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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 20-F

(Mark One)

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12 (b)(MARK ONE)

/ / REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)2000

/ / 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 0-26498
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NUR MACROPRINTERS LTD.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)(Exact Name of Registrant as specified in its charter)

ISRAEL
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(Jurisdiction of incorporation or organization)

5 David Navon Street
Moshav Magshimim 49001, Israel
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(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:12 ABBA HILEL SILVER ST.
P.O. BOX 1281, LOD 71111, 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 1.0 par value
-----------------
Title of Class

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

ordinary shares,
NIS 1.0 par value
-----------------
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, 1999:2000:

ordinary shares,
NIS 1.0 par value, 11,774,57314,497,185 shares
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Title of Class Number of Shares

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. Yes X/X/ No -- --/ /

Indicate by check mark which financial statement item the registrant has
elected to follow. Item 17 / / Item 18 X
-- --

2/X/

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IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT ON FORM 20-F
CONTAINS FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS CONTAINED
HEREIN ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN "ITEM 1: DESCRIPTION OF BUSINESS--RISK3: KEY INFORMATION--RISK FACTORS" AND
"ITEM 9:
MANAGEMENT'S DISCUSSION5: OPERATING AND ANALYSIS OF FINANCIAL CONDITIONREVIEW AND RESULTS OF
OPERATIONS"PROSPECTS." READERS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT
MANAGEMENT'S ANALYSIS AS OF THE DATE HEREOF. THE COMPANY UNDERTAKESWE UNDERTAKE NO OBLIGATION TO
PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES THAT ARISE AFTER THE DATE HEREOF. IN ADDITION TO THE DISCLOSURE
CONTAINED HEREIN, READERS SHOULD CAREFULLY REVIEW ANY disclosureDISCLOSURE OF RISKS AND
UNCERTAINTIES CONTAINED IN OTHER DOCUMENTS THAT THE COMPANY FILESWE FILE FROM TIME TO TIME WITH
THE SECURITIES AND EXCHANGE COMMISSION.

PART I

ITEM 1: DESCRIPTIONIDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable.

ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3: KEY INFORMATION

Not Applicable except ITEMS 3.A and 3.D, which are detailed below.

SELECTED FINANCIAL DATA

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AND SHARE DATA)

1996(1) 1997(1) 1998(1) 1999(2) 2000(3)(4)
---------- ---------- ----------- ----------- -----------

Revenues:
Sales of printers and related products......... $ 13,639 $ 18,874 $ 31,905 $ 58,259 $ 121,924
Sales of printed materials..................... 2,998 3,085 4,540 2,460 --
---------- ---------- ----------- ----------- -----------
16,637 21,959 36,445 60,719 121,924
---------- ---------- ----------- ----------- -----------
Cost of revenues:
Cost of sales of printers and related
products..................................... 11,528 9,627 16,368 30,440 64,107
Cost of sales of printed materials............. 2,008 1,684 2,579 1,344 --
---------- ---------- ----------- ----------- -----------
13,536 11,311 18,947 31,784 64,107
---------- ---------- ----------- ----------- -----------
Gross profit................................... 3,101 10,648 17,498 28,935 57,817
---------- ---------- ----------- ----------- -----------
Research and development expenses.............. 1,530 1,726 5,027 5,530 15,077
Less royalty-bearing grants.................... 372 43 818 721 451
---------- ---------- ----------- ----------- -----------
Research and development expenses, net......... 1,158 1,683 4,209 4,809 14,626
---------- ---------- ----------- ----------- -----------
Selling and marketing expenses, net............ 4,823 4,620 6,111 9,485 17,385
General and administrative expenses............ 2,560 3,439 4,802 6,275 12,765
Amortization of goodwill and other intangible
assets resulting from the acquisition of
Salsa Group.................................. 1,452
---------- ---------- ----------- ----------- -----------
Write-off of debts from related parties........ 3,757 -- -- -- --
---------- ---------- ----------- ----------- -----------
11,140 8,059 10,913 15,760 31,602
---------- ---------- ----------- ----------- -----------
Operating income (loss)........................ (9,197) 906 2,376 8,366 11,589
Financial expenses, net........................ (567) (320) (592) (616) (1,423)
Other income (expenses), net................... 76 (8) (20) 176 25
---------- ---------- ----------- ----------- -----------
Income (loss) before taxes on income........... (9,688) 578 1,764 7,926 10,191
Taxes on income................................ 400 67 264 798 1,244
---------- ---------- ----------- ----------- -----------
Income (loss) after taxes on income............ (10,088) 511 1,500 7,128 8,947
Minority interest in earnings of a
subsidiary................................... -- (26) (43) (28) --
Equity in gains (losses) of affiliates,
net(5)....................................... -- -- -- 75 (454)
---------- ---------- ----------- ----------- -----------
Net income (loss).............................. $ (10,088) $ 485 $ 1,457 $ 7,175 $ 8,493
---------- ---------- ----------- ----------- -----------
Basic net earnings (loss) per share............ $ (1.47) $ 0.07 $ 0.13 $ 0.64 $ 0.65
---------- ---------- ----------- ----------- -----------
Diluted net earnings (loss) per share.......... $ (1.47) $ 0.07 $ 0.13 $ 0.56 $ 0.57
========== ========== =========== =========== ===========
Weighted average number of shares used in
computing basic net earnings (loss) per
share........................................ 6,880,000 7,293,640 10,880,000 11,181,137 13,150,110
========== ========== =========== =========== ===========
Weighted average number of shares used in
computing diluted net earnings (loss) per
share........................................ 6,880,000 7,293,640 11,451,389 12,722,600 14,793,327
========== ========== =========== =========== ===========

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(1) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe and NUR Germany.

(2) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific and
NUR Germany (first 6 months). We owned 84% of NUR Germany; this subsidiary
was sold during the third quarter of 1999.

(3) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific,
Salsa Digital Printers, NUR Hungary Trading and Software Licensing Limited
Liability Company, NUR DO Brazil Ltda., Encre Consumables B.V. and Signtech
Japan.

(4) In July 2000, we purchased substantially all of the assets and assumed
specified liabilities of Salsa Digital, Ltd. and related entities. As part
of the asset purchase transaction, we also acquired all of the outstanding
capital stock of Signtech Japan.

(5) Represents equity in Stillachem and NUR Pro Engineering.

CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS U.S. DOLLARS)

1996(1) 1997(1) 1998(1) 1999(2) 2000(3)(4)
-------- -------- -------- -------- ----------

Working capital....................................... $ 690 $ 4,674 $ 5,441 $15,791 $ 55,186
Total assets.......................................... 12,161 13,783 21,995 39,648 120,006
Total liabilities..................................... 10,325 7,998 14,565 21,785 72,081
Total shareholders' equity............................ $ 1,836 $ 5,785 $ 7,430 $17,863 $ 47,925

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(1) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe and NUR Germany.

(4) In July 2000, we purchased substantially all of the assets and assumed
specified liabilities of Salsa Digital, Ltd. and related entities. As part
of the transaction, we also acquired all of the outstanding capital stock of
Signtech Japan.

RISK FACTORS

INVESTING IN OUR SECURITIES IS VERY RISKY. YOU SHOULD BE ABLE TO BEAR A
COMPLETE LOSS OF YOUR INVESTMENT. TO UNDERSTAND THE LEVEL OF RISK, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION
FOUND IN THIS FORM.

WE DEPEND ON A FEW KEY PRODUCTS IN A BUSINESS GENERALSUBJECT TO RAPID TECHNOLOGICAL
CHANGE. We are highly dependent upon the sale of our principal products -- the
NUR Blueboard printers, the NUR Fresco printers and the NUR Salsa printers.
Rapid changes in technology, customer preferences and evolving industry
standards increasingly characterize the market for our printers. Our growth and
future financial performance will depend upon our ability to update our current
products and develop and market new products to keep pace with technological
advances in the industry. During 1998, 1999 and 2000, we invested approximately
$5.0 million, $5.5 million and $15.0 million, respectively, in research and
development projects of which, in 1998, $1.95 million was related to the
acquisition of technology that caused a one-time write-off assigned to research
and development and, of which, in 2000, $4.3 million was related to the Salsa
Digital asset purchase transaction that caused a one-time write-off assigned to
research and development. Salsa Digital invested toward research and development
approximately $0.7 million, $1.8 million and $0.6 million in 1998, 1999 and the
first six months of 2000, respectively. Our business could seriously suffer if
we fail to anticipate or respond adequately to changes in technology and
customer preferences, or if our products are delayed in their development or
introduction. We cannot assure you that we will successfully develop any new
products. If our competitors introduce new products, the sales of our existing
products and our financial results could be harmed.

WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE AND INTEGRATE RECENTLY ACQUIRED
ASSETS FROM SALSA DIGITAL, WHICH COULD INTERRUPT OUR BUSINESS OR HARM OUR
FINANCIAL RESULTS. We acquired substantially all assets and assumed related
liabilities of Salsa Digital, Ltd. and related entities in July 2000. We could
have difficulty in assimilating the acquired business or technologies into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our
financial results.

WE CURRENTLY HAVE NO COMMITMENTS FOR ADDITIONAL FINANCING. We believe our
revenue from operations, capital resources and credit facilities will be enough
to fund our business activities at their current rate. We will need additional
funds, however, if we seek to expand our operations. If we are unable to raise
funds through public or private financing of debt or equity, we will be unable
to increase expenditures that could ultimately hurt our financial results, such
as research and development or production and marketing of our products. The
amount of money we will need depends on numerous factors, including the success
of our marketing and customer service efforts, our research and development
activities and the demand for our products and services. We currently have no
commitments for additional financing. We cannot guarantee that additional
financing will be available or that, if available, will be obtained on terms we
find favorable.

WE DEPEND ON A SINGLE INK AND INK-JET PRINTHEADS SUPPLIER FOR EACH OF OUR
PRINTERS. We currently purchase all of the ink and ink-jet printheads used in
our NUR Blueboard printers from one supplier. We also purchase all of the ink
and ink-jet printheads used in the NUR Fresco printers and the NUR Salsa
printers from single suppliers. If any of these sole suppliers experience
problems that result in production delays, our sales to new customers and
existing customers that rely on our ink and/or ink-jet components to operate
their printers could be hurt. Because the success of our business depends on the
sale of our printers, such a supply problem could have a severe effect on our
financial results. Also, if our sole suppliers reduce or change the credit or
payment terms they extend to us, our business could be harmed.

WE RELY ON SUBCONTRACTORS TO HELP US MANUFACTURE OUR PRODUCTS. We employ a
limited number of unaffiliated subcontractors to manufacture components for our
printers. For example, components for our NUR Salsa printers are manufactured
mainly by an unaffiliated subcontractor. In addition, the assembly of our NUR
Blueboard and NUR Fresco printers is currently conducted by an affiliate of NUR.
Our subcontractors have, in the past, been late in delivering components. We
have, however, been able to obtain adequate supplies of the components and raw
materials necessary to produce our printers and we have not had any serious
problems with our subcontractors. Because we rely on subcontractors, we cannot
be sure that we will be able to maintain an adequate supply of components.
Moreover, we cannot be sure that any of the components we purchase will satisfy
our quality standards and be delivered on time. Our business could suffer if we
fail to maintain our relationships with our subcontractors or fail to develop
alternative sources for our printer components. Also, as our business grows, we
will need to purchase greater quantities of components on a timely basis and any
delay in supply could hurt our sales. We cannot guarantee that we will develop
alternative sources of production for our products.

THE MARKET FOR OUR PRINTERS AND OUR BUSINESS IS VERY COMPETITIVE. The
printing equipment industry is extremely competitive and many of our competitors
have greater management, financial, technical, manufacturing, marketing, sales,
distribution and other resources than we do. We compete against several
companies that market digital printing systems based on electrostatic,
drop-on-demand inkjet, airbrush and other technologies. Some of our principal
competitors in this market include Vutek, Scitex 3M Image Graphics and Raster
Graphics Inc. Our ability to compete depends on factors both within and outside
of our control, including the performance and acceptance of our current printers
and any products we develop in the future. We also face competition from
existing conventional wide-format and super-wide format printing methods,
including hand painting, screen printing and offset printing. Our competitors
could develop new products, with existing or new technology, that could be more
competitive in our market than our printers. We can not assure you that we can
compete effectively with any such products.

WE FACE STRONG COMPETITION IN THE MARKET FOR PRINTING SUPPLIES. We also
compete with independent manufacturers in the market for printer supplies. In
1998, 1999 and 2000, ink sales accounted for 23.6%, 23.13% and 20.0% of our
total sales, respectively. We cannot guarantee that we will be able to remain
the exclusive or even principal ink manufacturer for our printers. We also
operate in the substrate business, which is also highly competitive and
characterized by a large number of suppliers worldwide. We are developing
substrates through subcontractors that we believe have a high added-value when
used with our printers. In 1998, 1999 and 2000 substrate sales accounted for 2%,
12% and 10% of our total sales, respectively. We cannot assure you that we will
be able to compete effectively or achieve significant revenues in the substrate
business.

WE DEPEND ON EREZ SHACHAR, OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER SINCE
1997, AND OTHER KEY EMPLOYEES. Our success depends to a significant extent upon
the contributions of key personnel and our senior executives, especially Erez
Shachar, our President and Chief Executive Officer. Our business could seriously
suffer if one or more of our key personnel or senior executives were to leave
our company. In addition, we do not have, and do not contemplate getting,
"key-man" life insurance for any of our key employees. Our future success will
also depend in part on our continuing ability to retain our key personnel and
senior executives and to attract other highly qualified employees. We cannot
assure our continued success in attracting or retaining highly qualified
personnel.

