---

---



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

|NOTE 12 |  | TAXES ON INCOME:(continued)
|------- | - | ---------------------------

| | 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 $466 million at December 31,
2004. Most of the carryforward amounts are available indefinitely with no expiration date.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d. | Deferred
income taxes:
| | -- | ----------------------

|                                          | December 31
|----------------------------------------- | -----------
|
|
|
|
|Computed in respect of the following:     |            
|Allowance for doubtful accounts and       |            
|other provisions                          |            
|Carryforward tax losses and credits       |            
|Inventories                               |            
|Investments                               |            
|Marketable Securities                     |            
|Accrued liabilities and deferred income   |            
|Property, plant and equipment             |            
|Intangible assets                         |            
|                                          |            
|                                          |            
|L e s s - valuation allowance (attributed |            
|mainly to loss carryforwards and expenses |            
|deductible upon payment)                  |            
|                                          |            
|                                          |            
|                                          |            
|Deferred income taxes are included in the |            
|balance sheets in current assets:         |            
|                                          |            

| | e. | Income
(loss) before taxes on income from continuing operation:
| | -- | ---------------------------------------------------------------

|                                         | Year ended December 31
|---------------------------------------- | ----------------------
|
|
|
|
|The Company and its Israeli subsidiaries |                       
|Non-Israeli subsidiaries                 |                       
|                                         |                       
|                                         |                       
|                                         |                       

F - 37

---

---



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

|NOTE 12 |  | TAXES ON INCOME:(continued)
|------- | - | ---------------------------

| | f. | Taxes
on income included in the statements of operations  from           continuing
operation:
| | -- | -----------------------------------------------------------------------------------------------

| | 1) | As
follows:
| | -- | -----------

|                        | Year ended December 31
|----------------------- | ----------------------
|
|
|
|
|Current:                |                       
|Israeli                 |                       
|Non-Israeli             |                       
|                        |                       
|                        |                       
|                        |                       
|Deferred, see e. above: |                       
|Israeli                 |                       
|Non-Israeli             |                       
|                        |                       
|                        |                       
|                        |                       
|                        |                       
|                        |                       

| | 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(3)
above) and the actual tax expense:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | Year ended December 31
|-------------------------------------------- | ----------------------
|
|
|
|
|
|Income (loss) before taxes on income         |                       
|                                             |                       
|Theoretical tax expense (tax benefit) on     |                       
|the above amount                             |                       
|Effect of lower tax rate for                 |                       
|"approved enterprises"                       |                       
|                                             |                       
|                                             |                       
|Increase (decrease) in taxes resulting from  |                       
|different tax rates - net                    |                       
|Increase in taxes resulting from             |                       
|permanent differences                        |                       
|Change in valuation allowance                |                       
|Changes in deferred taxes resulting from     |                       
|carryforward tax losses                      |                       
|Increase in taxes resulting from prior years |                       
|Increase (decrease) in taxes arising         |                       
|from differences between non-dollar          |                       
|currencies income and dollar                 |                       
|income , net, and other*                     |                       
|                                             |                       
|Taxes on income in the consolidated          |                       
|statements of operations                     |                       
|                                             |                       
|                                             |                       

| | * | 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 38

---

---



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

|NOTE 12 |  | TAXES ON INCOME:(continued)
|------- | - | ---------------------------

| | g. | Tax
assessments:
| | -- | ----------------

| | 1) | The
Company has received, or is considered to have receive, final tax           assessments
through the 1999 tax year.
| | -- | ----------------------------------------------------------------------------------------------------------------------

| | 2) | Following
the filing of tax returns of the Companys U.S. subsidiaries for                the
years 1992 through 1996 (and receive certain refunds in respect thereof),
               the Internal Revenue Service (IRS) commenced an audit on those years. By
the end                of 2001, the Company had already made advance payments of $21.5
million on                account of this audit. In partial settlement of said audit the
Company consented                to a partial assessment by the IRS for
approximately $10.6 million                of federal taxes on certain agreed upon issues
in June 2002. In the same month,                the Company received a notice from the
IRS proposing to assess $29.6 million of                additional federal income taxes
for the years 1992 through 1996. In August 2002,                the Company appealed the
proposed additional assessment. In February 2004,                following negotiations
with the IRS, the Company finalized the settlement with                the IRS, and the
during the remainder of 2004, the Company concluded paying                according to
the settlement with the IRS in an amount of $5.9 million to the                IRS, and
also paid $5.7 million as state taxes derived from that IRS audit.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3) | In
December 2004, as a result of the conclusion of the 1992-1996 IRS audit, the
               Company filed federal tax amendments for the years 1994, 1995 and 1997,
claiming                a refund of $7.8 million of federal taxes. As of the date of
these financial                statements, the IRS has not responded to our refund
request. Due to the existing                uncertainty surrounding the outcome of this
refund request, the said amount is                not included in the financial
statements.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 affected by
changes in exchange rates. These contracts do not qualify for hedge accounting under FAS
133. Accordingly gains and losses for these forward-exchange contracts are recognized in
earnings. As of December 31, 2004 and 2003, the liability for losses deriving from
forward-exchange contracts amounted to approximately $412,000 and $556,000, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 39

---

---



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

|NOTE 13 |  | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:
|------- | - | ------------------------------------------

| | b. | Concentrations
of credit risks
| | -- | ------------------------------

| | At
December 31, 2004 and 2003, 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c. | Cash
Management and Fair value of financial instruments
| | -- | -------------------------------------------------------

| | The
financial instruments of the Company and its subsidiaries consist mainly of cash and cash
equivalents, marketable securities, 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 40

---

---



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

|NOTE 14 |  | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:
|------- | - | ----------------------------------------------

| | Balance
sheets:
| | ---------------

| | a. | Short-Term
Investments:
| | -- | -----------------------

| | 1) | The
fair value and the amortized cost of available-for-sale securities and cash
          equivalents are as follows:
| | -- | ---------------------------------------------------------------------------------------------------------------------

|                                        | December 31, 2004
|--------------------------------------- | -----------------
|
|
|
|
|United States government and government |                  
|agencies debentures                     |                  
|Corporate debt securities               |                  
|Mortgage backed securities              |                  
|                                        |                  
|                                        |                  
|                                        |                  
|                                        |                  

| | (*) | Such
unrealized holding losses are the result of an increase in market interest rates during
fiscal 2004 and are not the result of credit or principal risk. Based on the nature of the
investments, management concluded that such unrealized losses were not other than
temporary as of December 31, 2004. Amounts reclassified out of accumulated comprehensive
income into earning are determined by specific identification.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Maturities
of the above securities are as follows:
| | --------------------------------------------------

|                     | Estimated fair
market value
|-------------------- | ---------------------------
|
|
|
|
|2005                 |                            
|2006                 |                            
|2007                 |                            
|2008                 |                            
|2009 and there after |                            
|                     |                            
|                     |                            
|                     |                            
|                     |                            

| | As
of December 31, 2004, the Company held investments in available for sale with unrealized
holding losses totaling $327,000, all of which are less then one year. Realized losses in
2004 were approximately $70,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 41

---

---



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

|NOTE 14 |  | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (continued)
|------- | - | ---------------------------------------------------------

| | 2) | 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 recorded approximately $750,000 gain in its shareholders equity. This gain
was realized and released to earnings in 2003. 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 was charged
to other income (loss), net in the statement of operation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 | December 31
|------------------------------------------------ | -----------
|
|
|
|
|b.  Allowance for doubtful accounts (as included |            
|in trade receivables) - the change in allowance  |            
|for doubtful is composed as follows:             |            
|Balance at beginning of year                     |            
|Addition to allowance                            |            
|Write-off of bad debts                           |            
|                                                 |            
|                                                 |            
|                                                 |            
|c.  Other receivables:                           |            
|Value added taxes receivable                     |            
|Employees                                        |            
|Other                                            |            
|                                                 |            
|                                                 |            
|                                                 |            
|d.  Inventories                                  |            
|Components of systems and materials              |            
|Work in process                                  |            
|Consumables                                      |            
|Finished products                                |            
|                                                 |            
|                                                 |            
|                                                 |            