WE RELY ON TRADE SECRETS, PATENTS AND PROPRIETARY RIGHTS. We rely on a
combination of trade secrets, licenses, patents and non-disclosure and
confidentiality agreements to establish and protect our proprietary rights in
our products. We cannot guarantee that our existing patents or any future
patents will not be challenged, invalidated, or circumvented, or that our
competitors will not independently develop or patent technologies that are
substantially equivalent or superior to our technology. We

cannot be sure that we will receive further patent protection in Israel, the
United States, or elsewhere, for existing or new products or applications. Even
if we do secure further patent protection, we cannot guarantee it will be
effective. Also, although we take precautionary measures to protect our trade
secrets, we cannot guarantee that others will not acquire equivalent trade
secrets or steal our exclusive technology. For example, in some countries,
meaningful patent protection is not available. We are not aware of any
infringement claims against us involving our proprietary rights. Third parties
may assert infringement claims against us in the future, and the cost of
responding to such assertions, regardless of their validity, could be
significant. In addition, such claims could be found to be valid and result in
large judgments against us. Even if such claims are not valid, the cost could be
substantial to protect our patent rights.

WE MAY BE SUBJECT TO ENVIRONMENTAL RELATED LIABILITIES DUE TO OUR USE OF
HAZARDOUS MATERIALS SUCH AS METHYL ETHYL-KETONE SOLVENT. We mix the ink used in
some of our printers with a methyl ethyl-ketone solvent. Methyl ethyl-ketone
solvent is a hazardous substance and is subject to various government
regulations relating to its transfer, handling, packaging, use and disposal. We
store the ink at warehouses in Europe, the United States and Israel, and a
shipping company ships it at our direction. We face potential responsibility for
problems that may arise when we ship the ink to customers. We believe that we
are in material compliance with all applicable environmental laws and
regulations. If we fail to comply with these laws or an accident involving our
ink waste or methyl ethyl-ketone solvent occurs then our business and financial
results could be harmed.

WE RELY ON GOVERNMENT GRANTS, TAX BENEFITS AND OTHER FUNDING FROM THIRD
PARTIES. We have been favorably affected by certain Israeli and Belgian
Government programs and tax legislation principally related to research and
development and sales and marketing grants and capital investment incentives.
Our operations could be adversely affected if these programs or tax benefits are
reduced or eliminated and not replaced with equivalent programs or benefits, or
if our ability to participate in these programs were significantly reduced. We
cannot assure you that such programs and tax legislation will continue in the
future or that the available benefits will not be reduced or that we will
continue to meet the conditions to benefit from such programs and legislation.

WE MUST COMPLY WITH CONDITIONS TO RECEIVE GRANTS AND TAX BENEFITS. To
receive grants and tax benefits under Israeli law, we must comply with a number
of conditions. If we fail to comply with these conditions, the grants and tax
benefits that we receive could be partially or fully canceled and we would be
forced to refund the amount of the canceled benefits received, in whole or in
part, adjusted for inflation and interest. We believe that we have operated and
will continue to operate in compliance with the required conditions, although we
cannot be sure.

POLITICAL INSTABILITY IN ISRAEL MAY DISRUPT OUR MOST IMPORTANT OPERATIONS
AND OUR BUSINESS. Some of our facilities, operations and subcontractors are
located in the State of Israel. Political and military conditions in Israel may
affect our operations. A state of hostility has existed in Israel since it was
established in 1948, varying in degree and intensity, between Israel and certain
Arab countries. Although Israel has entered into agreements with some of these
countries, the Palestine Liberation Organization and the Palestinian Authority,
and the feuding parties have signed various declarations in hopes of resolving
some of the hostilities, we cannot predict the future political situation in
this volatile region. To date, Israel has not entered into a peace treaty with
Lebanon or Syria, with whom Israel shares its northern borders, or with certain
other Arab countries with whom a state of hostility exists. Any major
hostilities involving Israel, the Palestinian Authority, or Arab countries in
the Middle East could have a serious negative impact on our operations. All
nonexempt male adult citizens of Israel, including some of our officers and
employees, are obligated to perform military reserve duty and are subject to
being called for active duty under emergency circumstances. We cannot predict
the full impact of such conditions on us in the future, particularly if
emergency circumstances occur. If many of

our employees are called for active duty, our operations in Israel may be slowed
and our business may be harmed.

YOU MAY HAVE DIFFICULTY ENFORCING U.S. JUDGMENTS AGAINST US IN ISRAEL. We
are organized under the laws of Israel and our headquarters are in Israel. Most
of our officers and directors reside outside of the United States. Therefore,
you may not be able to enforce any judgment obtained in the U.S. against us or
any of such persons. You may not be able to enforce civil actions under U.S.
securities laws if you file a lawsuit in Israel. However, we have been advised
by our Israeli counsel that subject to certain limitations, Israeli courts may
enforce a final judgment of a U.S. court for liquidated amounts in civil matters
after a hearing in Israel. If a foreign judgment is enforced by an Israeli
court, it will be payable in Israeli currency.

OUR OPERATING RESULTS FLUCTUATE FROM PERIOD-TO-PERIOD. The results of our
operations for any quarter are not necessarily indicative of results to be
expected in future periods. Our operating results have in the past been, and
will continue to be, subject to quarterly fluctuations as a result of factors
such as the integration of people, operations and products from acquired
businesses and/or technologies, increased competition in the printing equipment
industry, the introduction and market acceptance of new technologies and
standards, changes in general economic conditions and changes in economic
conditions specific to our industry. Further, our revenues may vary
significantly from quarter to quarter as a result of, among other factors, the
timing of new product announcements and releases by our competitors and us. We
do not typically have a material backlog of orders at the beginning of each
quarter. We generally ship and record a significant portion of our revenues for
orders placed within the same quarter, primarily in the last month of the
quarter. We may not learn of shortfalls in sales until late in, or shortly after
the end of, such fiscal period. As a result, our quarterly earnings may be
subject to significant variations.

OUR BUSINESS IS SUBJECT TO RISKS FROM INTERNATIONAL OPERATIONS. We conduct
business globally. Accordingly, our future results could be materially adversely
affected by a variety of uncontrollable and changing factors including, among
others, foreign currency exchange rates; regulatory, political, or economic
conditions in a specific country or region; trade protection measures and other
regulatory requirements; business and government spending patterns; and natural
disasters. Any or all of these factors could have a material adverse impact on
our future international business.

CURRENCY FLUCTUATIONS ARE A RISK WE FACE ON A DAILY BASIS. Because we
generate revenues and expenses in various currencies, including the U.S. dollar,
the NIS and certain European currencies, our financial results are subject to
the effects of fluctuations of currency exchange rates. We cannot predict,
however, when exchange or price controls or other restrictions on the conversion
of foreign currencies could impact our business. Currency fluctuations could
hurt our profitability.

OUR STOCK PRICE MAY BE VOLATILE. Our ordinary shares have experienced
substantial price volatility, particularly as a result of variations between our
actual or anticipated financial results, the published expectations of analysts,
and as a result of announcements by our competitors and us. In addition, the
stock market has experienced extreme price and volume fluctuations that have
affected the market price of many technology and manufacturing companies, in
particular, and that have often been unrelated to the operating performance of
these companies. These factors, as well as general economic and political
conditions, may materially adversely affect the market price of our ordinary
shares in the future. Additionally, volatility or a lack of positive performance
in our stock price may adversely affect our ability to retain key employees, all
of whom have been granted stock options.

ITEM 4: INFORMATION ON NUR

HISTORY AND DEVELOPMENT OF NUR

The company's legal and commercial name is NUR Macroprinters Ltd. (the "Company")The main
office is located at 12 Abba Hilel Silver St., P.O. Box 1281, Lod 71111, Israel.
The telephone number is (011) 972-8-914-5555. NUR's registered agent in the
United States is CT Corporation System located at 1633 Broadway, New York, New
York 10019.

NUR was incorporated as an Israeli corporation on July 29, 1987 and our
corporate governance is controlled by the Israeli Companies Law. Our ordinary
shares have been traded on the Nasdaq National Market since October 1995 and are
currently traded under the symbol "NURM." NUR is a world leader in the
development, manufacturing, marketing and servicingleading supplier of wide
format and super wide format inkjetdigital printing systems.systems worldwide.

In September 1998, we purchased certain piezo drop-on-demand technology from
Meital Technologies Ltd. We purchased Meital's technology for an aggregate
amount of $3.0 million. The Company's printers are used for
on-demand, short-run,Meital acquisition resulted in the recognition by us
of a one-time charge involving a write-off of technology assigned to research
and development of $1.95 million in the third quarter of 1998. As part of the
purchase price, NUR has paid to Meital $0.75 million to date and has future
royalty obligations of up to $0.55 million which have been provided for. If the
provision amount of $0.55 million is not paid, Meital has the option to buy back
the technology in the aggregate amount of royalties paid by us. We intend to pay
such amounts in 2001.

In September 1999, we sold our 84% interest in M.NUR Marketing &
Communications GmbH, (NUR Germany). This subsidiary engaged in the printing of
super wide format (updigital graphics.

In October 1999, we established NUR Pro Engineering Ltd., a joint venture in
which we hold 50%. We manufacture and assemble the NUR Blueboard printers and
NUR Fresco printers through NUR Pro Engineering.

In July 2000, we acquired substantially all assets and assumed specified
liabilities of Salsa Digital, Ltd. and related entities, previously one of our
competitors in the digital printing market. Under the terms of our agreement, we
acquired the assets for $30 million, which consisted of $20 million in cash and
666,667 ordinary shares valued at approximately $10 million, based upon the
closing price of the ordinary shares on the Nasdaq National Market on May 15,
2000. In 1997, 1998 and 1999, the business we acquired from Salsa Digital had
revenues of $13 million, $25 million and $33 million, respectively, compared
with our revenues during the same periods of $22 million, $36 million and
$61 million.

In December 2000, we relocated our main facilities in Israel to 1.8 meters (6 feet), "WF")a high-tech
industrial zone in Lod, Israel to a building consisting of approximately 50,000
square feet. We use this facility as our headquarters and superwidefor research and
development. We have invested a total of approximately $2 million in building
out these facilities. The initial five-year lease of the Lod facility, which
commenced November 20, 2000, provides for monthly rent of approximately $63,000.
The lease agreement grants NUR an option to continue the lease term for two
consecutive periods of 2.5 years.

In April 2001, NUR announced and commenced implementation of a restructuring
plan, in order to align its cost structure to more conservative growth rates.
The restructuring actions are primarily related to the reorganization of
operating activities, such as the centralization of certain manufacturing
operations, the relocation of activities, a reduction in workforce and a
reduction in other administrative costs. The restructuring costs accrued for in
the first quarter of 2001 were $2,500,000. In addition, NUR incurred one-time
inventory write-offs of approximately $4 million. NUR associates the inventory
write-offs with more efficient product rationalization.

For a historical view of our financing activities, including capital
expenditures and divestitures, please refer to "ITEM 5: Operating and Financial
Review and Prospects."

BUSINESS OVERVIEW

NUR Macroprinters Ltd. is a leading supplier of wide format (over 1.8 meters, "SWF") printing. The Companyand super wide
format digital printing systems worldwide. We develop, manufacture, sell and
service digital color printers for the printing of large images such as
billboards, posters and banners, point of purchase displays, exhibition and
trade show displays as well as decorations and backdrops for construction
scaffolding covers, showrooms, television and film studios, museums and
exhibits. We also suppliessupply our customers with inks and solvents for use with our
printers and print substrates essential to the operationfor use with all brands of wide and super wide
format digital printers.

In July 2000, we purchased substantially all of the Company'sassets and assumed
certain liabilities of Salsa Digital, Ltd. and related entities, previously one
of our competitors in the digital printing market. As part of this asset
purchase transaction, we acquired the rights to manufacture and sell their line
of printers--the NUR Salsa-TM- printers. These printers complement the NUR line
of products by offering a full range of entry level printers.

The Company's main product line isnewly integrated company consists of three research and development
centers, including facilities for research and development of printing equipment
in Lod, Israel and San Antonio, TX (USA), and a facility for the development of
inks in Charleroi, Belgium. We have worldwide marketing, sales and service
subsidiaries in Europe, North America, Brazil and the Asia Pacific regions.

Our super wide products are headed by the NUR Blueboard-TM- family of SWFsuper
wide format printers. The NUR Blueboard-TM- printer, a second generation of
super wide format printers, was introduced by the CompanyNUR in early 1997. The Blueboard
printer can print on substrates of variable widths from 0.9 to 5.0 meters
(approximately 3 to 16.4 feet). The Blueboard printer is based on continuous
inkjet digital printing technology and is designed for high throughput, high
print quality, reliability and ease of use.

In April 1998, the Companywe introduced a faster version of the Blueboard printer, the
Blueboard 2-TM-, in response to demand from its customers for increased
productivity. In February 1999, the Companywe introduced the Blueboard HiQ-TM-, which
produces higher quality prints with higher resolution than the Blueboard and the
Blueboard 2 printers. BeforeIn April 2000, we introduced the introductionlatest version of the
Blueboard printers,--the NUR Blueboard-TM- printer,Blueboard HIQ+-TM-. The NUR Blueboard HIQ+ offers
two optional packages for multiple roll printing or double-sided printing for
outdoor backlight applications and a digital calibration system providing for
ease of use. The NUR Salsa 5000-TM- is also a cost-effective super wide digital
printer. The NUR Salsa 5000 offers production flexibility by allowing for both
super wide print jobs (up to 5 meters or approximately 16 feet) and wide format
jobs. Its piezo drop-on-demand technology provides the Company's
principal products were its first generation WF, Outboardphotorealistic printing
quality needed for both super wide and SWF Wideboard
printers. The Outboardwide jobs that require up-close viewing.

Our wide format printers are headed by the NUR Fresco-TM- printer, which was
commercially released in February 2000. The NUR Fresco is capable ofa new printing in widths of up to
1.6 meters (approximately 5 feet), was manufactured untilsystem,
targeted at the fourth quarter of
1995. In the fourth quarter of 1995, the Company introduced the Wideboard
printer, which iswide format screen printing environment and capable of printing
on substrates of variable widths of up to 51.83 meters (16.4(approximately 6 feet). The NUR Outboard and Wideboard printers both use
continuous inkjet technology.

In February 2000, the Company commercially released the NUR Fresco, a
new printing system, targeted at the WF screen printing environment. The
NUR Fresco is the first of the Company'sour printers to use drop-on-demand technology
("D-O-D")
involving the intermittent firing of ink drops when needed on the substrate
while the printing head travels across the substrate. We also offer NUR Salsa
wide format printers. The Outboard
printer, Wideboard printer,NUR Salsa wide format digital printers include the NUR
Salsa line of 32-head, piezo technology digital printing systems. These systems
are capable of printing on variable widths from 1.5 to 3.2 meters (approximately
5 to 10 feet).

The NUR Blueboard printers, the NUR Fresco and the NUR FrescoSalsa printers are
sometimes referred to collectively herein as the "Company's Printers". The CompanyPrinters."

We also sellssell specialized inks and substrates for use with the Company's
Printers. The inks sold by the CompanyNUR to itsour customers for use with the NUR Blueboard,
and the
NUR Fresco and NUR Salsa printers are resistant to water and ultraviolet rays
and are well suited for indoor and outdoor use.use without

lamination. The substrates the Company sellswe sell to our customers are also suitable for indoor
and outdoor use and are made of vinyl, PVC paper and mesh.

The Company sells itsvarious textiles.

We sell our printers and related products primarily to commercial printers,
design and service firms, screen printers, outdoor media companies and trade
shops. The products are used to print large images such as
billboards, posters and banners; point of purchase, exhibition and trade show
displays; as well as decorations and backdrops for construction scaffolding
covers, showrooms, television and film studios, museums and exhibits. The
Company's Printers are installed in over 200more than 600 sites throughout
Europe, North and South America, Africa and Asia.

The Company was incorporated as an Israeli corporation on July 29,
1987. The Company's Ordinary Shares have been traded on the Nasdaq National
Market since October 1995 and are currently traded under the symbol NURM.

INDUSTRY BACKGROUND

The market for printed applications requiring WFwide format and SWFsuper wide
format printing has expanded overduring the last few years. WFWide format and SWFsuper
wide format printing applications include billboards, posters and banners;
special event and trade show displays; point of purchase displays; fleet
graphics; decorations and backdrops. For example, the retail, automotive,
restaurant, travel and gasoline industries use outdoor advertising to promote
their products in numerous locations including roadside billboards and posters
displayed on streets and buildings, as well as the outside of buses, vans,
trucks and trains, so-called vehicular graphics. WFWide format and SWFsuper wide
format prints can also be found in theaters as stage decorations, in museums and
exhibitions as backdrops or displays and on construction sites as building site
coverings. Prior to the introduction of digital printing systems, WFwide format
and SWFsuper wide format short-run prints were produced either by hand painting,
which is relatively slow and expensive, and produces lesser quality images, or
by screen or offset printing, both of which are relatively expensive and time
consuming processes.

With the cost of digital printing expected to decrease and the ability of
digital technology expected to produce shorter runs more economically, the
Company believeswe
believe that the use of WFwide format and SWFsuper wide format prints, such as those
produced by the Company's Printers, should grow, and that the portion of the
market serviced by digital printing shouldwill continue to increase. The ability to
produce WFwide format and SWFsuper wide format images digitally has also opened new
media opportunities for advertisers, such as mural printing, carpet printing and
new forms of fleet graphics printing. The growth in demand for WFwide format and
SWFsuper wide format digital printers is fueled by both the replacement of
conventional print methods and the development of new printing applications.

TRADITIONAL WFWIDE FORMAT AND SWFSUPER WIDE FORMAT PRINTING METHODS

Conventional methods of WFwide format and SWFsuper wide format printing have
included hand painting, screen printing and offset printing. Generally,
producing WFwide format and SWFsuper wide format color prints by traditional methods
in relatively short runs from a few copies to a few hundred copies, depending on
the application, has either been relatively slow and expensive or of limited
quality. Because of the inherent limitations of the traditional WFwide format and
SWFsuper wide format printing methods, quality WFwide format and SWFsuper wide format
prints produced by these methods are generally limited to long runs of identical
prints, designed and prepared well in advance or, in the case of hand painting,
to single print applications. As a result, traditional methods of producing WFwide
format and SWFsuper wide format prints have not provided timely and economic
solutions for the needs of the short run printing market.

HAND PAINTING. Hand painting involves either the projection of an image
onto a substrate, which is then drawn onto the substrate and subsequently
painted by hand, or the spraying of paint onto material covered by a template
that has been cut to the desired shape. The process of hand painting is an
alternative mainly in developing countries where labor costs are significantly
lower and where the significantly lower image quality is tolerated by the local
marketmarket.

SCREEN PRINTING. The screen printing process is distinguished by its
ability to print finely detailed images on practically any surface, including
paper, plastics, metals and three-dimensional surfaces. However, the process
requires significant set-up time and materials cost before the image can be sent
to press. This cost constrains the minimum number of copies the screen printer
can produce

11
economically. As screen-printing is a highly labor-intensive process,process; it is best
suited for run lengths between 5020 to 400

4
copies. Hence, this market is a clear
target in which the Company believes itswe believe our digital printers can be highly competitive.

OFFSET PRINTING. Offset color printing generally produces very high quality
images compared to hand painting or screen-printing.screen printing. However, because of the
complex steps involved in offset color printing, each printing job, whether
small or large, involves substantial setup time and costs. In addition, much
like hand painting and screen-printing,screen printing, alterations and customizations are not
economically feasible unless the entire offset color printing process is
repeated. Another drawback is that the variety of substrate materials and widths
suitable for use with offset printing machinery is limited. In general, offset
color printing is best suited for long print runs.

WFWIDE FORMAT AND SWFSUPER WIDE FORMAT DIGITAL PRINTING

The introduction of digital printing is aiding in the transformation of the
WFwide format and SWFsuper wide format printing industry by lowering setup costs,
shortening turnaround time and reducing labor requirements. The Company believesWe believe that the
availability of WFwide format and SWFsuper wide format digital printing should lead
to an increase in demand for limited runs for customized and localized
advertising campaigns. In addition, the Company believeswe believe that single use applications,
such as the use of banners, displays and backdrops for trade shows, theme parks,
entertainment and special events, should become more popular. The Company believesWe believe that
the market for WFwide format and SWFsuper wide format printing should increase as
current applications gain market acceptance and as new applications are
developed.

Digital printing involves the production of hard-copy images and text from
digital data that is either generated on a computer at the printing site or
originated by a customer on the customer's computer system. The digital data is
then transferred directly from an electronic pre-press or desktop publishing
system to the digital printer. There are currently several digital printing
technologies available, including electrostatic, airbrush, D-O-D,drop-on-demand,
thermal transfer and continuous inkjet printing.

ELECTROSTATIC PRINTING. Electrostatic printing is a non-impact printing
technique that employs an array of metal styli, selectively pulsed to a high
potential to generate a charged latent image on dielectric-coated paper, which
is then toned to develop the latent image into a visible image. The achievable
printing resolution is up to 400 dots per square inch ("DPI").inch. The main drawback of the
technology is the need for special and expensive substrates and toners. This
requirement inflates the cost of consumables considerably.

THERMAL TRANSFER PRINTING. Thermal transfer printing is a contact printing
technology that employs arrays of heated needles and pressure to melt and
transfer wax based inks from a carrier roll onto a restricted variety of
substrates. Like electrostatic printing, thermal transfer printing requires
relatively expensive consumables.

AIRBRUSH PRINTING. Airbrush printing is accomplished by forcing a low
viscosity colored fluid through small aperture nozzles, thus creating a spray
jet. Computer driven modulation of the spray jets deposits an image-wise colored
layer deposited onto the substrate. The strongest feature of airbrush technology
is the printer's ability to cover large areas with uniform color. One
manufacturer of airbrush printers produces a printer that can also print on both
sides of a poster at the same time, which is important for signs that are
rear-illuminated.

PIEZO CONTINUOUS INKJET PRINTING ("CIJ"). CIJPRINTING. Continuous inkjet printing technology
involves the continuous flow of electrically conductive ink within a closed loop
that is deflected to a specific location on a sheet of paper or other medium.
The ink is separated into uniform micro-drops and the micro-drops are
electronically directed to be printed onto a selected area of the medium.
CIJContinuous inkjet printing technology allows for high speed printing and
produces images with good resolutions sufficient for

12
viewing from distances of beyond five feet. CIJContinuous inkjet printers also
produce multiple copies with consistent color quality, unlike airbrush printers.
The cost of equipment using CIJcontinuous inkjet printing technology is relatively
high in comparison to printers using electrostatic 5
technology. However, the cost
of the output produced with CIJcontinuous inkjet printers is lower than that of
electrostatic printers. Although the printer and printing costs of CIJcontinuous
inkjet printing and airbrush technology are comparable, CIJcontinuous inkjet
printers produce higher quality prints at higher speeds and with more consistent
color. The Company'sNUR's Blueboard
Outboard and Wideboard printers all use piezo CIJcontinuous inkjet printing
technology.

PIEZO D-O-DDROP-ON-DEMAND INKJET PRINTING. D-O-DDrop-on-demand technology involves
the intermittent firing of ink drops when needed on the substrate. It provides
high resolution and enables use of a variety of inks, for home, office and
industrial use. In September 1998, the Companywe acquired from Meital Technologies Ltd. ("Meital") all
rights (including all related assets) to Meital's piezo drop-on-demand inkjet
technologies for application in WFwide format digital printers for approximately
$3.0 million.printers. To address the
needs of the WFwide format market for higher resolution images for use with
shorter viewing distances, the Company utilizes D-O-Dwe utilize drop-on-demand technology in itsthe NUR
Fresco printer.

While D-O-Ddrop-on-demand is still a relatively new and evolving technology,
CIJcontinuous inkjet printing is a well-established and therefore reliable technology.
D-O-DDrop-on-demand technology was primarily developed for office use and is
characterized by a relatively higher resolution and a selected range of
substrates while CIJcontinuous inkjet printing technology was developed mainly for
use in industrial applications and therefore, shows a more uniform and stable
color output, including the ability to print on a wide selection of substrates.

The Company believesWe believe that itsour NUR Blueboard printers are currently the only
commercially available SWFsuper wide format digital printers using piezo continuous
inkjet technology. Although not the only D-O-Ddrop-on-demand printer available for
the WFwide format market, the
Company believeswe believe that the NUR Fresco's productivity makes it
particularly attractive to screen printers. The Company believesOur NUR Salsa printers complement
our product line by offering a full-range of printers at entry level prices. We
believe that the Company's Printers have been designed and engineered to fit the
overall needs of their respective WFwide format and SWFsuper wide format printing
markets.

The Company'sNUR's strategy is to:

- strengthen itsour position as a world leader in the SWFwide format and super
wide format digital printing marketmarkets by supplying the most productive and
cost-effective SWFwide format and super wide format digital printers;printers and
totally digitally-based printing solutions for the out-of-home advertising
market;

- replace a significant portion of existing WFlarge format screen printers
with itsour large format digital inkjet printers;

- be itsour customers' vendor of choice for all of their ink and substrate
needs;

- enable itsour customers to develop new ways to profit from the
Company'sour printing
systems; and

- provide itsour customers with highly responsive and capable support, service
and supplies.

PRODUCTS

The Company'sNUR's revenues are derived primarily from the sale and service of the
Company's Printers and the sale of consumables used with the Company's Printers.
The consumables consist primarily of ink and substrates. See "Item 9.
Management's Discussion"ITEM 5: Operating
and Analysis of Financial ConditionReview and Results of
Operations--GeographicProspects--Geographic Breakdown of Revenues" for more
information on the breakdown of revenues by category of activity and into
geographic markets.

13
PRINTERS

The Outboard printer, which was introduced in 1992, was the Company's
first product, and, until the end of 1995, its principal product. The Outboard
printer is capable of producing WF prints in widths of up to 1.6 meters. In the
fourth quarter of 1995, the Company introduced the Wideboard printer, which was
the Company's first generation SWF printer and its principal product in 1996.
The Wideboard printer is capable of producing prints of widths of 5 meters. The
Company has discontinued the manufacture of the Outboard printer and of the
Wideboard printer.

6
SUPER WIDE FORMAT DIGITAL PRINTERS

Since the beginning of 1997, the CompanyNUR has been marketing and selling the NUR
Blueboard printer, a second-generation SWFsuper wide format printer that is also capable
of producing prints of up to 5 meters in width with practically no limit on the
length of the print. The NUR Blueboard is designed for high throughput, high
print quality, reliability and ease of use. When wider widths of prints are
required, the NUR Blueboard printer, as is the case with the other Company's
Printers, creates a print layout in sections that, when seamed and placed
together, create a continuous image due to the NUR Blueboard printer's high
level of color consistency and accuracy.