F - 42

---

---



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

|NOTE 14 |  | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION(continued)
|------- | - | --------------------------------------------------------

| | e. | Accrued
and other liabilities:
| | -- | ------------------------------

|                                        | December 31
|--------------------------------------- | -----------
|
|
|
|
|Payroll and related expenses            |            
|Accrued royalties and sales commissions |            
|Deferred revenue                        |            
|Provision for warranty*                 |            
|Advances from customers                 |            
|Other                                   |            
|                                        |            
|                                        |            
|                                        |            

|                                               | 2004 | 2003 | 2002
|---------------------------------------------- | ---- | ---- | ----
|
|
|
|
|*  The changes in the balance during the year: |      |      |     
|Balance at beginning of the year               |      |      |     
|Payments made under the warranty               |      |      |     
|Product warranties issued for new sales        |      |      |     
|                                               |      |      |     
|Balance at end of year                         |      |      |     
|                                               |      |      |     

| | f. | Short-term
credit and long-term loans:
| | -- | --------------------------------------

| | 1) | Short-term
credit and loans
| | -- | ---------------------------

| | The
balance as of December 31, 2004 represents: $16,397,000 short-term bank loans denominated
in dollars and bearing interest of three months Libor + 1% to Libor + 2.25% per annum (as
of December 31, 2004 and 2003  3.63% to 4.88% and 2.3%-3.5%, respectively);
$14,358,000 short-term bank loans denominated in Euro and bearing interest of Libor +
1.75% to 2% per annum (as of December 31, 2004 and 2003 respectively, 4%- 4.25% and
3.8%-4.4%), current maturities of long term loans from banks in the amount of $2,347,000
and current maturities of other long term loan in the amount of $1,210,000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 43

---

---



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

|NOTE 14 |  | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION(continued)
|------- | - | --------------------------------------------------------

| | 2) | Current
maturities of long-term loans (represent loans of Scitex Vision):
| | -- | -------------------------------------------------------------------------

|      | December 31
|----- | -----------
|
|
|
|
|Banks |            
|Other |            
|      |            
|      |            
|      |            
|      |            

| | 3) | Long-term
loans:
| | -- | ----------------

| | a) | The
long-term loans from banks mature in the following years:
| | -- | -------------------------------------------------------------

|                          | December 31
|------------------------- | -----------
|
|
|
|
|Current maturities        |            
|                          |            
|Second year               |            
|Third year                |            
|Fourth year               |            
|Fifth year and thereafter |            
|                          |            
|                          |            
|                          |            
|                          |            
|                          |            
|                          |            

| | As
to the maturity dates of another loan see c below.
| | -----------------------------------------------------

| | b) | The
long-term loans from banks are dollar denominated and bear interest of           three
month Libor + 1.75 % to Libor + 2.25 % per annum (as of December 31, 2004           and
2003  4.38% to 4.88 % and 2.9% to 3.4% respectively).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | In
2000, Scitex Vision entered into a collaboration agreement (the           Collaboration
Agreement) with a leading European supplier (the           supplier) to
the textile, paper and plastics printing industry, for           developing inks for
printing on textile. Pursuant to the Collaboration           Agreement, the Supplier is
to pay Scitex Vision certain royalties on sales of           ink for use with the Scitex
Visions textile printing machines. Following           the Collaboration Agreement,
the Company received from the supplier a long-term           convertible loan of $5
million. The loan was received on December 27, 2000, and           bore 6% annual
interest. However, if the milestones described in the           Collaboration Agreement
were met, the loan was to be interest free.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 44

---

---



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

|NOTE 14 |  | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION(continued)
|------- | - | --------------------------------------------------------

| | 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 ends
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 Collaboration 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 any, shall be repaid in cash
to the Supplier. Pursuant to the conversion terms, whereby the Supplier was granted
beneficial conversion features, the Company recorded an original discount of $882,353,
which represents the difference between the loan amount and the value of the ordinary
shares. This amount was fully amortized to interest expense over 33 months, which is the
period from the grant date to the beginning of the period during which the supplier was
entitled to convert the loan into ordinary shares.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 ($5 million)
is interest free and payable in four annual installments in the following years
subsequent to December 31, 2003. The first payment of $1 million was paid in December
2004 and the remaining amount is payable as follows (the amounts are presented in their
net present values):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   | December 31,
2004
|------------------ | -----------------
|
|
|
|
|Current maturities |                  
|                   |                  
|Second year        |                  
|Third 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, Scitex
Vision has recorded the loan based on its present value using 3.3% interest rate, which
is applicable to such loans 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 $408,000 (Discount),
as well as all interest accrued at December 30, 2003, in the total amount of $904,000,
have been credited to financial expenses, net in the year ended December 31,
2003. The amortization of the Discount recorded as financial expenses, amounted to
$158,000 in 2004.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 45

---

---



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

|NOTE 14 |  | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION(continued)
|------- | - | --------------------------------------------------------

| | d) | Long-term
loans convertible into subsidiarys shares
| | -- | ----------------------------------------------------

| | In
July 2003 and May 2004, two of the Companys shareholders granted Scitex Vision
convertible loans in the total amount of $933,000 and $805,000, respectively, bearing
interest equal to the greater of Libor + 1% (as of December 31, 2004 and 2003 -3.63% and
2.1%, respectively) or the NIS equivalent of the principal amount linked to the rate of
change of the Israeli CPI over the period of the loans. The loans and interest 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 may be converted by the lenders to
4,234,316 ordinary shares of the Scitex Vision at any time at an exercise price of
$0.4052 per share, which equals the estimated fair value of Scitex Visions ordinary
shares at the date of grant of the loans. According to the loans agreements, an automatic
conversion shall occur upon the occurrence of certain events. In addition, all lenders
were granted warrants representing 25% of the total loan amount, to purchase 1,058,578
ordinary shares of Scitex Vision at an exercise price of $0.4052 per share. $98,500 and
$54,500 were allocated to the said warrants out of the total above-mentioned loans in
2004 and 2003, respectively. These amounts are amortized to interest expenses over the
maximum term of the loans, which is 5 years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Pursuant
to the conversion terms, whereby the lenders were granted beneficial conversion features (BCF),
the Company recorded an original discount of $98,500 and $54,500 in 2004 and 2003,
respectively, which represents the difference between the loan allocated amount and the
amount payable. These amounts are amortized to interest expenses over the maximum term of
the loans, which is 5 years. The warrants expire after 5 years from grant as well.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
the years 2004 and 2003 the Company recorded interest expenses of $99,000 and $20,000,
respectively, in connection with the said warrants, amortization of the BCF amount and
interest expenses.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | e) | Long-term
loans  other
| | -- | -----------------------

| | In
July 2004, Jemtex received a waiver of all rights regarding a long-term loan at the
amount of $581,000. The waiver of the loan is presented in the financial statements under
other income (loss)".
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 46

---

---



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

|NOTE 14 |  | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION(continued)
|------- | - | --------------------------------------------------------

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

|                                          | Year ended December 31
|----------------------------------------- | ----------------------
|
|
|
|
|g.  Research and development costs , net: |                       
|Expenses incurred                         |                       
|L e s s  -  royalty-bearing               |                       
|participations from the                   |                       
|Government of Israel                      |                       
|                                          |                       
|                                          |                       
|                                          |                       
|h.  Selling, general and administrative   |                       
|expenses:                                 |                       
|Selling*                                  |                       
|General and administrative**              |                       
|                                          |                       
|                                          |                       
|                                          |                       
|*  Including:                             |                       
|Advertising costs                         |                       
|                                          |                       
|** Including:                             |                       
|Related parties                           |                       
|                                          |                       
|Net change in allowance for               |                       
|doubtful accounts and direct              |                       
|write-off of bad debts                    |                       
|                                          |                       
|                                          |                       

| | i. | Restructuring
charges
| | -- | ---------------------

| | During
2003, a subsidiary implemented a restructuring plan in the form of reduction in work
force, abandonment of leased premises and development of new combined information
technology system, and accrued expenses accordingly. The expenses included mainly
severance pay and other benefits to approximately 42 employees retiring from their employ
in the amount of approximately $130,000, costs related to the disposal of certain
activities in the amount of approximately $390,000, and costs related to the development
of new combined information technology system in the amount of approximately $500,000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 47