In April 1998, the Companywe introduced a faster version of the NUR Blueboard printer,
the NUR Blueboard 2 printer, in response to demand in the SWFsuper wide format
printing industry for increased productivity. In February 1999, the Companywe introduced
the NUR Blueboard HiQ as part of the NUR Blueboard family of products, with ever
higher print quality and higher resolution than the market leadingexisting NUR Blueboard
printers. In April 2000, we introduced the latest of the NUR Blueboard
printers--the NUR Blueboard HIQ+. The NUR Blueboard HIQ+ offers a digital
calibration system that provides ease of use and two optional packages for
multiple roll printing or double-sided printing for outdoor backlight
applications. The NUR Blueboard HiQ isand HIQ+ are available both as an upgrade to
existing NUR Blueboard printers and as a new productproducts delivered from the
manufacturer.

The NUR Blueboard printers are all based on piezo continuous inkjet
technology, which is particular suitable for the superwidesuper wide format market due to
itsour outdoor durable inks, color consistency, high reliability and adaptability
for use with a variety of substrate materials including vinyl, carpet, canvas,
tarpaulin and mesh. The NUR Blueboard printers are currently the
Company's main hardware products. The NUR Blueboard printers accept a wide variety of rolled
substrates, differing in types and sizes, with a new design feeding mechanism
that allows for ease of loading and unloading of substrate rolls weighing 330
lbs.pounds or more. The NUR Blueboard printers are unique in that they are able to
print at their respective top speeds (up to 320 sq. ft./hr.square feet per hour for the NUR
Blueboard and up to 650 sq. ft./hrsquare feet per hour for the NUR Blueboard 2, and the
NUR Blueboard HiQ)HiQ and HiQ+) while printing at their respective highest visual
resolutions (70 DPIdots per square inch for the NUR Blueboard and NUR Blueboard 2
and 150 DPIdots per square inch for the NUR Blueboard HiQ)HiQ and HiQ+). They print
directly from digital data, using no printing plates. The NUR Blueboard
printers' software accepts many popular types of image formats (such as TIFF,
CT, JPEG, BMP, and PostScript) and images with
various resolutions and converts them automatically for printing. In addition,
the NUR Blueboard printers' software can be connected to any communication
configuration supported by the operating system, which enables smooth
integration of the printers in the pre-press environment for higher
productivity. The NUR Blueboard printers' operating software is based on
Microsoft Corporation's Windows NT multitasking operating system which enables
printing while preparing the next job for print. The software has sophisticated
color correction tables that enable the printers to match color output according
to substrate characteristics.

The NUR Blueboard printers are marketed primarily to commercial printers,
design and service firms, screen printers, outdoor media companies and trade
shops for shorter run, WFwide format and SWFsuper wide format printing. The Company'sOur NUR
Blueboard printers reproduce images with visual resolutions of 70-150 DPI,dots per
square inch, which allows for superior viewing from distances of 5-10 feet or
more, depending on the image file resolution. The NUR Blueboard printers are
capable of producing millions of distinctive colors. Thanks to the constant ink
monitoring and control built into its continuous inkjet printing technology, the
NUR Blueboard printers achieve a high level of color consistency for copies
printed at different times and under different environmental conditions in the
shop. Generally, depending upon the required print resolution, the Outboard printer operates at speeds of between
200 to 600 sq. ft./hr; the Wideboard printer operates at speeds of between 100
to 300 sq. ft./hr; the NUR Blueboard
printer operates at speeds of up to 320 sq.
ft./hr;square feet per hour. The NUR Blueboard
2, the NUR Blueboard HiQ and the NUR Blueboard 2 and NUR Blueboard HiQHIQ+ operate at speeds of up to
650 sq.
ft./hr.square feet per hour.

The Company's NUR Blueboard printers areSalsa 5000 is a cost-effective super wide digital roll-fed pressesprinter. NUR Salsa
5000 offers production flexibility by allowing for both super wide print jobs
(up to 5 meters or approximately 16 feet wide) and wide format jobs. Its piezo
drop-on-demand technology provides the photorealistic printing quality needed
for both super wide and wide jobs that acceptrequire up-close viewing. We believe the
NUR Salsa 5000 complements our product line, by offering a variety of substrates. They print directly fromcost-effective super
wide format, photo realistic digital data, using no
printing plates. The Company's Printers can be operated in a standalone mode or
in conjunction with pre-press and desktop publishing systems. When configured
with a pre-press system, the pre-press workstation prepares the digital file
containing the specifications for the output to be produced. The Company'sprinter at entry level prices.

WIDE FORMAT DIGITAL PRINTERS

Our NUR Fresco 1800 printer, commercially released in February 2000, was
first introduced in February 1999. In August 1999, we began an extensive beta
testing program with the NUR Fresco 1800 printer, started an extensive Beta
testing program, which included installation in
beta sites throughout the world and testing the machine in real time
environment.

7
The NUR Fresco printer is a digital production press specifically aimed at
the WFwide format market. Offering throughput of up to 900 sq.ft/hr, the Company believessquare feet per hour,
we believe that the NUR Fresco printer offers a digital alternative to screen
printing for short to medium length prints, eliminating the high set up cost
associated with films and screen preparation costs which are the basis of screen
printing. With emphasis on ease of use and operational flexibility, the NUR
Fresco printer is designed to fit any workflow, whether of a digital printing or
of screen printing. The NUR Fresco printer produces full color images from up to
six feet1.8 meters (or approximately 6 feet) wide with virtually no length limitations
on a wide variety of substrates at a resolution of up to 360 DPI.dots per square
inch.

The NUR Fresco printer is suitable for a wide range of applications such as
point of purchase displays, indoor and outdoor banners, bus shelters, fleet
graphics displays, shopping mall displays and more. Operating both in roll to
roll and roll to sheet modes, the NUR Fresco printer offers operational
flexibility to choose the handling method suitable for each job. The NUR
Fresco's small foot print is made possible due to a built-in drying system that
produces a fully dry and ready to use print, in any print speed. The built-in
drying system is based on state-of-the-art control mechanism. The NUR Fresco
printer accepts most popular graphics file format, offering full integration to
the already existing processes of the printing business. The NUR Fresco printer
is designed for ease of use and can be run by one operator.

The Fresco media program is developed by NUR in tandem with leading
substrate manufacturers in the market to offer NUR Fresco users variety of media
choice suitable for all types of applications range and price range. By
developing this open media system NUR Fresco printer offers low operating costs
without binding the user to a specific provider of expensive consumables.

TheWe believe the NUR Fresco printer complements the NUR Blueboard printers,our product line by
expanding the Company's Printers coverage into a more complete and full range of
indoor and outdoor WFwide format and SWFsuper wide format application graphics.

The NUR Salsa wide format printers include the NUR Salsa line of 32-head,
piezo technology digital printing systems. Various NUR Salsa models print up to
eight colors at up to 600 dots per square inch, in print widths of 5 feet, 8
feet and 10 feet, offering production, enhanced photo realistic and photo high
quality modes of operation. With speeds up to 40 square meters (or approximately
410 square feet) per hour for commercial output, the NUR Salsa series makes both
one-offs and short-run jobs profitable. This series of printers uses low-cost
consumables and prints on a wide selection of substrates, ensuring low operating
costs. We believe the NUR Salsa series complements our product line, by offering
a full a range of cost-effective wide format, photo realistic digital printers
at entry level prices.

The Company's Printers can be operated in a standalone mode or in
conjunction with pre-press and desktop publishing systems. When configured with
a pre-press system, the pre-press workstation prepares the digital file
containing the specifications for the output to be produced. The Company's
Printers require little operator supervision, enabling one operator to run
several machines at once.

While an operator must be specifically trained in the operation of a printer, no
special color mixing skills are required unlike conventional methods such as
offset printing.

The Company's Printers can significantly reduce the setup costs associated
with each print job, the skill level of the personnel required and the number of
skilled personnel required as compared to traditional methods of WFwide format and
SWFsuper wide format printing. These advantages make WFwide format and SWFsuper wide
format short-run color printing significantly more economical than conventional
printing methods. Additionally, the relatively quick turnaround for the printed
product enables the Company's Printers to produce more output in a given period,
thereby lowering the costs of labor per print.

Unlike hand painting, screen or offset printing, the layout can be viewed
through the pre-press workstation prior to printing, permitting last minute
fine-tuning. By running a single copy of the print, corrections of text,
enhancements of images, and additions of color can all be accomplished with
minimal time, effort and cost. Additionally, since the format can readily be
changed, the Company's Printers allow the end-user to make each print in the run
different, with little time, effort, or additional cost. For example, if so
desired, different languages, graphics and text can be added to each print in a
run.

During the years ended December 31, 1997, 1998, 1999 and 1999,2000, sales of the
Company's Printers accounted for approximately 55%52%, 52%55% and 55%65%, respectively,
of the Company'sNUR's total consolidated sales. Sales of spare parts used in the Company's
Printers accounted for approximately 6%4.6%, 4.6%2.4% and 2.4%2.3% of total sales in the
years ended December 31, 1997, 1998, 1999 and 1999, respectively. Excluding M.
NUR Marketing & Communication GmbH's ("NUR Germany") in the years ended December
31, 1997, 1998 and 1999, sales of the Company's Printers accounted

for approximately 64%, 59.7% and 57.5%, respectively, of the Company's total
sales. Sales of spare parts used in the Company's Printers accounted for
approximately 7%, 5.4% and 2.5% of total sales in the years ended December 31,
1997, 1998 and 1999,2000, respectively. Currently, the
retail prices of the Company's Printers generally range from $375,000$169,000 to
$550,000$499,000 per machine.

CONSUMABLES

The CompanyNUR sells consumables (inks and printing substrates) primarily to the users
of the Company's Printers and substrates to users of other WF and
SWF printers.Printers.

INKS

The NUR Blueboard printers use specialized solvent-based pigmented ink
designed for the needs of the SWFsuper wide format market. The ink is resistant to
water and ultraviolet rays, making it fairly durable and thus well suited for
outdoor conditions. The Company's Printers, through the utilization of the ink,
can print on almost an unlimited variety of substrates, including numerous types
of paper, vinyl, cloth, textiles, mesh and metals. The ink enables the output of
the Company's Printers to be used both for indoor and outdoor advertising.
During the years ended December 31, 1997, 1998, 1999 and 1999,2000, sales of the ink
accounted for approximately 21%23.6%, 23.6%23.1% and 23.1%20.0%, respectively, of the Company'sNUR's total
sales. Excluding NUR Germany's results from the years ended December 31,
1997, 1998 and 1999, sales of the ink accounted for approximately 24.4%, 27% and
24.1%, respectively, of the Company's total sales

This ink used by the Blueboard Outboard and Wideboard printers, was developed with the Company'sour
participation by Imaje S.A. ("Imaje"), a French ink manufacturer, specifically for use in
the Company's Printers. The Company hasWe have an exclusive distribution and manufacturing
agreement with Imaje for the use of the ink in the WF and SWFsuper wide format printers.
The Company hasWe have an exclusive distribution agreement for the ink with Imaje. The
agreement between the CompanyNUR and Imaje calls for mutual exclusivity to be kept for as
long as both parties abide by the agreement.

The NUR Fresco usesprinters and NUR Salsa series use specialized solvent-based
pigmented ink designed for the needs of the WFwide format market and suited for
D-O-Ddrop-on-demand technology printers. It also is highly resistant to water and UV
and imparts more vibrant colors in the images printed using the NUR Fresco.

As of February 2000, inksFresco or
NUR Salsa printers.

Inks for the NUR Fresco printerprinters are manufactured by Stillachem, S.A., a 50%wholly
owned subsidiary of the Company ("Stillachem")NUR, and are sold to the customers by the Company'sour sale, marketing
and service subsidiaries. Stillachem focuses on the development and manufacture
of specialized inks for D-O-Ddrop-on-demand digital printing systems and inks for
other digital printers, including clear-coat varnishes for WFwide format and SWFsuper
wide format

printers. In August 1999, shortly after its incorporation, Stillachem acquired
from Techno-Ink Manufacturing Pty. Ltd., a South African based company involved
in the manufacture of digital production inks, certain know-how and equipment
required for the manufacture of digital inks and ink related products.

Inks for the NUR Salsa printers are developed and manufactured by our wholly
owned subsidiary Salsa Digital Printers in San Antonio, TX (USA) and are sold to
customers by our sales, marketing and service subsidiaries.

SUBSTRATES

As of June 1998, the CompanyNUR also began supplying, through itsour wholly owned
subsidiary in Belgium, NUR Media Solutions, S.A. ("NUR Media Solutions"), specialized substrates designed to
work with the Company's Printers and itsour ink. The CompanyNUR sells substrates under the NUR
brand name that are manufactured by several different suppliers for the Company.us. The
substrates are made of vinyl, PVC, paper and mesh and are suited for indoor and
outdoor use. The substrates are distributed worldwide by the Company'sour sales and service
organizations.subsidiaries. All NUR-branded materials are manufactured exclusively for NUR
Media Solutions.

NUR Media Solutions, with other leading manufacturers, introduced the Fresco
media program, which offers users of the NUR Fresco specially endorsed
substrates. These are tested to work with the NUR Fresco and the NUR Fresco ink
for a total printing solution that provides a high quality performance,
reliability and durability.durability

SALES AND MARKETING

The Company distributesWe distribute and sells itssell our products through its wholly-owned
subsidiaries,the following wholly owned
subsidiaries: NUR Europe S.A. ("NUR Europe"), NUR America, Inc. ("NUR America"),
NUR Asia Pacific (Hong Kong) Ltd. ("NUR Asia Pacific"), NUR Macroprinters
(Shanghai) Ltd. ("NUR Shanghai") and through its NUR Middle East and Africa
division ("NUR Middle East & Africa").

Until(including the end of 1996, most worldwide sales of the Company's Printers
had been made through Scitex Corporation Ltd. ("Scitex"). Since the beginning of
1997, the Company moved to direct distribution of its printers starting from the
Americas and Europe. As of February 1999, the Company established two additional
sales organizations, NUR Asia Pacific and NUR Middle East & Africa replacing
Scitex's role as distributordivision), NUR
America, NUR Asia Pacific, NUR Shanghai, NUR DO Brazil Ltda. and Signtech Japan.

In July 2000, we purchased substantially all of the Company's productsassets and specified
liabilities of Salsa Digital, Ltd. and related entities, previously one of our
competitors in the Far East,digital printing market. We have fully integrated the Middle Eastformer
Salsa Digital sales and Africa. The Company'smarketing force into our own existing and recently
formed marketing, sales and service subsidiaries in Europe, North America,
Brazil and the Asia Pacific regions. Our marketing activities include
participating in relevant tradeshows worldwide, advertising in trade
publications, marketing directly to a target base, as well as publishing itsour own
newsletters, participating in services and industry forums and maintaining an
internet site.

Through NUR Media Solutions' objective isSolutions, we are working to develop and market a wide
range of advanced consumables for the Company's WFour wide format and SWFsuper wide format
printers. Included in such consumables are the Company'sour specialized substrates, which are
designed to work with the Company'sour existing range of printers and inks and will beinks. These consumables
are distributed worldwide by the Company'sour sales and service organizations.

The Israeli Government, through the Fund for the Encouragement of Marketing
Activities of the Ministry of Industry and Commerce (the "Marketing
Fund"),Trade, awards participation grants
for marketing expenses incurred overseas. In 1997, 1998, 1999 and 1999, the Company2000, we received $0.2 million,
$0.11 million, $0.13 million and $0.13$0.14 million, respectively, for the promotion
of the Company'sour exportation of itsour printers. The CompanyNUR is obligated to pay a royalty of 3%3-4% of
the export added value to the Marketing Fund until 100% of the grants have been
repaid. The value of the grants received (including grants received in previous
years) are linked to the U.S. dollar. As of December 31, 1999, the Company2000, we had made
royalty payments in respect of such grants to the Marketing Fund totaling
approximately $0.08$0.18 million.

In September 1999, the Company sold its 84% interest in M.NUR Marketing
& Communications GmbH, the Company's German subsidiary, which engaged in the
printing of SWF digital graphics. The capital gain from this sale amounted to
$132,000.

PRODUCTION AND SOURCES OF SUPPLY

Until September 1999, the CompanyNUR manufactured and assembled the NUR Blueboard
printers through a subcontractor. As of October 1999, the Company
manufacturesNUR began manufacturing
and assembles all ofassembling the NUR Blueboard printers through NUR Pro Engineering, Ltd., a 50%
owned subsidiary ("NPE").affiliate of NUR. The NUR Fresco printer is also manufactured through NUR
Pro Engineering. Full system integration and acceptance and quality

control testing of the printers are conducted by the Companyus at a NPEan NUR Pro Engineering
facility located near the Company'sour operations in Israel. Product quality control tests
and inspections are performed at various steps throughout the manufacturing
process, and each product is subjected to a final test prior to delivery.

The Company believesWe believe that, to meet anticipated increases in sales, itwe can expand NPE'sNUR Pro
Engineering's production capabilities or engage sub-contractorssubcontractors to carry out
certain of the manufacturing or the assembly of its printers The Companyour printers. NUR supplies NPENUR
Pro Engineering with the inkjet heads used in the NUR Blueboard printers, which
the
Company acquireswe acquire from Imaje, the sole manufacturer and supplier of these components.
With the NUR Fresco printer, most of the components are available from several
sources; however, the drop-on-demand inkjet printheads used in the NUR Fresco
printer, are currently purchased exclusively from Modular Ink Technology, a
Swedish company. We have contracted with Modular Ink Technology to ensure the
supply of printheads, though this company is our sole supplier. The Company believes that it will be able to obtain and/or
manufacture inksNUR Salsa
line of printers is assembled by our wholly owned subsidiary Salsa Digital
Printers. Frames for the NUR Blueboard OutboardSalsa printers are manufactured, primarily, by an
unaffiliated subcontractor, Acradigital Corp., and Wideboard printers.

NPE employs unaffiliated subcontractors to manufacture certain
componentsthe inkjet printheads for the
Company's Printers. Such subcontractorsNUR Salsa are purchased exclusively from Modular Ink Technology.

To date, we have in the past,
been late in delivering components. The Company has, however, been able to obtain adequate supplies of the components and
raw materials necessary to produce itsour printers and hashave not had any serious
problems with itsour subcontractors. As the Company'sour business grows, itshowever, we will need
to purchase greater quantities of components on a timely basis; anybasis. Any delay in
supply could ultimately hurt its sales.

Theour business.

As of June 1998, NUR Fresco will also be assembled by NPE. Most ofbegan supplying, through our wholly owned
subsidiary in Belgium, NUR Media Solutions, specialized substrates designed to
work with the components
are available from several sources, however, the D-O-D inkjet print heads used
inCompany's Printers and our ink. NUR sells substrates under the NUR
Fresco,brand name that are currently purchased from Modular Ink Technology ("MIT"),
a Swedish company.manufactured by several different suppliers for us. The
Company has contractedsubstrates are made of vinyl, PVC, paper and mesh and are suited for indoor and
outdoor use. To date, we have not experienced any material supply problems with
MIT to ensure the supply of
print heads.substrates.

SERVICE AND SUPPORT

Installation, post sale support and warranty services of the Company'sour products, are
provided by NUR America, NUR Europe, (including the Middle East & Africa
division), NUR Asia Pacific, NUR Shanghai, NUR DO Brazil Ltda. and NUR
Middle East Africa. The Company'sSigntech
Japan. In most cases, our warranty to itsour direct customers and the
Company's distributors in most cases
covers defects in the Company's Printers for a period of six months after
installation. InAnd, in most cases, the CompanyNUR has a parallel warranty from NPEour
subcontractors or from itstheir suppliers with respect to most of the components
covered by the Company'sour warranty. The CompanyNUR is also committed to maintaining sufficient spare
parts and materials necessary for the operation of the Company's Printers for a
period of five years after the manufacturing date of the last NUR printer.

RESEARCH AND DEVELOPMENT

The Company'sNUR's research and development efforts, which currently engagingengage approximately
5580 employees, are focused on developing new products and technologies;technologies, enhancing
the quality and performance relative to price of itsour existing products;products, reducing
manufacturing costs;costs, upgrading and expanding itsour product line through the
development of additional features;features and improving functionality in response to
market demand.

There are twoWe have three research and development facilities, the mainincluding a facility
located at the Company'sour headquarters in Lod, Israel, a facility located in San Antonio,
TX (USA) and another smaller facility in Charleroi, Belgium.

Total research and development expenses, before royalty bearing grants, were
approximately $1.73 million, $5.03 million, $5.53 million and $5.53$15 million in the years ended
December 31, 1997, 1998, 1999 and 1999,2000, respectively. In the year ended December 31,
1998, $1.95 million of these expenses were related to the acquisition of
technology from Meital Technologies Ltd., resulting in a one-time write-off of
technology assigned to research and development. In the year ended December 31,
2000, $4.3 million of these

expenses were due to a one-time write-off of in-process research and development
related to the Salsa Digital asset purchase transaction.

Research and development expenditures are comprisedcomposed principally of salaries
for employees, the hiring of sub-contractors,subcontractors, capital investment in
infrastructure for software and electronic designs and prototype material costs.
Initially, the CompanyNUR relied on outside research and development. The
CompanyWe began itsour own
research and development operations in early 1994. NUR Europe, one of our
subsidiaries, received a grant from local authorities in Belgium for
reimbursement of up to 70% of its total research and development investment,
which it carries out in Belgium, up to approximately $1 million. If no revenues are derivedNUR Media
Solutions markets and sells the products developed under the grant, and
reimburses the Belgium authorities at a rate of 3%-6% of the revenue generated
from the technologies and NUR Europe develops no products as a result thereof, then no
repaymentsale of the grant is required. Should revenues be recognized from the
research and development efforts, a progressive five-year repayment program
would be implemented.products. NUR Media Solutions has established a research
and development center in Belgium dedicated to the research and development of
print substrates and inks for use with the Company's Printers. Between May 1999
and April 2000, NUR Media Solutions received a grant from the Belgium
authorities for reimbursement of up to 50% of its total research and development
investment, which it carries out in Belgium, up to approximately $0.3 million.
NUR Media Solutions will reimburse the grant, as of January 2001 at a rate of 6%
of the revenue generated from the products developed under the grant. As of
December 31, 2000, the maximum royalty obligation of NUR and NUR Media Solutions
is in the amount of $0.95 million.

In September 1998, the Companywe purchased certain piezo D-O-Ddrop-on-demand technology from
Meital. The CompanyMeital Technologies Ltd. We purchased Meital's technology for an aggregate
amount of $3.0 million, of which payment of $0.85 million was conditional upon the
success of the technology, and $0.9 million was to be paid in future
installments.million. The Meital acquisition resulted in the recognition by the Companyus
of a one-time 11
charge involving a write-off of technology assigned to research
and development of $1.95 million in the third quarter of 1998. As part of the
purchase price, the CompanyNUR has paid to Meital $0.75 million to date and has future
royalty obligations to Meital, during the next two years, of up to $1.3 million. During 1999,$0.55 million which have been provided for. If the
Company paid royalties to Meital in theprovision amount of $0.45 million. If the Company does$0.55 million is not meet its obligationpaid, Meital has to pay minimum
royalty payments, Meital will have the option to buy back
the technology back for
approximatelyin the aggregate amount of royalties paid by us. We intend to pay
such amounts in 2001.

In July 2000, we purchased all of the Companyassets and assumed specified
liabilities of Salsa Digital, Ltd. and related entities, previously one of our
competitors in the digital printing market. The Salsa Digital asset purchase
transaction resulted in the recognition by us of a one-time write-off of
$4.3 million assigned to date.in-process research and development.

In the past, the CompanyNUR has received grants from the Government of Israel, through
the Office of the Chief Scientist, (the "OCS"), for the development of itsour systems and
products, including the Outboard printer. The
CompanyNUR received approximately $0.37 million,
$0.04 million, $0.82 million, $0.74 million and $0.74$0.26 million in research and
development grants from the OCSOffice of the Chief Scientist in the years ended
December 31, 1996, 1997, 1998, 1999 and 1999,2000, respectively. The OCSOffice of the Chief
Scientist awards grants of up to 50% (and in certain circumstances up to 66%) of
a project's approved expenditures in return for royalties. Under the terms of
the Company's funding,
from the OCS, royalties are payable generally at a rate of 2% to 3% on sales of
products developed from the funded project and ending when 100% to 150% of the
dollar value of the grant is repaid. No payments of royalties for such grant
were made to OCSthe Office of the Chief Scientist in the years ended December 31,
1996,1997 through 1999.2000. As of December 31, 1999, the Company2000, we had a contingent liability to pay
OCS $1.1$0.4 million in future royalty payments. The CompanyNUR expects to make royalty payments to
the OCSOffice of the Chief Scientist on sales of the NUR Fresco printers. The terms
of the OCS grants prohibit the manufacture of products developed with government
grants to be performed outside of Israel or the transfer out of Israel of the
technology developed pursuant to these grants without the prior consent of the
OCS.Office of the Chief Scientist. These restrictions do not bar exports from Israel
of products developed with such technologies. In addition, the know-how from the
research and development that is used to produce the product may not be
transferred to third parties or out of Israel without the approval of the OCS.Office
of the Chief Scientist.

COMPETITION

The principal competitive factors affecting the Company'sNUR's sales of itsour products are
their performance relative to price, productivity and throughput, product
features and technology, quality, reliability, cost of operation and
consumables, the quality and costs of training, support and service as well as
the flexibility of adapting to customers' applications of the products. Other
competitive factors include the ability to provide access to product financing,
the Company'sNUR's reputation and customer confidence in the CompanyNUR to continually develop new
products and product accessories that will help them maintain and grow their
business.

The Company'sOur main competitors in the SWFsuper wide format arena are Vutek, Signtech and
Scitex. All three companies have introduced products that directly compete with
the NUR Blueboard printers. In the WFwide format market, the main competitors are
Scitex, through its subsidiary, Scitex Wide Format Printing Ltd., formerly
Idanit Technologies Ltd., 3M Image Graphics, Vutek and Raster Graphics Inc.
These companies have introduced products that compete with the NUR Fresco
printer.

The printing industry is large, and many of the Company'sour competitors possess greater
management, financial, technical, manufacturing, marketing, sales, distribution
and other resources than those of the Company.NUR. As a result, there can be no assurance
that competitors will not develop and market products utilizing new technology
that are competitive in price and performance with the Company's Printers, and
there can be no assurance that the Companywe can compete effectively with such products.