---

---



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

|NOTE 14 |  | SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION(continued)
|------- | - | --------------------------------------------------------

|                                                  | Year ended December 31
|------------------------------------------------- | ----------------------
|
|
|
|
|j.   Financial expenses,net:                      |                       
|Interest income                                   |                       
|Gain (loss) on trading marketable securities, net |                       
|Interest expense on long-term loans               |                       
|from banks                                        |                       
|from others                                       |                       
|Convertible loan -BCF and warrant                 |                       
|amortization and interests                        |                       
|Bank charges                                      |                       
|Revaluation of long-term loan                     |                       
|Other (including foreign exchange                 |                       
|transaction losses , net)                         |                       
|                                                  |                       
|                                                  |                       
|                                                  |                       
|k.   Other income (loss),net:                     |                       
|Write-down of available-for-sale securities       |                       
|Gain from sale of a portion in a subsidiary       |                       
|Share in beneficial conversion feature of         |                       
|convertible preferred shares issued by a          |                       
|subsidiary                                        |                       
|Write-off and write-down of investments           |                       
|in investee companies                             |                       
|Gain from sale of investments in                  |                       
|associated and investee companies                 |                       
|Gain from waiver of a loan                        |                       
|Other                                             |                       
|                                                  |                       
|                                                  |                       
|                                                  |                       

|NOTE 15 |  | SEGMENTS INFORMATION:
|------- | - | ---------------------

| | a. | General:
| | -- | --------

| | Following
the transaction and as a result of the consolidation of Jemtex for the first time in 2004
the Company operates in the following two segments:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | 1) | Wide
Format digital printing  development, manufacturing and market
               industrial digital inkjet printing solutions mainly to the graphic
               arts, packaging and textile markets as well as related services and
               consumable products.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | Continuous
inkjet industrial digital printing  develop, manufacture and                market
of continuous inkjet based digital printers for the industrial printing
               ceramic tiles and textile markets.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 48

---

---



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

|NOTE 15 |  | SEGMENTS INFORMATION(continued)
|------- | - | -------------------------------

| | b. | Information
on segment loss and assets of the reportable operating segments:
| | -- | ----------------------------------------------------------------------------

| | 1) | Measurement
of segment loss and assets:
| | -- | ---------------------------------------

| | The
measurement of losses and assets of the reportable segments is based on the same
accounting principles applied in these consolidated financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | Financial
data relating to the reportable operating segments:
| | -- | -------------------------------------------------------------

|                                                             | Year ended December 31,
2004
|------------------------------------------------------------ | ----------------------------
|
|
|
|
|Consolidated revenues from the                               |                             
|Wide Format digital printing                                 |                             
|                                                             |                             
|Operating loss from continuing operations:                   |                             
|Wide Format digital printing                                 |                             
|Continuous inkjet industrial digital printing                |                             
|                                                             |                             
|Total consolidated operating loss from continuing operations |                             
|                                                             |                             
|Interest income (expenses), net:                             |                             
|Wide Format digital printing                                 |                             
|Continuous inkjet industrial digital printing                |                             
|                                                             |                             
|Total consolidation interest expenses, net                   |                             
|                                                             |                             
|Other income (loss), net:                                    |                             
|Wide Format digital printing                                 |                             
|Continuous inkjet industrial digital printing                |                             
|                                                             |                             
|Total consolidation other income (loss), net                 |                             
|                                                             |                             
|Loss before taxes on income:                                 |                             
|Wide Format digital printing                                 |                             
|Continuous inkjet industrial digital printing                |                             
|                                                             |                             
|Total consolidation loss before taxes on income              |                             
|                                                             |                             

F - 49

---

---



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

|NOTE 15 |  | SEGMENTS INFORMATION(continued)
|------- | - | -------------------------------

|                                                            | December 31,
2004
|----------------------------------------------------------- | -----------------
|
|
|
|
|Assets:                                                     |                  
|Wide Format digital printing:                               |                  
|Intangible assets                                           |                  
|Other assets                                                |                  
|Goodwill                                                    |                  
|Continuous inkjet industrial digital printing               |                  
|                                                            |                  
|                                                            |                  
|                                                            |                  
|Consolidation adjustment                                    |                  
|                                                            |                  
|                                                            |                  
|                                                            |                  
|Expenditures for long-lived assets:                         |                  
|Wide Format digital printing:                               |                  
|Intangible assets                                           |                  
|Fixed assets                                                |                  
|Goodwill                                                    |                  
|Continuous inkjet industrial digital printing, other assets |                  
|                                                            |                  
|                                                            |                  
|                                                            |                  
|                                                            |                  
|Depreciation and amortization expenses:                     |                  
|Wide Format digital printing:                               |                  
|Intangible assets                                           |                  
|Other assets                                                |                  
|Continuous inkjet industrial digital printing, other assets |                  
|                                                            |                  
|                                                            |                  
|                                                            |                  
|                                                            |                  

| | c. | Geographical
information:
| | -- | -------------------------

| | 1) | Following
are data regarding revenues from external customers in respect of           continuing
operations, classified by geographical area based on the location of           the
customers (Wide Format digital printing segment only):
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                | Year ended December 31
|--------------- | ----------------------
|
|
|
|
|America         |                       
|Europe          |                       
|Far East        |                       
|Other countries |                       
|                |                       
|                |                       
|                |                       
|                |                       

F - 50

---

---



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

|NOTE 15 |  | SEGMENTS INFORMATION(continued)
|------- | - | -------------------------------

| | 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
|------------ | -----------
|
|
|
|
|Israel       |            
|America      |            
|Europe       |            
|South Africa |            
|Asia         |            
|             |            
|             |            
|             |            
|             |            

|NOTE 16 |  | SUBSEQUENT EVENTS:
|------- | - | ------------------

| | a. | Possible
Sale of Scitex Vision
| | -- | ------------------------------

| | On
March 21, 2005, the Company announced that it is engaged in preliminary negotiations
for the possible sale of its holdings in Scitex Vision, in which it holds 75.5% of the
issued share capital (69.5% on a fully diluted basis) for an enterprise value of Scitex
Vision in the range of $230-250 million. The proposed transaction is subject to a due
diligence process, negotiation and execution of definitive agreements. The Company added
that there is no assurance whatsoever that any transaction would result with respect to
Scitex Vision or as to the terms, deal structure and the purchase price for Scitex Vision
if a sale occurs.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | Contingent
Liabilities Settlement
| | -- | ---------------------------------

| | In
reference to contingent liabilities set forth in Note 10 b1 above, on April 6, 2005, the
Company and the Companys two largest shareholders, Clal and Discount (the Purchasers)
came to an agreement with the minority shareholder, whereby they agreed to purchase all
of the minority shareholders shares in Scitex Vision, constituting 1.89% of Scitex
Visions issued share capital (1.35% on a fully diluted basis) in consideration for
$1.6 million, plus additional contingent consideration to be paid if Scitex Vision
undergoes an exit event within the next 2 years at a higher valuation as
detailed in the agreement. In the framework of the agreement, the minority shareholder
shall dismiss all suits and other legal proceedings it had initiated or had threatened to
initiate against the Company, the Purchasers and other various parties. In addition, the
minority shareholder, on one hand, and the Company, the Purchasers and other various
parties on the other hand are waiving all other claims and disputes in connection with
Scitex Vision they may have vis-à-vis the other party to the agreement.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c. | Sale
of Assets of RealTimeImage Ltd.
| | -- | ------------------------------------

| | On
April 28, 2005 IDX Systems Corporation (NASDAQ:IDXC) announced that it had signed an
agreement to acquire the assets of RealTimeImage, Ltd., (RTI) in which the Company holds
approximately 14.9% of the issued share capital (RTI was recorded on the Companys
balance sheet at $1.2 million as of December 31, 2004, and accounted under the cost
method). IDX will purchase the assets of RTI at an estimated purchase price of $15.5
million. The closing of the acquisition is subject to certain terms and conditions. Also,
the distribution of funds to the shareholders of RTI is subject to certain time and other
limitations and processes, including under the above agreement.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 51

---

---



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

|NOTE 16 |  | SUBSEQUENT EVENTS(continued)
|------- | - | ----------------------------

| | d. | Sale
of Objet Geometries Ltd.
| | -- | -----------------------------

| | In
June 2005, the Company sold all of its holdings in Objet to several shareholders
of Objet for $3 million in cash, payable in two installments. Additional contingent
consideration will be paid to the company if Objet undergoes specified exit events prior
to the end of 2007. The book value of the investment in Objet was recorded on the Companys balance
sheet at $124,000 as of December 31, 2004, and accounted under the equity method.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F - 52

---

---



# Report of Independent
Registered Public Accounting Firm on Financial Statement Schedules

To the Board of Directors
ofScitex Corporation Limited.