TRADE SECRETS, PATENTS AND PROPRIETARY RIGHTS

The CompanyWe currently reliesrely on a combination of trade secrets, licenses and patents,
together with non-disclosure and confidentiality agreements, to establish and
protect itsour proprietary rights in itsour products. No assurance can be given that
the Company'sNUR's existing patents or any future patents by the CompanyNUR will not be challenged,
invalidated, or circumvented, or that the
Company'sour competitors will not independently
develop or patent technologies that are substantially equivalent or superior to
the Company'sour technology. There can be no assurance that further patent protection will be
obtained in Israel, the United States, or elsewhere, for existing or new
products or applications, or that such further protection, if obtained, will be
effective. In some countries, meaningful patent protection is not available. 12

The Company isWe
are not aware of any material claim that itsour products infringe upon the
proprietary rights of third parties. However, there can be no assurance that
third parties will not assert infringement claims against the CompanyNUR in the future, and
the cost of responding to such assertions, regardless of their validity, could
be significant. In addition, such claims may be found to be valid and could
result in awards against the Company,NUR, which could have a material effect on the Company'sour
business. As a result, the cost to the CompanyNUR of protecting itsour patent rights could be
substantial. The Company believesWe believe that itsour success is less dependent upon the legal
protection afforded by patent and other proprietary rights than on the
knowledge, ability, experience and technological expertise of itsour employees and
itsour key suppliers. It is the
Company'sNUR's policy to have employees sign confidentiality
agreements, to have selected parties, including key suppliers, sub-contractors,subcontractors
and distributors, sign non-competition agreements, and to have third parties
sign non-disclosure agreements. Although the CompanyNUR takes precautionary measures to
maintain itsour trade secrets, no assurance can be given that others will not
acquire equivalent trade secrets or otherwise gain access to or disclose the Company'sNUR's
proprietary technology, or that the Companywe can meaningfully protect itsour rights to such
proprietary technology not subject to patent protection.

EMPLOYEES AND LABOR RELATIONS

As of MarchDecember 31, 2000, the Companywe employed approximately 200528 persons worldwide, about 23%fifteen
percent of which work in research and development. 95Approximately one-fifth of
these employees are employed by the CompanyNUR in Israel and the remainder are employed by
the
Company'sour subsidiaries worldwide. All of the Company'sNUR's employees who have access to
confidential information are required to sign a non-disclosure agreement
covering all Companyof our confidential information that they might possess or to which
they might have access.

The Company believes its20

We believe our labor relations are satisfactory and hassatisfactory. We have never experienced a
strike or work stoppage. The Company believes itsWe believe our future success will depend, in part, on
itsour ability to continue to attract, retain, motivate and develop highly
qualified technical, marketing and sales andas well as management personnel.

Israeli law generally requires severance pay equal to one month's salary for
each year of employment upon the termination of employment. The
Company'sNUR's liability for
future severance pay obligations is fully provided for by payments equal to
8.33% of an employee's salary each month made to various managers' insurance
policies and by accrual. The employees of the CompanyNUR are usually provided with an
additional contribution towardstoward their retirement that amounts to 10% of wages, of
which the employee and the employer each contributes half. Furthermore, Israeli
employees and employers are required to pay predetermined sums to the National
Insurance Institute, which is similar to the United States Social Security
Administration, and additional sums towards compulsory health insurance.

INSURANCE

The Company believesWe believe that the insurance coverage for itsour business is in accordance
with industry standards and is adequate and appropriate in light of the Company'sour
businesses and the risks to which they are subject.

RISK FACTORSLEGAL PROCEEDINGS

In December 1999, Poalim Capital Markets Ltd., an Israeli company engaged in
the business of mediation and assistance in securities transactions, filed suit
in the District Court of Tel Aviv, Israel, against NUR and Isal Amlat
Investments (1993) Ltd. Poalim Capital Markets claimed that NUR, in executing a
private placement agreement with Isal Amlat Investments (1993) Ltd. and
Dovrat & Co. Ltd. in September 1999, breached an agency agreement with Poalim
Capital Markets. Poalim Capital Markets seeks enforcement and monetary relief up
to approximately $0.33 million. NUR believes that the claims are without merit
and is defending itself vigorously against the action.

In September 2000, Abudi Signage Industry Ltd., an Israeli Company, and
Abudi Printing Technology Ltd., a wholly owned subsidiary of Abudi Signage
Industry Ltd. (collectively, the "Abudi Parties"), filed suit in the District
Court of Tel Aviv, Israel, against Meital Technologies Ltd., Mr. Kobi Markovitz
(the major shareholder of Meital), who is currently a consultant to NUR in the
field of technologies development, NUR and Erez Shachar, our President and Chief
Executive Officer. The Abudi Parties claim that Meital, in selling its peizo
drop-on demand technology to NUR breached agreements between the Abudi Parties
and Meital pursuant to which: (i) Meital was to develop, manufacture and sell to
the Abudi Parties an upgrade for Abudi's Vutek airbrush digital printers and
Abudi was to receive the exclusive right to market, distribute and sell these
upgrades, and (ii) Abudi was provided an option to purchase up to 20% of Meital
shares upon terms and conditions no less favorable than other investors. The
Abudi Parties claim that NUR knowingly purchased the Meital technology and
therefore caused Meital to breach its option agreements with the Abudi Parties.
The Abudi Parties seek consequential and indemnification monetary damages up to
approximately $4.95 million. NUR believes that the claims are without merit and
plans to defend itself vigorously against the action.

The Poalim Capital Markets' litigation and the Abudi Parties' litigation,
whether or not determined in our favor or settled by us, may be costly and may
divert the efforts and attention of our management from normal business
operations.

We are not currently subject to any other material legal proceedings. We may
from time to time become a party to various legal proceedings in the ordinary
course of our business.

ORGANIZATIONAL STRUCTURE

As of December 31, 2000, the following chart presents our corporate
structure, the jurisdiction of incorporation of our subsidiaries and the
percentage of shares that we hold in those subsidiaries.

SUBSIDIARIES PERCENTAGE JURISDICTION OF INCORPORATION
- ------------ ---------- -----------------------------

Encre Consumables B.V................................ 100% Amsterdam, Netherlands
NUR America Inc. (NUR America)....................... 100% Massachusetts, United States*
NUR Asia Pacific (Hong Kong) Ltd. (NUR Asia
Pacific)........................................... 100% Hong Kong, China
NUR DO Brazil Ltda................................... 100% Sao Paulo, Brazil
NUR Europe S.A. (NUR Europe)......................... 100% Brussels, Belgium
NUR Hungary Trading and Software Licensing Limited
Liability Company.................................. 100% Budapest, Hungary
NUR Macroprinters (Shanghai) Ltd. (NUR Shanghai)..... 100% Shanghai, China
NUR Media Solutions S.A. (NUR Media Solutions)....... 100% Brussels, Belgium
Salsa Digital Printers Ltd. (Salsa Digital
Printers).......................................... 100% Texas, United States**
Signtech Japan Ltd. (Signtech Japan)................. 100% Tokyo, Japan
NUR Pro Engineering Ltd.............................. 50% Rosh Ha'ain, Israel
Stillachem S.A. (Stillachem)......................... 50.1% Charleroi, Belgium***

- ------------------------

* NUR America has recently relocated to San Antonio, TX.

** Salsa Digital Printers is now doing business as NUR Engineering USA.

*** NUR acquired the remaining outstanding capital stock of Stillachem in
May 2001. As a result, Stillachem is now a wholly owned subsidiary of NUR.

ISRAEL

We recently relocated NUR's main facilities to a high-tech industrial zone
in Lod, Israel that consists of approximately 50,000 square feet. We use this
facility as our headquarters and for research and development. The initial
five-year lease of the Lod facility, which commenced November 20, 2000, provides
for monthly rent of $63,000. The lease agreement grants NUR an option to
continue the lease term for two consecutive periods of 2.5 years.

NUR Pro Engineering Ltd., a 50% owned affiliate, leases approximately 10,023
square feet in Rosh Ha'ain, Israel, for the manufacture and assembly of the NUR
Blueboard and the NUR Fresco printers. The Rosh Ha'ain lease expires in
October 2002.

UNITED STATES

NUR America leases office space in Newton, MA consisting of 26,500 square
feet that it has used as the subsidiary's headquarters, sales and marketing
offices and demonstration and service center. The Newton lease expires in
January 2011. In addition, NUR America leases and sub-leases an additional 4,500
square feet of office space in Newton, MA that served in the past as NUR
America's headquarters. This lease expires in October 2008. As part of our
recently announced plan to streamline and consolidate our U.S. operations, we
plan to relocate all of our American operations to the San Antonio, TX facility.
We are currently evaluating options with respect to the leases on the Newton, MA
offices.

Salsa Digital Printers leases 61,350 square feet in San Antonio, TX for use
as Salsa Digital Printers' headquarters, manufacturing facility and research
center. The San Antonio, TX lease expires in June 2001. Salsa Digital Printers
is negotiating an extension of the lease agreement. As noted above, the San
Antonio, TX facility will also become the headquarters for NUR America and NUR
America's sales and marketing offices. Salsa Digital currently leases office
space in San Antonio, TX, on behalf of Nur America, consisting of 5,900 square
feet for use as Nur America's training and service center.

EUROPE

NUR Europe leases approximately 1,970 square feet of office space in
Louvain-la-Neuve, Belgium for use as the subsidiary's headquarters and sales
office, demonstration and service center. The Louvain-la-Neuve lease expires in
September 2011. In 2000, NUR Europe expanded its headquarters space at the above
address by an additional 2,460 square feet. The lease for the additional space
expires in March 2012.

NUR Media Solutions leases approximately 1,920 square feet office space in
Louvain-la-Neuve, Belgium for use as office space. The Louvain-la-Neuve lease
expires in November 2009.

Stillachem leases temporary office space in Belgium of approximately 853
square feet. The lease expires in November 2002. Stillachem intends to rent
additional office space of approximately 800 square feet at the same location.

ASIA PACIFIC

NUR Shanghai leases approximately 7872 square feet of space for use as a
warehouse and as a demonstration center in a free trade zone in Shanghai, China
and occupies approximately 482 square feet office space in a separate location
in Shanghai, China. The leases will expire on January 2002 and December 2001,
respectively.

NUR Asia Pacific leases office space of approximately 1,254 square feet in
Hong Kong. The lease expires on September 2002. NUR Asia Pacific leases office
space of approximately 685.5 square feet in Singapore. The lease expires on
December 2001. NUR Asia Pacific also leases an office of approximately 425
square feet in Guangzhou. The Guangzhou lease expires on October 2001.

JAPAN

Signtech Japan leases approximately 660 square feet of office space in
Tokyo. The lease expires February 2002.

ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OPERATING RESULTS

GENERAL

NUR is a world leader in the market for the sale of wide format and super
wide format digital printing systems. NUR develops, manufactures, sells and
services digital, inkjet color printing systems for on demand, production, wide
format and super wide format printing. NUR also supplies inks and substrates
that are consumable products for the operation of the Company's Printers. In
July 2000, we purchased all of the assets and assumed specified liabilities of
Salsa Digital, Ltd. and related entities, previously one of our competitors in
the digital printing market. NUR's total revenues grew from $36.4 million in the
year ended December 31, 1998 to $60.7 million in the year ended December 31,
1999 and $121.9 million in the year ended December 31, 2000. Salsa Digital's
total revenues grew from $24.9 million in the year ended December 31, 1998 to
$33.0 million in the year ended December 31, 1999 and $17.5 million for the
first six months of 2000.

We carry out our research and development activities at three locations,
including our facilities in Lod, Israel, our facilities in San Antonio, TX (USA)
and in our facilities in Belgium. NUR's main sales and service activities are
carried out through our wholly owned subsidiaries, NUR Europe, located in
Brussels, Belgium, NUR America, located in Newton, MA (USA), NUR Asia Pacific
located in Hong Kong, NUR Shanghai located in Shanghai, China, NUR DO
Brazil Ltda., located in Sao Paulo, Brazil, Signtech Japan located in Tokyo,
Japan and through NUR Europe's division of Middle East & Africa located in
Belgium. NUR America will be relocating to San Antonio, TX as part of our
recently announced U.S. consolidation plan. The former Salsa Digital business is
currently operated through Salsa Digital Printers Ltd. and NUR Hungary Trading
and Software Licensing Limited Liability

Company, both of which are wholly owned subsidiaries. NUR wholly owns NUR Media
Solutions, located in Brussels, Belgium, which develops advanced consumables for
the Company's Printers. NUR wholly owns Stillachem, located in Charleroi,
Belgium, which is a digital ink factory producing inks for the NUR Fresco
printers, and 50% of NUR Pro Engineering Ltd. located at Rosh Ha'ain Israel
which is our main subcontractor for the assembly of the NUR Blueboard and NUR
Fresco printers.

NUR was incorporated as an Israeli corporation on July 29, 1987 and began
operations in June 1991. Since October 1995, NUR's ordinary shares have been
traded on the Nasdaq National Market. NUR is currently quoted on Nasdaq National
Market under the symbol "NURM."

Revenues are derived from the sale of the Company's Printers, which include
the NUR Blueboard printers, the NUR Fresco printer and the NUR Salsa printers,
inks, substrates, spare parts and related services.

Cost of sales of printers and related materials includes materials, labor,
overhead, and other direct or allocated costs involved in the manufacture,
warehousing, delivery, support, and maintenance of products. Research and
development expenses include mainly labor, materials consumed, expenses by
subcontractors, consultants, and others. In 2000, $4.3 million of research and
development expenses were due to a one-time write-off of in-process research and
development related to the Salsa Digital asset purchase. Research and
development expenses are carried to the statement of operations as incurred.
Grants are netted from research and development costs on an accrual basis as the
related expenses are incurred.

The sales and marketing expenses include the costs associated with the staff
of the sales and marketing force of NUR and our subsidiaries, advertising and
promotion of existing and new products, trade shows, commissions, and other
marketing activities. During 2000, NUR expended significant financial and
management resources to expand our business and product offerings. Grants are
netted from sales and marketing costs on an accrual basis as the related
expenses are incurred. NUR invested in the integration of the Salsa Digital and
the NUR worldwide sales and service organizations, strengthening the service and
sales organizations of NUR Europe, (including the Middle East & Africa
division), NUR America, NUR Asia Pacific, NUR Shanghai and NUR DO Brazil and
Signtech Japan. NUR also invested in the continuation of the development of NUR
Media Solutions, a subsidiary dedicated to the development and marketing of
consumables, mainly substrates, inks and clear coat varnishes for the use with
NUR's products, and of Stillachem, an ink factory located in Belgium.

CERTAIN ACCOUNTING POLICIES

NUR's consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the U.S. For more information
on NUR's financial statements, please see NUR's consolidated financial
statements as of December 31, 2000, which are included as a part of this annual
report on Form 20F.

The main sources of revenues for NUR are sales of the Company's Printers and
related consumable products. Revenues from sales of products are recognized upon
delivery provided that the collection of the resulting receivable is probable,
there is persuasive evidence of an arrangement, no significant obligations in
respect of installation remain and the price is fixed or determinable. NUR does
not grant a right of return.

The accompanying consolidated financial statements have been prepared in
U.S. dollars. The U.S. dollar is the currency of the primary economic
environment in which the operations of NUR, NUR America, NUR Salsa, NUR Hungary
and NUR Pro Engineering are conducted. The majority of sales are made in U.S.
dollars and the majority of purchases of materials and components are invoiced
and paid in U.S. dollars. In addition, a substantial portion of costs are
incurred outside Israel in U.S. dollars or paid in U.S. dollars or in New
Israeli Shekels (NIS) linked to the exchange rate of the U.S. dollar. The U.S.
dollar is the functional and reporting currency of NUR.

See Note 2 to NUR's consolidated financial statements, which are included as
a part of this annual report, for a discussion of NUR's accounting policy for
determining rate of exchange and linkage based amounts.

NUR's transactions and balances denominated in U.S. dollars are presented in
their original amounts. Non-dollar transactions and balances have been
remeasured into U.S. dollars in accordance with Statement No. 52 of the
Financial Accounting Standards Board (FASB), "Foreign Currency Translation." All
transaction gains and losses from remeasurement of monetary balance sheet items
denominated in non-dollar currencies are reflected in the statement of
operations as financial income or expenses, as appropriate.

The financial statements of other subsidiaries and an affiliate, whose
functional currency is not the U.S. dollar, have translated into dollars. All
balance sheet accounts have been translated using the exchange rates in effect
at the balance sheet date. Statement of operations amounts have been translated
using the average exchange rate for the period. The resulting translation
adjustments are reported as a component of accumulated other comprehensive
income (loss) in shareholders' equity.

NUR accounts for stock-based compensation in accordance with the
requirements of Accounting Principles Board Opinion No. 25 ("APB 25")
"Accounting for Stock Issued to Employees" and Interpretation No. 44 "Accounting
for Certain Transactions Involving Stock Compensation" ("FIN 44") in accounting
for its employee stock option plans. Under APB 25, when the exercise price of
NUR's employee options is less than the fair market value of the underlying
shares on the date of grant, compensation expense is recognized.

In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock Based Compensation" and EITF 96-18 "Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services" with respect to options issued to
non-employees were applied. According to FASB 123, the fair market value of
these options was estimated at the grant date using Black-Scholes options
pricing model.

In June 1998, FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), which is required to be adopted
in years beginning after June 15, 2000. Based on NUR's derivative positions at
December 31, 2001, we do not expect the impact of this new statement on our
consolidated balance sheets or results of operations to be material.

GEOGRAPHIC BREAKDOWN OF REVENUES

We sell our products and services throughout the world. Revenues are
generally attributed to the location of the sale of the product or service to
the end-user. The table below shows the breakdown of revenues (dollars in
thousands) by categories of activities and into geographic markets in the years
ended December 31, 2000, 1999 and 1998. The "Others" category, below, includes,
among other things, revenues generated by the service of the Company's Printers.
With the sale of NUR Germany in the third quarter of 1999, NUR no longer derives
significant revenues from the sale of printed materials.

PRINTED
PRINTERS INK SUBSTRATES MATERIALS OTHERS
YEAR ENDED (65.3%) (19.8%) (9.8%) (0%) (5.1%)
DECEMBER 31, 2000 ------------------- ------------------- ------------------- ------------------- --------
REGION $ % $ % $ % $ % $
- ----------------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Middle-East & Africa....... 4,081 5.2% 1,059 4.3% 979 8.2% -- -- 513
Asia....................... 18,120 22.8% 5,238 21.6% 365 3.0% -- -- 2,500
Europe..................... 27,802 35% 5,932 24.5% 5,922 49.3% -- -- 1,633
North & Latin America...... 29,518 37% 11,872 49.6% 4,747 39.5% -- -- 1,643
------ ---- ------ ---- ------ ---- ----- --- -----
Total Revenues............. 79,521 100% 24,101 100% 12,013 100% -- -- 6,289
====== ==== ====== ==== ====== ==== ===== === =====

OTHERS TOTAL
YEAR ENDED (5.1%) (100%)
DECEMBER 31, 2000 -------- -------------------
REGION % $ %
- ----------------- -------- -------- --------

Middle-East & Africa....... 8.2% 6,632 5.4%
Asia....................... 39.7% 26,223 21.6%
Europe..................... 26.0% 41,289 33.9%
North & Latin America...... 26.1% 47,780 39.1%
---- ------- ----
Total Revenues............. 100% 121,924 100%
==== ======= ====

PRINTED
PRINTERS INK SUBSTRATES MATERIALS OTHERS
YEAR ENDED (55.1%) (23.1%) (12.1%) (4%) (5.7%)
DECEMBER 31, 1999 ------------------- ------------------- ------------------- ------------------- --------
REGION $ % $ % $ % $ % $
- ----------------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Middle-East & Africa....... 2,408 7.2% 1,428 10.2% 785 10.8% -- -- 330
Asia....................... 6,357 19% 2,792 19.9% 468 6.4% -- -- 378
Europe..................... 11,017 32.9% 3,533 25.1% 2,898 39.8% 2,460 100% 1,540
North & Latin America...... 13,692 40.9% 6,291 44.8% 3,123 43% -- -- 1,219
------ ---- ------ ---- ------ ---- ----- --- -----
Total Revenues............. 33,474 100% 14,044 100% 7,274 100% 2,460 100% 3,467
====== ==== ====== ==== ====== ==== ===== === =====

OTHERS TOTAL
YEAR ENDED (5.7%) (100%)
DECEMBER 31, 1999 -------- -------------------
REGION % $ %
- ----------------- -------- -------- --------

Middle-East & Africa....... 9.5% 4,951 8.2%
Asia....................... 10.9% 9,995 16.5%
Europe..................... 44.4% 21,448 35.3%
North & Latin America...... 35.2% 24,325 40%
---- ------- ----
Total Revenues............. 100% 60,719 100%
==== ======= ====

PRINTED
PRINTERS INK SUBSTRATES MATERIALS OTHERS
YEAR ENDED (52.3%) (23.6%) (2.4%) (12.5%) (9.2%)
DECEMBER 31, 1998 ------------------- ------------------- ------------------- ------------------- --------
REGION $ % $ % $ % $ % $
- ----------------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Middle-East & Africa....... 916 4.8% 858 9.9% 156 17.5% -- -- 308
Asia....................... 1,762 9.2% 1,286 15.1% -- -- -- -- 278
Europe..................... 7,369 39% 2,388 28% 460 51.5% 4,540 100% 1,484
North & Latin America...... 9,005 47% 4,087 47% 278 31% -- -- 1,270
------ ---- ------ ---- ------ ---- ----- --- -----
Total Revenues............. 19,052 100% 8,619 100% 894 100% 4,540 100% 3,340
====== ==== ====== ==== ====== ==== ===== === =====

OTHERS TOTAL
YEAR ENDED (9.2%) (100%)
DECEMBER 31, 1998 -------- -------------------
REGION % $ %
- ----------------- -------- -------- --------

Middle-East & Africa....... 9.2% 2,238 6.1%
Asia....................... 8.3% 3,326 9.1%
Europe..................... 44.4% 16,241 44.6%
North & Latin America...... 38.1% 14,640 40.2%
---- ------- ----
Total Revenues............. 100% 36,445 100%
==== ======= ====

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain line items
from NUR's statement of operations as a percentage of NUR's sales:

YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1997(1) 1998(1) 1999(2) 2000(3)
-------- -------- -------- -------- --------
(IN PERCENTS)

REVENUES................................................ 100% 100% 100% 100% 100%
Cost of sales of printers and related products........ 69 43.9 44.9 50.1 52.6
Cost of sales of printed materials.................... 12 7.6 7.1 2.2 --
Gross profit.......................................... 19 48.5 48 47.7 47.4
Research and development expenses..................... 9 7.8 13.8 9.1 12.3
Research and development expenses net................. 7 7.7 11.5 7.9 12.0
Selling expenses, net................................. 29 21 16.8 15.6 14.3
General and administrative expenses................... 15 15.7 13.2 10.3 10.5
Amortization of goodwill and other intangible
assets.............................................. 1.1
Write-off debts of related parties.................... 23 -- -- --
Operating income (loss)............................... (55) 4.1 6.5 13.8 9.5
Financial expenses, net............................... 4 1.5 1.6 1 1.1
Other income (expense), net........................... -- -- 0.05 0.3 --
Taxes on income (tax benefit)......................... 2 0.3 0.7 1.3 1.0
Minority interest in earnings of a subsidiary......... -- 0.1 0.1 0.05 --
Equity in earnings (losses) of affiliates, net........ -- -- -- 0.1 0.4
Net income (loss)..................................... (61) 2.2 4 11.8 7.0

- ------------------------

(1) Represents NUR on a consolidated basis with our subsidiaries NUR Media
Solutions, NUR America, NUR Europe and NUR Germany.

(2) Represents NUR on a consolidated basis with our subsidiaries NUR Media
Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific and NUR
Germany (6 months). We owned 84% of NUR Germany; this subsidiary was sold
during the third quarter of 1999.

(3) Represents financial information for NUR together with our subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR Asia Pacific,
Salsa Digital Printers Ltd. (6 months), NUR Hungary Trading and Software
Licensing Limited Liability Company, NUR DO Brazil Ltda., Encre Consumables
B.V. and Signtech Japan.

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999

REVENUES. Total revenues increased by 100.8% to approximately
$121.9 million in the year ended December 31, 2000, from approximately
$60.7 million in the year ended December 31, 1999, both as a result of the
purchase of substantially all of the assets of Salsa Digital, Ltd. in July 2000
and internally generated growth. Excluding NUR Germany results from the year
ended December 31, 1999 (a subsidiary that was sold during the third quarter of
1999), total revenues in 2000 increased by 109.5% compared to $58.2 million in
1999. NUR's total revenues, including Salsa Digital on a pro forma basis
(assuming the Salsa Digital acquisition had been consummated as of January 1,
1999), increased by 48.6% to approximately $139.4 million in the year ended
December 31, 2000, from approximately $93.8 million in the year ended
December 31, 1999.

GROSS PROFIT. Gross profit was approximately $57.8 million in the year
ended December 31, 2000, an increase of 100.0% from $28.9 million in the year
ended December 31, 1999. Gross profit as a percentage of revenues was 47.4% in
the year ended December 31, 2000 compared to 47.7% in the year ended
December 31, 1999. Excluding NUR Germany, (a subsidiary that was sold during the
third quarter of 1999), gross profits from the year ended December 31, 2000
increased by 107.9%, $57.8 million in the year ended December 31, 2000 as
compared to $27.8 million in 1999. Gross profits on a pro forma basis were
approximately $65.2 million in the year ended December 31, 2000 compared to
$42.4 million in the year ended December 31, 1999, an increase of 53.8%.

EXPENSES. Research and development costs, net of government grants, were
approximately $14.6 million in the year ended December 31, 2000, compared to
$4.8 million in the year ended December 31, 1999, an increase of 204.2%. The
increase occurred as a result of NUR's internal growth and the purchase of
substantially all of the assets of Salsa Digital, Ltd. in July 2000 and included
a one time $4.3 million write-off of research and development in-process due to
the Salsa Digital asset purchase transaction. NUR expects to continue to invest
significant resources in our research and development programs for new products
and enhancements of existing products. NUR expects that research and development
expenses will continue to increase in absolute dollar terms as compared to
previous years. Net research and development costs on a pro forma basis were
approximately $9.6 million in the year ended December 31, 2000 compared to
$6.7 million in the year ended December 31, 1999, an increase of 43.3%.

Selling and marketing expenses were approximately $17.3 million in the year
ended December 31, 2000 compared to approximately $9.5 million in the year ended
December 31, 1999, an increase of 82.1%. The increase is due to NUR's internal
growth and the purchase of substantially all of the assets of Salsa
Digital, Ltd. in July 2000. NUR received $0.14 million in the year ended
December 31, 2000 from the Marketing Fund for selling and marketing expenses as
compared to $0.13 million in the year ended December 31, 1999. NUR is no longer
eligible for support from the Marketing Fund due to NUR reaching the maximum
allowed export revenues. The majority of sales and marketing expenses are
incurred by the following distribution subsidiaries, NUR Europe, NUR America,
NUR Shanghai and NUR Asia Pacific. Selling and marketing expenses on a pro forma
basis were approximately $22.7 million in the year ended December 31, 2000
compared to $14.5 million in the year ended December 31, 1999, an increase of
56.6%.