Our audits of the consolidated
financial statements referred to in our report dated May 2, 2005, except for note 16d, as
to which the date is June 28, 2005, appearing in this Form 20-F of Scitex Corporation Ltd.
also included an audit of the Financial Statement Schedule II  Valuation and
Qualifying Accounts listed in item 18 of this Form 20-F. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial statements.

|                 |                                    
|---------------- | -----------------------------------
|Tel-Aviv, Israel | /s/ Kesselman & Kesselman          
|May 2, 2005      | Certified Public Accountants (Isr.)
|                 | A member of PricewaterhouseCoopers 
|                 | International Limited              

S - 1

---

---



SCITEX CORPORATION LTD.SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Three years ended December 31, 2004
(U.S. $ in thousands)

|Column A                         | Column B | Column C | Column D | Column E
|-------------------------------- | -------- | -------- | -------- | --------
|
|Allowance for doubtful accounts: |          |          |          |         
|Year ended December 31, 2004     |          |          |          | 4,190   
|                                 |          |          |          |         
|Year ended December 31, 2003     |          |          |          | 2,957   
|                                 |          |          |          |         
|Year ended December 31, 2002     |          |          |          | 1,620   
|                                 |          |          |          |         
|Valuation allowance for deferred |          |         
|tax assets:                      |          |         
|Year ended December 31, 2004     |          |          |          | 184,984 
|                                 |          |          |          |         
|Year ended December 31, 2003     |          |          |          | 123,253 
|                                 |          |          |          |         
|Year ended December 31, 2002     |          |          |          | 94,877  
|                                 |          |          |          |         
|Inventory valuation provision:   |          |         
|Year ended December 31, 2004     |          |          |          | 4,340   
|                                 |          |          |          |         
|Year ended December 31, 2003     |          |          |          | 1,225   
|                                 |          |          |          |         
|Year ended December 31, 2002     |          |          |          | 750     
|                                 |          |          |          |         

S - 2

---

---

[ZIV HAFT LETTERHEAD]

# REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

# To the shareholders
of

# JEMTEX INK JET PRINTING
LTD.

We have audited the accompanying
balance sheets of Jemtex Ink Jet Printing Ltd. (the Company) as of
December 31, 2004 and 2003 and the related statements of operations, changes in
shareholders deficiency and cash flows for each of the two years in the period ended
December 31, 2004. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. 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 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, 2004 and 2003 and the results of its operation
and its cash flows for each of the two years in the period ended December 31, 2004, in
conformity with accounting principles generally accepted in the United States of America.

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, 2004 has a shareholders deficiency of
approximately $ 4.2 million. These factors 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 that might result from the outcome of this uncertainty.

|Tel-Aviv, Israel 
February 28, 2005 | /s/ ZIV HAFT
ZIV HAFT
Certified Public Accountants (Isr.)
BDO member firm
|----------------------------------- | -------------------------------------------------------------------------

J - 1

---

---



# Objet Geometries Ltd.

# Consolidated Financial
Statements As of December 31, 2004



---

---



|Objet Geometries Ltd.                              
|---------------------------------------------------
|Consolidated Financial Statements December 31, 2004
|                                                   

|Contents                                      |           
|--------------------------------------------- | ----------
|
|
|
|
|Report of Independent Public Accountants      | O-2       
|Financial Statements:                        
|Consolidated Balance Sheets                   | O-3 - O-4 
|Consolidated Statements of Operations         | O-5       
|Statements of Changes in Shareholders' Equity | O-6       
|Consolidated Statements of Cash Flows         | O-7       
|Notes to the Financial Statements             | O-8 - O-20

O - 1

---

---



|Chaikin, Cohen, Rubin & Gilboa.                                                                                                          
|-----------------------------------------------------------------------------------------------------------------------------------------
|Atidim Technology Park, Bldg. 4,
P.O.B. 58143 Tel-Aviv 61580, IsraelTel: 972-3-6489858 Fax: 972-3-6489946
E-mail: accounting@ccrcpa.co.il
|                                                                                                                                         
|                                                                                                                                         

# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

# To The Shareholders ofObjet Geometries Ltd.

We have audited the accompanying
consolidated balance sheets of Objet Geometries Ltd., (the Company) and its
subsidiaries as of December 31, 2004 and 2003 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, 2004. 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 audits in accordance
with auditing standards generally accepted in Israel, 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 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,
2004 and 2003 and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States.

Without qualifying our opinion, we
wish to draw your attention that the Company is defendant in certain lawsuits as described
in note 8A.

/s/ Chaikin, Cohen, Rubin
& GilboaChaikin, Cohen, Rubin
& Gilboa Certified Public
Accountants (Isr.)

Tel-Aviv, March 2, 2005

O - 2

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|Objet Geometries Ltd.      
|---------------------------
|Consolidated Balance Sheets
|                           
|In thousands of US Dollars 

|                                       |  | December 31,
|-------------------------------------- |  | ------------
|
|
|
|
|ASSETS                                 |  |             
|                                       |  |             
|Current assets                         |  |             
|                                       |  |             
|Cash and cash equivalents              |  |             
|Restricted cash                        |  |             
|Trade receivables                      |  |             
|Other receivables and prepaid expenses |  |             
|Inventories                            |  |             
|                                       |  |             
|                                       |  |             
|                                       |  |             
|                                       |  |             
|                                       |  |             
|Property, plant and equipment          |  |             
|                                       |  |             
|                                       |  |             
|Other assets                           |  |             
|Severance pay funds                    |  |             
|Other                                  |  |             
|                                       |  |             
|                                       |  |             
|                                       |  |             
|                                       |  |             
|                                       |  |             
|                                       |  |             
|                                       |  |             

|
Elan Jaglom Chairman of the Board of Directors | 
Adina ShorrChief Executive Officer
|------------------------------------------------------------- | -------------------------------------------------

The
accompanying notes are an integral part of the financial statements

O - 3

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|Objet Geometries Ltd.      
|---------------------------
|Consolidated Balance Sheets
|                           
|In thousands of US Dollars 

|                                                              |  | December 31,
|------------------------------------------------------------- |  | ------------
|
|
|LIABILITIES AND CAPITAL DEFICIENCY                            |  |             
|                                                              |  |             
|Current liabilities                                           |  |             
|                                                              |  |             
|Short term loans                                              |  |             
|Trade payables                                                |  |             
|Deferred revenues                                             |  |             
|Accrued liabilities and other liabilities                     |  |             
|                                                              |  |             
|                                                              |  |             
|                                                              |  |             
|                                                              |  |             
|Long-term liabilities                                         |  |             
|                                                              |  |             
|Accrued severance pay                                         |  |             
|                                                              |  |             
|                                                              |  |             
|Contingencies and commitments                                 |  |             
|                                                              |  |             
|Capital deficiency                                            |  |             
|                                                              |  |             
|Ordinary shares of NIS 0.01 par value:                        |  |             
|Authorized: 100,000,000 at December 31, 2004 and 2003; issued |  |             
|and outstanding: 3,669,900 at December 31, 2004 and 2003      |  |             
|Preferred shares of NIS 0.01 par value:                       |  |             
|Authorized: 400,000,000 at December 31, 2004 and 2003; issued |  |             
|and outstanding: 102,110,637 and 93,842,996 at December 31,   |  |             
|2004 and 2003, respectively                                   |  |             
|Additional paid in capital                                    |  |             
|Accumulated deficit                                           |  |             
|                                                              |  |             
|                                                              |  |             
|                                                              |  |             
|                                                              |  |             
|                                                              |  |             
|                                                              |  |             
|                                                              |  |             

The accompanying
notes are an integral part of the financial statements

O - 4

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|Objet Geometries Ltd.                
|-------------------------------------
|Consolidated Statements of Operations
|                                     
|In thousands of US Dollars           

|                                     |  | Year ended December 31,
|------------------------------------ |  | -----------------------
|
|
|
|
|Revenues                             |  |                        
|                                     |  |                        
|Cost of revenues                     |  |                        
|                                     |  |                        
|                                     |  |                        
|Gross profit                         |  |                        
|                                     |  |                        
|                                     |  |                        
|Operating expenses:                  |  |                        
|                                     |  |                        
|Research and development, net        |  |                        
|                                     |  |                        
|Marketing and selling                |  |                        
|                                     |  |                        
|General and administrative           |  |                        
|                                     |  |                        
|Special legal expenses and provision |  |                        
|                                     |  |                        
|Amortization of intangible assets    |  |                        
|                                     |  |                        
|                                     |  |                        
|Total operating expenses             |  |                        
|                                     |  |                        
|                                     |  |                        
|Operating loss                       |  |                        
|                                     |  |                        
|Financial expenses, net              |  |                        
|                                     |  |                        
|                                     |  |                        
|Net loss                             |  |                        
|                                     |  |                        

The
accompanying notes are an integral part of the financial statements

O - 5

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|Objet Geometries Ltd.                      
|-------------------------------------------
|Statements of Changes in Capital Deficiency
|                                           
|In thousands of US Dollars                 

|                                | Number of Shares | Share Capital |  |           | Total
|------------------------------- | ---------------- | ------------- |  | --------- | -----
|
|
|
|
|Balance at January 1, 2002      |                  |               |  | 3,669,900 |      
|                                |                  |              
|Net loss for the year           |                  |               |  | -         |      
|                                |                  |               |  |           |      
|                                |                  |              
|Balance at December 31, 2002    |                  |               |  | 3,669,900 |      
|                                |                  |              
|Conversion of convertible loans |                  |               |  | -         |      
|                                |                  |              
|Issuance of preferred shares    |                  |               |  | -         |      
|                                |                  |              
|Net loss for the year           |                  |               |  | -         |      
|                                |                  |               |  |           |      
|                                |                  |              
|Balance at December 31, 2003    |                  |               |  | 3,669,900 |      
|                                |                  |              
|Issuance of preferred shares    |                  |               |  |           |      
|                                |                  |              
|Net loss for the year           |                  |               |  |           |      
|                                |                  |              
|Balance at December 31, 2004    |                  |               |  | 3,669,900 |      
|                                |                  |               |  |           |      

The accompanying
notes are an integral part of the financial statements

O - 6

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|Objet Geometries Ltd.                
|-------------------------------------
|Consolidated Statements of Cash Flows
|                                     
|In thousands of US Dollars           

|                                                            | Year ended December 31,
|----------------------------------------------------------- | -----------------------
|
|
|
|
|Cash flows from operating activities                        |                        
|Net loss for the year                                       |                        
|Adjustments to reconcile net loss to net cash flows used in |                        
|operating activities:                                       |                        
|Depreciation and amortization                               |                        
|Provision for severance pay, net                            |                        
|Other                                                       |                        
|Changes in operating assets and liabilities                 |                        
|Increase in trade receivables                               |                        
|Decrease (increase) in other receivables and prepaid        |                        
|expenses                                                    |                        
|Decrease (increase) in inventories                          |                        
|Increase (decrease) in trade payables                       |                        
|Increase (decrease) in deferred revenues                    |                        
|Increase (decrease) in customer advance                     |                        
|Increase in accruals and other current liabilities          |                        
|                                                            |                        
|                                                            |                        
|Net cash used in operating activities                       |                        
|                                                            |                        
|                                                            |                        
|Cash flows from investing activities                        |                        
|Purchase of fixed assets                                    |                        
|Restricted cash                                             |                        
|                                                            |                        
|                                                            |                        
|Net cash used in investing activities                       |                        
|                                                            |                        
|                                                            |                        
|Cash flows from financing activities                        |                        
|Short term loan received                                    |                        
|Receipts on account of shares                               |                        
|Issuance of shares                                          |                        
|Convertible loans received                                  |                        
|                                                            |                        
|                                                            |                        
|Non cash provided by financing activities                   |                        
|                                                            |                        
|                                                            |                        
|Increase (decrease) of cash and cash equivalents            |                        
|                                                            |                        
|Cash and cash equivalents at beginning of year              |                        
|                                                            |                        
|                                                            |                        
|Cash and cash equivalents at end of year                    |                        
|                                                            |                        

# Supplemental non cash
investing and financing activities:

On December 1, 2003 convertible loan
of $505,000 was converted to 1,990,173 preferred shares.

On March 4, 2003 77,663,122 preferred
shares were issued on account of the conversion of $8,965,436 loans, the receipt of
$2,500,000 on account of shares received in 2002 and shares issued in accordance with anti
dilution protection as stated in the articles.

The
accompanying notes are an integral part of the financial statements

O - 7

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

# NOTE 1  GENERAL

| | A. | Objet
Geometries Ltd. (the Company) was founded and commenced its operations on
                    March 8, 1998. The Company develops, manufactures and markets 3D
printers for                     the rapid prototyping market.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is an Israeli  corporation and it has a fully owned subsidiary:  Objet Geometries
                  Inc. - located in the United States.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | B. | The
Company faces a number of business risks, including uncertainties regarding
                    demand and market acceptance of the Companys products, the
effects of                     technological changes, uncertainties concerning government
regulation,                     competition, dependence on proprietary technology and the
development of new                     products. Additionally, other risk factors such as
the loss of key personnel                     could affect the future results of the
Company.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 2 
SIGNIFICANT ACCOUNTING POLICIES

| | The
significant accounting policies followed in the preparation of the financial statements,
applied 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 amounts
reported in the financial statements and accompanying notes. Actual results could differ
from those estimates.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | B. | Reporting
currency
| | -- | ------------------

| | Most
of the Companys revenues are generated in U.S. dollars (dollar). In
addition, most of the Companys costs and expenses are incurred in dollars. The
Companys management believes that the dollar is the primary currency of the
economic environment in which the Company operates. Thus, the financial and reporting
currency of the Company is the dollar.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Accordingly
transactions and balances originally denominated in dollars are presented in their
original amounts. Transactions and balances in other currencies are remeasured into
dollars in accordance with the principles set forth in Statement No. 52 of the Financial
Accounting Standards Board of the United States (FASB).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Exchange
gains and losses from the aforementioned remeasurement are reflected in the statement of
operations as financial income or expenses. The representative rate of exchange at
December 31, 2004 was $1 = 4.308 New Israeli Shekels (NIS) (At December 31,
2003 $ 1 = 4.379 NIS).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

O - 8

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 2       SIGNIFICANT ACCOUNTING POLICIES(Continued)

| | C. | Principles
of consolidation
| | -- | ---------------------------

| | The
consolidated financial statements include the accounts of the Company and its fully owned
subsidiary. Significant intercompany transactions and balances have been eliminated upon
consolidation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | D. | Cash
equivalents
| | -- | ----------------

| | All
highly liquid investments with an original maturity of three months or less are
considered cash equivalents.
| | ----------------------------------------------------------------------------------------------------------------

| | E. | Restricted
cash
| | -- | ---------------

| | Restricted
cash is primarily invested in highly liquid deposits, which are used as security for the
Companys facilities lease commitment.
| | ------------------------------------------------------------------------------------------------------------------------------------------

| | F. | Inventories
| | -- | -----------

| | Inventories
are valued of the lower of cost or market. Cost is determined as follows:
| | -------------------------------------------------------------------------------------

| | Raw
materials and consumables  on a moving average basis.
| | ----------------------------------------------------------

| | Finished
products and products in process  on basis of production costs:
| | -------------------------------------------------------------------------

| | Raw
materials  on the moving average basis.
| | --------------------------------------------

| | Labor
and overhead  on the basis of actual manufacturing costs.
| | ----------------------------------------------------------------

| | G. | Property,
plant and equipment
| | -- | -----------------------------

| | These
assets are stated at cost, net of accumulated depreciation. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Annual
rates of depreciation are as follows:
| | --------------------------------------------

|                               | %    
|------------------------------ | -----
|
|
|
|
|Computers and software         | 33   
|Office furniture and equipment | 6-33 
|Machinery and equipment        | 10-33

| | Equipment
produced by the Company and used for research and development purposes is depreciated on
a straight-line basis over two years. Leasehold improvements are amortized on a straight-
line basis over the shorter of the term of the lease or the estimated useful life of the
improvement.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | H. | Technology
and other intangible assets
| | -- | --------------------------------------

| | Acquired
technology is amortized by the straight-line method over a period of 2.5 years.
| | ----------------------------------------------------------------------------------------

O - 9

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 2       SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | I. | Impairment
of long-lived assets and intangibles
| | -- | -----------------------------------------------

| | The
Companys long-lived assets and certain identifiable intangibles are reviewed for
impairment in accordance with Statement of Financial Accounting Standard No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144),
whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the future undiscounted cash flows
expected to be generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. As of December 31, 2004, no impairment
losses have been identified.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | J. | Revenue
recognition
| | -- | -------------------

| | Revenues
from sales of products and consumables are recognized when an arrangement exists (usually
in the form of a purchase order), delivery has occurred and title passed to the customer,
the Companys price to the customer is fixed or determinable, collectability is
reasonably, assured future obligations of the Company are considered insignificant and
the cost of such obligations can be reliably estimated. With respect to products with
installation requirements, revenue is recognized 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 when all
criteria above are met, sales of finished products to distributors are recognized as
revenue upon delivery and after title and risk pass to distributors.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Service
revenue is recognized ratably over the contractual period or as services are performed.
| | -----------------------------------------------------------------------------------------------

| | Warranty
costs are provided for at the same time as the revenues are recognized. The annual
provision for warranty costs is calculated based on expected cost of inputs, based on
historical experience.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Emerging
Issues Task Force (EITF) Issue 00-21, Revenue Arrangements with
Multiple Deliverables, addresses the accounting, by a vendor, for contractual
arrangements in which multiple revenue-generating activities will be performed by the
vendor. It is effective prospectively for all arrangements entered into in fiscal periods
beginning after June 15, 2003. EITF Issue 00-21 addresses when and, if so, how an
arrangement involving multiple deliverables should be divided into separate units of
accounting. In accordance with EITF Issue 00-21 the Company separates the different units
of accounting of sales with multiple deliverables (generally consists of machine and
Resin) based on the objective and reliable evidence of fair value of the different
elements, which is estimated based on stand alone sales of the different elements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Customers
deposits and other payments received prior to sales recognition are included in advances
from customers and deferred revenues in the balance sheets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

O - 10

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 2       SIGNIFICANT ACCOUNTING POLICIES (Continued)

| | K. | Deferred
income taxes
| | -- | ---------------------

| | Deferred
taxes are determined utilizing the asset and liability method based on the estimated
future tax effects of differences between the financial accounting and tax bases of
assets and liabilities under the applicable tax laws. Deferred income tax provisions and
benefits are based on the changes in the deferred tax asset or tax liability from period
to period. Valuation allowances are provided for deferred tax assets when it is more
likely than not that all or a portion of the deferred tax assets will not be realized.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | L. | Concentration
of credit risk
| | -- | ----------------------------

| | Financial
instruments that are potentially subject to concentrations of credit risk consist
principally of cash and cash equivalents and trade receivables. The majority of the
Companys cash and cash equivalents are invested in dollar and Euro instruments with
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s trade receivables are derived from sales to large and solid organizations
located mainly in the United States, Europe and the Far East. The Company performs
ongoing credit evaluations of its customers and to date has not experiences any material
losses. An allowance for doubtful accounts is determined with respect to those amounts
that the Company has determined to be doubtful of collection. In certain circumstances,
the Company may require letters of credit, other collateral or additional guarantees.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | M. | Severance
Pay
| | -- | -------------

| | The
Companys liability for severance pay is calculated pursuant to the severance pay
law based on the most recent salary of the 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,
pension funds and by an accrual.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
value of these policies and pensions funds is recorded as assets 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 the
severance pay law or labor agreements. The value of the deposited funds is based on the
cash surrendered value of these policies, and includes immaterial profits.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Severance
expenses for the years ended December 31, 2002, 2003 and 2004 amounted to approximately
($50,000) $26,000 and ($28,000), respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------

O - 11

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES(Continued)

| | N. | Research
and development, net
| | -- | -----------------------------

| | The
Company expenses research and development costs, as incurred.
| | -----------------------------------------------------------------

| | Royalty
bearing participation from the Government of Israel via the Office of the Chief Scientist
(OCS) for the development of approved projects is recognized as a reduction of expenses
as the related costs are incurred.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | O. | Stock
based compensation
| | -- | ------------------------

| | The
Company grants restricted shares and stock options for a fixed number of shares to
employees, consultants and others. The Company accounts for stock options grants to
employees in accordance with APB Opinion No.25, Accounting for Stock Issued to
Employees and for stock options granted to consultants and others, in accordance
with FAS Statement No. 123 Accounting for Stock-based compensation using the
minimum value method. 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 of accounting
for employee stock options or similar equity instruments, and encourages adoption of such
method for stock compensation plans. However, it also allows companies to continue to
account for those plans using the accounting treatment prescribed by APB 25. The impact
of the measurement requirements of the FAS Statement No. 123 for stock options grants to
employees on the financial statements, using the minimum value method, was immaterial.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | P. | Comprehensive
income
| | -- | --------------------

| | The
Company has no comprehensive income (loss) components other than net income (loss).
| | ---------------------------------------------------------------------------------------

| | Q. | Reclassifications
| | -- | -----------------

| | Certain
comparative figures have been reclassified to conform to the current year presentation.
| | -----------------------------------------------------------------------------------------------

O - 12

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES(Continued)

| | R. | Recently
issued accounting pronouncements
| | -- | -----------------------------------------

| | 1. | In
December 2004, the Financial Accounting Standards Board (FASB)
               issued the revised Statement of Financial Accounting Standards (FAS)
               No. 123, Share-Based Payment (FAS 123R),
which                addresses the accounting for share-based payment transactions in
which the                Company obtains employee services in exchange for (a) equity
instruments of the                Company or (b) liabilities that are based on the fair
value of the                Companys equity instruments or that may be settled by
the issuance of such                equity instruments. This statement eliminates the
ability to account for                employee share-based payment transactions using APB
Opinion No. 25 or using the                minimum value method and requires instead that
such transactions be accounted                for using the grant-date fair value based
method. This statement will be                effective as of the beginning of the first
interim or annual reporting period                that begins after June 15, 2005
for public companies and the beginning of                the annual reporting period that
starts after December 15, 2005 for non                public companies. Early
adoption of FAS 123R is encouraged. This Statement                applies to all awards
granted or modified after the statements effective                date. In
addition, compensation cost for the unvested portion of previously                granted
awards that remains outstanding on the statements effective date
               shall be recognized on or after the effective date, as the related
services are                rendered, based on the awards grant-date fair value as
previously                calculated for the pro-forma disclosure under FAS 123.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company estimates that the cumulative effect of adopting FAS 123R as of its adoption date
by the Company , based on the options outstanding as of December 31, 2004 will be
immaterial. This estimate does not include the impact of additional awards, (including
the 2004 Plan) which may be granted, or forfeitures, which may occur subsequent to
December 31, 2004 and prior to the adoption of FAS 123R. The Company expects that
upon the adoption of FAS 123R, the Company will apply the modified prospective
application transition method, as permitted by the statement. Under such transition
method, upon the adoption of FAS 123R, the Companys financial statements for
periods prior to the effective date of the statement will not be restated. The impact of
this statement on the Companys financial statements or its results of operations in
2006 and beyond will depend upon various factors, among them the Companys future
compensation strategy.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

O - 13

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES(Continued)

| | Recently
issued accounting pronouncements(cont.)
| | ------------------------------------------------

| | 2. | In
November 2004, the FASB issued FAS No. 151, Inventory Costs  an
               Amendment of ARB 43, Chapter 4" (FAS 151). This statement
               amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to
               clarify the accounting for abnormal amounts of idle facility expense,
freight,                handling costs, and wasted material. This statement requires that
those items be                recognized as current-period charges. In addition, this
Statement requires that                allocation of fixed production overheads to the
costs of conversion be based on                the normal capacity of the production
facilities. This statement will be                effective for inventory costs incurred
during fiscal years beginning after June                15, 2005 (January 1, 2006 for the
Company). Earlier application of FAS 151 is                permitted. The provisions of
this statement shall be applied prospectively. The                Company does not expect
this statement to have a material effect on the                Companys financial
statements or its results of operations.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | In
December 2004, the FASB issued FAS No. 153, Exchanges of Non-Monetary
               Assets  An Amendment of APB Opinion No. 29 (FAS
               153).  FAS 153 amends APB Opinion No. 29, Accounting
for                Non-Monetary Transactions (Opinion 29). The amendments made by
FAS 153 are                based on the principle that exchanges of non-monetary assets
should be measured                based on the fair value of the assets exchanged.
Further, the amendments                eliminate the exception for non-monetary exchanges
of similar productive assets                and replace it with a general exception for
exchanges of non-monetary assets                that do not have commercial substance.
The provisions in FAS 153 are effective                for non-monetary asset exchanges
occurring in fiscal periods beginning after                June 15, 2005 (July 1, 2005
for the Company).  Early application of the FAS                153 is permitted. The
provisions of this Statement shall be applied                prospectively. The
Company does not expect the adoption of FAS 153 to have                a material effect
on the Companys financial statements or its results of                operations.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 3 
RECEIVABLES AND PREPAID EXPENSES

|                                           | December 31,
|------------------------------------------ | ------------
|
|
|
|
|VAT refunds                                |             
|Prepaid expenses                           |             
|Research and development grant receivables |             
|Other receivables                          |             
|                                           |             
|                                           |             
|                                           |             
|                                           |             

O - 14

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 4       INVENTORIES

|                         | December 31,
|------------------------ | ------------
|
|
|
|
|Components and materials |             
|Consumables              |             
|Work in process          |             
|Finished products        |             
|                         |             
|                         |             
|                         |             
|                         |             

NOTE 5      - PROPERTY, PLANT AND EQUIPMENT

|                               | December 31,
|------------------------------ | ------------
|
|
|
|
|
|Cost                           |             
|Computers and software         |             
|Office furniture and equipment |             
|Leasehold improvement          |             
|Machinery and equipment        |             
|                               |             
|                               |             
|                               |             
|                               |             
|                               |             
|Accumulated depreciation       |             
|Computers and software         |             
|Office furniture and equipment |             
|Leasehold improvement          |             
|Machinery and equipment        |             
|                               |             
|                               |             
|                               |             
|                               |             
|                               |             

| | Depreciation
expenses totaled $300,000, $336,000 and $531,000, in the years ended December 31, 2004,
2003 and 2002, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------

# NOTE 6  SHORT-TERM
LOANS

| | The
balance as of December 31, 2004 represents short-term bank loans denominated in dollars
and bearing interest of 5.37% per annum. The maturity date is within 30-45 days.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 7  ACCRUED
LIABILITIES AND OTHER LIABILITIES

|                               | December 31,
|------------------------------ | ------------
|
|
|
|
|Employees and related expenses |             
|Accrued expenses               |             
|Warranty provision             |             
|Advances from customers        |             
|Other                          |             
|                               |             
|                               |             
|                               |             
|                               |             

O - 15

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

# NOTE 8 
CONTINGENCIES AND COMMITMENTS

| | A. | Contingencies
| | -- | -------------

| | 1. | On
December 16, 2003, certain minority shareholders of the company filed a
               lawsuit claiming approximately NIS 7.8 million (approximately $1.75
million)                against the company, certain of its shareholders, and certain of
its directors.                The lawsuit alleges that the defendants acted in a manner,
which prejudiced the                rights of the minority shareholders, and were in
breach of the Companys                obligations to such shareholders. Among the
relief being claimed by the said                minority shareholders are claims for
compensation, claims that the Company will                return to them (with linkage
and interest) the amount of their investment in the                Company, or that the
defendants will purchase their shares in the Company, and a                demand for
changes to the terms of certain convertible loans made to the Company                by
certain of the defendants. The Company has asked for a dismissal of the case
               relating to one of the parties suing. The Company and its attorneys are
not able                to give any realistic assessment as to the outcome of this
matter, therefore no                provision was recorded.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | On
October 26, 2004, a competitive company filed a lawsuit against the company
               and its North America distributor in which the plaintiff accused the
company and                its distributor of infringing six US patents based on sales in
the US of the                Companys three  dimensional modeling equipment.
The plaintiff has                requested damages in an unspecified amount, as well as
triple damages and                attorneys fees for alleged willful infringement. The
plaintiff also seeks an                injunction to prevent further infringement of its
patents.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 21, 2005 the Company filed a lawsuit against the competitive company claiming
infringement of three of the Companys US patents.
| | -------------------------------------------------------------------------------------------------------------------------------------------

| | Because
the case was recently filed the Company and its attorneys are still in the process of
evaluating the case. As such, the Company and its attorneys are not in a position, at
this time, to comment on the likelihood of an unfavorable outcome of the litigation or on
the amount or range of potential loss.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition, at this time the Company and its attorneys are not in a position to provide an
estimate on the cost of litigation if the case, were to proceed through trial.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company assesses the litigation costs for the year 2005 to be approximately $500,000,
which together with other expenses incurred in 2004 were recorded in the statement of
operations as special legal expenses and provision.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | A
former employee of the Company is suing the Company and one of its directors
               for a sum of NIS 315,000. The cause of action is an alleged breach of
certain                undertakings made by the Company to the plaintiff, including,
inter alia, an                undertaking to grant the plaintiff an option to purchase
1.75% of the                Companys shares. Additionally the plaintiff is claming
that the Company                allegedly failed to pay his salary and certain social
benefits. A statement of                defense by the Company has been filed.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Management
does not expect that the Company will incur substantial expenses in respect thereof;
therefore, no provision has been made for this lawsuit.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------

O - 16

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 8 - CONTINGENCIES AND COMMITMENTS(cont.)

| | B. | Commitments
| | -- | -----------

| | 1. | The
Company is committed to pay royalties of 3%-3.5% to the Government of Israel
               on sales of products in which the government participated in supporting
the                research and development expenses by way of grants, up to the amount
of the                grants received (dollar linked), plus annual interest based on the
LIBOR,                accruing from the date of grant. At the time the funding was
approved,                successful development of the project was not assured. In the
case of failure of                a project that was partly financed by royalty-bearing
Government participations,                the Company is not obligated to pay any
royalties to the Israeli Government.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of December 31, 2004, the maximum contingent liability in respect of these royalties
amounts to approximately 1.5 million dollars.
| | -------------------------------------------------------------------------------------------------------------------------------------

| | 2. | The
Companys facilities in Israel are rented under a lease agreement for 5
               years which end on December 31, 2006. The Company has two options to
extend the                agreement either by three additional years or by two additional
years following                the three for a total of 5 years. The rental payment under
this agreement is                $520,000 per annum. If the company doesnt exercise
the options mentioned                above the lessor will charge the Company for part of
the leasehold improvements                made by him up to maximum amount of about
$400,000.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Since
May 2002, the Company                leases part of the premises to third parties. The
annual rental revenue under                those agreements is $120,000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | The
Company is committed to pay royalties of 6-7% on sales of consumables to one
               of its suppliers as defined in the agreement between the parties.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

O - 17

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

# NOTE 9  SHARE
CAPITAL

| | A. | Balance
as of December 31, 2004 and 2003 
| | -- | ------------------------------------------

|                                       | December 31,
|-------------------------------------- | ------------
|
|
|
|
|Authorized :                           |             
|Ordinary shares of NIS 0.01 par value  |             
|Preferred shares of NIS 0.01 par value |             
|Issued and fully paid up               |             
|Ordinary shares of NIS 0.01 par value  |             
|Preferred shares of NIS 0.01 par value |             

| | B. | On
September 20, 2004 the Company completed a capital raising round, under which
          8,267,641 preferred shares were issued in consideration of $2,099,980. In
          addition, the Company granted to the investors 4,133,822 warrants to purchase
          preferred shares in consideration of an exercise price of $0.254 per share.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | C. | On
August 31, 2003, the Company received a convertible loan in the amount of
          $500,000 from one of its shareholders. The loan bore an interest of LIBOR + 4%
          per annum.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December 1, 2003, the loan was converted into 1,990,173 preferred shares. In addition, on
that date the company issued 4,075,501 preferred shares in consideration of $1,035,000
and granted 3,032,839 warrants to purchase preferred shares in consideration of an
exercise price of $0.254 per share.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | D. | On
March 4, 2003 the authorized shares capital was increase by 93,500,000           ordinary
shares and by 386,500,000 preferred shares.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------

| | On
that date, the company issued 77,663,122 preferred shares as follows:
| | ------------------------------------------------------------------------

| |  | 9,842,520
preferred shares in consideration of $2,500,000, which have been received in 2002.
| | - | --------------------------------------------------------------------------------------------

| |  | 22,480,621
 preferred  shares  pursuant to the Article of  Association of the company as anti
dilution                      agreements.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| |  | 45,339,981
 preferred  shares  as a  result  of  conversion  of  convertible  loans at the  amount
 of                      $8,965,436.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| | E. | The
Company has decided to grant up to 2,500,000 stock options to key employees,
          consultants and directors as an incentive to attract and retain qualified
          personnel. Each option can be converted into one ordinary share at an exercise
          price to be determined. The total number of options granted are:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       | Exercise price
|-------------------------------------- | --------------
|
|
|
|
|Balance as of December 31, 2003        |               
|Options forfeited                      |               
|                                       |               
|Balance of options  outstanding  as of |               
|December 31, 2004                      |               
|                                       |               
|Options  exercisable  as  of  December |               
|31, 2004                               |               
|                                       |               

O - 18

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

NOTE 9 - SHARE CAPITAL(cont.)

| | F. | In
2004, the Companys board of directors approved an Omnibus Incentive           Stock
Option and Restricted stock Plan (hereafter  the 2004 plan) under           which
up to 14,000,000 shares to be granted to key employees, consultants and
          directors. As of December 31, 2004 no options or shares were granted under the
          2004 plan.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 10  INCOME
TAXES

| | A. | On
October 14, 2001 the Company was granted Approved Enterprise                    status
under the law for the Encouragement of Capital Investment, 1959
                    (hereafter: the law) in the path of Alternative Benefits Program.
                    The program includes an investment of $ 2,050,000 in computers,
equipment, and                     leasehold improvements. Pursuant to the law, the
Company is entitled for                     exemption from taxes on income derived
therefrom for a period of 2 years,                     starting in the year in which the
Company first generated taxable income and                     reduced tax rate of 10-25%
for an additional period of 5-8 years.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the event of distribution of cash divided out of tax-exempt income, the Company will be
liable to corporate tax of 10-25% in respect of the amount distributed.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
period of tax benefits is subject to limits of the earlier of 12 years from the
commencement of production or 14 years from October 2001 (date of approval).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
entitlement to the above benefits is conditional upon the Company fulfilling the
conditions stipulated by the law, regulations published thereunder and the approval
letter.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | B. | The
Company is subject to the Income Tax Law (Inflationary Adjustments), 1985,
                    measuring income on the basis of changes in the Israeli Consumer
Price Index.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | C. | Until
December 31, 2003, the regular tax rate applicable to income of companies
                    (which are not entitled to benefits due to approved enterprise,
as                     described above) was 36%. In June 2004, an amendment to the Income
Tax Ordinance                     (No. 140 and Temporary Provision), 2004 was passed by
the Knesset                    (Israeli parliament), which determined, among
other things, that the corporate                     tax rate is to be gradually reduced
to the following tax rates: 2004  35%,                     2005  34%, 2006
 32% and 2007 and thereafter  30%.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | D. | The
Company has a carry forward loss of approximately $33 millions for tax
                    purposes as of December 31, 2004. Since it is more likely than not
that the                     differed tax regarding the loss carry forwards will not be
utilized in the                     foreseeable future, no income tax benefits have been
recorded in respect                     thereof.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | E. | The
subsidiary is taxed under the laws of its country of residence.
| | -- | -------------------------------------------------------------------

| | F. | The
Company and its subsidiary have not yet been assessed for income tax
                    purposes since their incorporation.
| | -- | --------------------------------------------------------------------------------------------------------------------------------

O - 19

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|Objet Geometries Ltd.                         
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|                                              
|In thousands of US Dollars                    

# NOTE 11  OTHER
OPERATING INFORMATION

| | A. | Research
and development expenses, net:
| | -- | ---------------------------------------

|                                            | Year ended December 31,
|------------------------------------------- | -----------------------
|
|
|
|
|Expenses incurred                           |                        
|Less - grants from the government of Israel |                        
|                                            |                        
|                                            |                        
|                                            |                        
|                                            |                        

| | B. | Following
is data regarding major suppliers:
| | -- | --------------------------------------------

| | Certain
components used in our systems are only available from single or limited sources.
| | -----------------------------------------------------------------------------------------

O - 20

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[Frazier & Deeter, LLC Letterhead]

REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
and StockholderScitex Vision America, Inc.

We have audited the accompanying
balance sheet of Scitex Vision America, Inc. (a wholly owned subsidiary of Scitex Vision,
Ltd.) (the Company) as of December 31, 2004 and the related statements of operations,
stockholders deficit, and cash flows for the year then ended (not presented
separately herein). 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 audit.

We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for purposes of expressing
an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial
statements referred to above (not presented separately herein) present fairly, in all
material respects, the financial position of Scitex Vision America, Inc. (a wholly owned
subsidiary of Scitex Vision, Ltd.) as of December 31, 2004, and the results of their
operations and their cash flows for the year then ended in conformity with generally
accepted accounting principles in the United States of America.

| |  | /s/ Frazier & Deeter, LLC
Frazier & Deeter, LLC
| |  | -------------------------------------------------------------

Atlanta, Georgia, United
StatesFebruary 7, 2005

| |  | 
| |  | 

V1

---

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# SIGNATURES

The Registrant hereby certifies that
it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and
authorized the undersigned to sign this Amendment No. 1 to its Annual Report on its
behalf.

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

Date: September 20, 2005

6

---

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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. (2)
|--- |  | -------------------------------------------------------------------

|3 |  | Voting
Agreement, dated December 1, 1980, by and among Discount Investment Corporation Ltd., PEC
             Israel Economic Corporation and Clal Electronics Industries Ltd. (3)
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4(a)(1) |  | Agreement
dated November 20, 2001 between Dundee Securities Corporation and the Registrant. (4)
|------- |  | -----------------------------------------------------------------------------------------------

|4(a)(2) |  | Asset
Purchase Agreement, dated November 24, 2003, between Eastman Kodak Company, the
             Registrant, Scitex Digital Printing, Inc. and Scitex Development Corp. (5)
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4(a)(3) |  | Agreement,
dated June 5, 2003, by and among Dundee Securities Corporation, Raymond James
             Ltd. and the Registrant. (6)
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|4(a)(4) |  | Agreement,
dated August 11, 2003, by and among Dundee Securities Corporation, Raymond James Ltd.
             and the Registrant. (7)
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------

|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. (8)
|------- |  | ---------------------------------------------------------------------

|4(c)(4) |  | The
Scitex 2001 Stock Option Plan (as amended, 2003). (9)
|------- |  | ---------------------------------------------------------

|4(c)(5) |  | The
Scitex 2003 Share Option Plan. (10)
|------- |  | ---------------------------------------

|4(d)(1) |  | Services
Agreement dated November 1, 2001, between Clal and the Registrant (as amended, 2004).
             (11)
|------- |  | ----------------------------------------------------------------------------------------------------------------

|4(d)(2) |  | Share
Exchange Agreement, dated December 22, 2002, by and among the Registrant, Scitex Vision
             Ltd. and Aprion Digital Ltd. (12)
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|4(d)(3) |  | Services
Agreement, dated March 1, 2004, between Discount Investment Corporation Ltd. and the
             Registrant. (13)
|------- |  | ---------------------------------------------------------------------------------------------------------------------------

|8 |  | List
of Subsidiaries of the Registrant. (14)
|- |  | --------------------------------------------

|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 Independent Registered Public Accounting Firm relating to Registrant. (14)
|-------- |  | -------------------------------------------------------------------------------------

|14(a)(2) |  | Consent
of Independent Registered Public Accounting Firm relating to Jemtex InkJet Printing Ltd.
(14)
|-------- |  | -----------------------------------------------------------------------------------------------------

|14(a)(3) |  | Consent
of Independent Registered Public Accounting Firm relating to Objet Geometries Ltd. (14)
|-------- |  | -----------------------------------------------------------------------------------------------

|14(a)(4) |  | Consent
of Independent Registered Public Accounting Firm relating to Scitex Vision America, Inc.
|-------- |  | ------------------------------------------------------------------------------------------------

7

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---

|(1) | Incorporated
by reference to Exhibit 1.1 to our Annual Report on Form 20-F for                the
fiscal year ended December 31, 2000, filed June 29, 2001.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated
by reference to Exhibit 1.2 to our Annual Report on Form 20-F for                the
fiscal year ended December 31, 2003, filed June 30, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated
by reference to Exhibit 10.h to our Registration Statement on Form                F-1
filed May 26, 1983 (File No. 2-82743).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated
by reference to Exhibit 4(a)(4) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2001, filed July 1, 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated
by reference to Exhibit 4(a)(2) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated
by reference to Exhibit 4(a)(3) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated
by reference to Exhibit 4(a)(4) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated
by reference to Appendix B to our Proxy Statement filed under the                cover of
a Current Report on Form 6-K filed April 1, 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated
by reference to Exhibit (d)(4) to our Tender Offer Statement on                Schedule
TO filed May 14, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated
by reference to Appendix B to our Proxy Statement filed under the                cover of
a Current Report on Form 6-K filed December 3, 2003.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Incorporated
by reference to Exhibit 4(d)(1) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated
by reference to Exhibit 4(d)(2) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2002, filed June 19, 2003.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Incorporated
by reference to Exhibit 4(d)(3) to our Annual Report on Form 20-F                for the
fiscal year ended December 31, 2003, filed June 30, 2004.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Incorporated
by reference to Exhibits 8, 14(a)(1), 14(a)(2) and 14(a)(3),                respectively,
to our Annual Report on Form 20-F for the fiscal year ended                December 31,
2004, filed June 30, 2005.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

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