General and administrative expenses were approximately $14.2 million,
including amortization of goodwill and other intangible assets in the year ended
December 31, 2000, compared to approximately $6.3 million in the year ended
December 31, 1999, representing an approximately 125% increase.

General and administrative expenses on a pro forma basis were approximately
$17.2 million in the year ended December 31, 2000 compared to $15.9 million in
the year ended December 31, 1999, an increase of 8.2%. This increase is a result
of both the purchase of substantially all of the assets of Salsa Digital, Ltd.
in July 2000 and approximately $0.6 million of integration costs and
$1.4 million of intangibles assets amortization costs, both related to the Salsa
Digital asset purchase transaction.

Financial expenses, net increased to $1.4 million in the year ended
December 31, 2000 from $0.6 million in the year ended December 31, 1999, a 133%
increase. This increase is mainly due to interest expenses taken to finance the
cash portion of the Salsa Digital asset purchase.

TAXES. Taxes on income were $1.2 million in the year ended December 31,
2000 as compared to $0.8 million in the year ended December 31, 1999, an
increase of 50.0%. Taxes on a pro forma basis were approximately $1.2 million in
the year ended December 31, 2000 compared to $0.8 million in the year ended
December 31, 1999, an increase of 50%.

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998

REVENUES. Total revenues increased by 66.8%, to approximately
$60.7 million in the year ended December 31, 1999 from approximately
$36.4 million in the year ended December 31, 1998, mainly as a result of the
introduction of the NUR Blueboard HiQ and market acceptance of the NUR Blueboard
printers and as a result of the continued move to direct distribution by NUR of
NUR's products in the Middle East, Africa and Asia. Growth was also fueled by
the growth of sales of the ink as a result of the growth of the installed base
of the Company's Printers and substrates a new business started in the third
quarter of 1999. Excluding NUR Germany's results from the year ended
December 31, 1998 (a company that was sold during the third quarter of 1999),
revenues in 1999 were $58.3 million, an increase of 82.8% compared to
$31.9 million in 1998.

GROSS PROFIT. Gross profit was approximately $28.9 million in the year
ended December 31, 1999, an increase of 65.1% from $17.5 million in the year
ended December 31, 1998. Gross profit as a percentage of sales was 47.6% in the
year ended December 31, 1999 compared to 48% in the year ended December 31,
1998. Excluding NUR Germany's results from the year ended December 31, 1998
gross profit increased to $27.8 million (47.8% as percentage of sales) from
$15.5 million (48.7% as percentage of sales) in 1998, an increase of 79.4%.

EXPENSES. Research and development costs, net of government grants, were
approximately $4.8 million in the year ended December 31, 1999, compared to
$4.2 million in the year ended December 31, 1998, an increase of 14.3%. The
increase is mainly as a result of increased efforts in developing new products.
NUR expects to continue to invest significant resources in our research and
development programs for new products and enhancements of existing products. NUR
expects that research and development expenses will continue to increase in
absolute dollar terms as compared to previous years.

Selling and marketing expenses were approximately $9.5 million in the year
ended December 31, 1999 compared to approximately $6.1 million in the year ended
December 31, 1998, an increase of 55.7%. NUR received $0.13 million in the year
ended December 31, 1999 from the Marketing Fund for selling and marketing
expenses as compared to $0.11 million in the year ended December 31, 1998. NUR
will not be eligible for support from the Marketing Fund commencing in 2000 due
to NUR reaching the maximum allowed export revenues. The majority of sales and
marketing expenses are incurred by the distribution subsidiaries, NUR Europe,
NUR America, NUR Shanghai and NUR Asia Pacific.

General and administrative expenses were approximately $6.3 million in the
year ended December 31, 1999, compared to approximately $4.8 million in the year
ended December 31, 1998, representing an approximately 31.3% increase. This
increase was due primarily to building of the

financial and administrative infrastructures of NUR and the opening of the new
subsidiaries in the Far East.

Financial expenses, net increased to $0.61 million in the year ended
December 31, 1999 from $0.59 million in the year ended December 31, 1998.

TAXES. Taxes on income were $0.8 million in the year ended December 31,
1999 as compared to $0.3 million in the year ended December 31, 1998, an
increase of 166.7%.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

REVENUES. Total revenues increased by 65.5%, to approximately
$36.4 million in the year ended December 31, 1998 from approximately
$22.0 million in the year ended December 31, 1997, mainly as a result of the
introduction of the NUR Blueboard 2 and market acceptance of the NUR Blueboard
printers and as a result of the continued move to direct distribution by NUR of
NUR's products in Europe and the United States, NUR's two major markets. Growth
was also fueled by the growth of sales of the ink as a result of the growth of
the installed base of the Company's Printers.

GROSS PROFIT. Gross profit was approximately $17.5 million in the year
ended December 31, 1998, an increase of 65.1% from $10.6 million in the year
ended December 31, 1997. Gross profit as percentage of sales was 48% in the year
ended December 31, 1998 compared to 48.5% in the year ended December 31, 1997.

SALES. Sales of the Company's Printers and related products increased by
68.8% to approximately $31.9 million in the year ended December 31, 1998 from
approximately $18.9 million in the year ended December 31, 1997. This increase
was attributed primarily to the introduction and market acceptance of the NUR
Blueboard and to increased revenues due to the move from sales through
distributors to direct sales to end users through NUR's subsidiaries in Europe
and the United States.

EXPENSES. Research and development costs, net of government grants, were
approximately $4.2 million in the year ended December 31, 1998, compared to
$1.7 million in the year ended December 31, 1997, an increase of 147.1%. The
increase is mainly due to a one-time write-off of technology in the amount of
$1.95 million and as a result of increased efforts in developing new products.
NUR expects to continue to invest significant resources in our research and
development programs for new products and enhancements of existing products. NUR
expects that research and development expenses will continue to increase in
absolute dollar terms as compared to previous years.

Selling and marketing expenses were approximately $6.1 million in the year
ended December 31, 1998 compared to approximately $4.6 million in the year ended
December 31, 1997, an increase of 32.6%. NUR received $0.11 million in the year
ended December 31, 1998 from the Marketing Fund for selling and marketing
expenses as compared to $0.2 million in the year ended December 31, 1997. NUR
will not be eligible for support from the Marketing Fund commencing in 1999 due
to NUR reaching the maximum allowed export revenues. The majority of sales and
marketing expenses are incurred by the distribution subsidiaries, NUR Europe and
NUR America.

General and administrative expenses were approximately $4.8 million in the
year ended December 31, 1998, compared to approximately $3.4 million in the year
ended December 31, 1997, representing an approximately 41.2% increase. This
increase was due primarily to legal and extra-ordinary audit costs resulting
from the change in control and management of NUR, and to the re-building of the
financial and administrative infrastructures of NUR.

Financial expenses, net increased to $0.59 million in the year ended
December 31, 1998 from $0.32 million in the year ended December 31, 1997.

TAXES. Taxes on income were $0.3 million in the year ended December 31,
1998 as compared to $0.1 million in the year ended December 31, 1997, an
increase of 200.0%.

LIQUIDITY AND CAPITAL RESOURCES

During the past several years, we have funded our operations primarily
through the private sale of our equity securities as well as through cash
generated from operations.

NUR has future royalty obligations to Meital Technologies Ltd., which will
not exceed $0.55 million, payable by September 2001. Such commitment is part of
the purchase price for technology acquired by NUR for Meital.

As part of the Matan Settlement Agreement, NUR was obligated to pay a total
of $0.9 million, plus interest and tax, assuming timely payments, to the Matan
Parties. During 1999 and 2000, NUR paid $0.6 million to Matan. The remaining sum
of $0.3 million has been fully reserved and is payable by NUR to the Matan
Parties in equal quarterly installments ending December 2001.

OPERATING ACTIVITIES

In the year ended December 31, 2000, NUR had net income of $8.5 million. Net
cash used in operating activities was approximately $10.2 million. The main
changes in NUR's working capital were (i) an increase of approximately
$25.7 million in trade accounts receivable, (ii) an increase of approximately
$9.4 million in inventories, (iii) an increase of approximately $7.2 million in
trade payables, and (iv) an increase of approximately $4.7 million in accrued
expenses and other liabilities.

In the year ended December 31, 1999, NUR had net income of $7.2 million. Net
cash provided by operating activities was approximately $4.0 million. The main
changes in NUR's working capital were (i) an increase of approximately
$3.6 million in trade accounts receivable, (ii) an increase of approximately
$6.7 million in inventories, (iii) an increase of approximately $2.6 million in
trade payables, and (iv) an increase of approximately $3.1 million in accrued
expenses and other liabilities.

In the year ended December 31, 1998, NUR had net income of $1.5 million. Net
cash provided by operating activities was approximately $2.9 million. The main
changes in NUR's working capital were (i) an increase of approximately
$3.0 million in trade accounts receivable, (ii) an increase of approximately
$1.4 million in inventories, and (iii) an increase of approximately
$2.9 million in trade payables.

INVESTING IN OUR SHARES IS VERY RISKY. YOU SHOULD BE ABLE TO BEAR A
COMPLETE LOSSACTIVITIES

Net cash used in investing activities was approximately $21.8 million in the
year ended December 31, 2000, consisting mainly of $18.7 million in respect of
the purchase of the Salsa Digital assets and liabilities, and $3.2 million for
equipment. Net cash used in investing activities was approximately $1.4 million
in the year ended December 31, 1999, including $0.7 million provided by
realization of investment in a subsidiary, and $3.6 million in the year ended
December 31, 1998, consisting mainly of $2.5 million for equipment and
$1.3 million for the acquisition of technology.

FINANCING ACTIVITIES

Net cash provided by financing activities in the year ended December 31,
2000 was approximately $42.1 million. In July and December 2000, we took
long-term commercial bank loans of $25 million and $10 million, respectively,
primarily to finance the cash portion of the Salsa Digital purchase and other
acquisition costs. In September 2000, we finalized a private placement through
Investec Investment Banking--Israel. Several investors acquired 748,223 shares
at a price of $13.365 per share raising net $9.4 million in cash.

NUR maintains long and short-term credit facilities in an aggregate amount
of approximately $35.4 million at December 31, 2000. At December 31, 2000, NUR
had approximately $34.7 million in long-term loans from banks and others,
$0.9 million of which is payable within 12 months and $0.7 in short term loans.
NUR's long term loans are linked to the U.S. dollar and the Belgian Franc
bearing interest at a rate ranging between 6% and 7.4%.

As of December 31, 2000, total current assets of NUR amounted to
approximately $92.2 million, out of which $19.2 million was in cash, cash
equivalents and marketable securities, compared with total current liabilities
of approximately $37.0 million. The increase in current assets is attributable
primarily to NUR's internal growth as well as the growth generated by the Salsa
Digital asset purchase transaction.

In the year ended December 31, 1999, net cash provided by financing
activities was approximately $4.4 million. In September 1999, NUR raised
$3.3 million through a private placement of 600,000 ordinary shares and warrants
to purchase 150,000 of our ordinary shares, in the aggregate to ISAL Amlat
Investment (1993) Ltd. and Dovrat & Co. Ltd. In February 2000, ISAL and Dovrat
exercised the warrants issued under the investment agreement at an exercise
price of $8.00 per share resulting in the payment of an additional $1.2 million
to NUR.

Net cash provided by financing activities in the years ended December 31,
1998 was approximately $1.8 million.

We have granted several security interests in our assets to various banks
and leasing companies to secure bank credit lines and lease facilities.

IMPACT OF YOUR INVESTMENT. TO UNDERSTAND THE LEVELINFLATION, DEVALUATION AND FLUCTUATION OF RISK, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION
FOUND IN THIS FORM.

WE NEED ADDITIONAL FINANCING.CURRENCIES

Most of NUR's sales are in U.S. dollars. In addition, a substantial portion
of costs are incurred outside Israel in U.S. dollars or paid in U.S. dollars or
in NIS linked to the exchange rate of the U.S. dollar. Costs not effectively
denominated in U.S. dollars are translated to U.S. dollars, when recorded, at
prevailing exchange rates for the purposes of NUR's consolidated financial
statements, and will increase if the rate of inflation in Israel exceeds the
devaluation of the Israeli currency against the U.S. dollar or if the timing of
such devaluations were to lag considerably behind inflation. Consequently, NUR
is and will be affected by changes in the prevailing NIS/U.S. dollar exchange
rate.

NUR might also be affected by the U.S. dollar exchange rate to the Euro.

During 1992 and 1993, the value of the U.S. dollar increased relative to
major currencies and the rate of inflation in Israel exceeded the rate in the
United States. In 1995, 1996 and 1997 the value of the U.S. dollar decreased
relative to major currencies, and the rate of inflation in Israel exceeded the
rate in the United States. The annual rate of inflation in Israel in 1998 was
8.6% and decreased to 1.3% in the year ended December 31, 1999 and to 0% in
2000. The NIS was devalued against the U.S. dollar by approximately 17.6% in
1998, by approximately 0.16% in 1999 and by approximately 2.7% in 2000. NUR
cannot predict whether the rate of devaluation of the NIS against the U.S.
dollar will continue to exceed the rate of inflation in the future and whether
these conditions will have a material adverse effect on NUR.

The representative dollar exchange rate for converting the NIS to dollars,
as reported by the Bank of Israel, was NIS 4.041 for one dollar U.S. on
December 31, 2000. The representative dollar exchange rate was NIS 4.153 on
December 31, 1999 and NIS 4.16 on December 31, 1998.

NUR's transactions and balances denominated in U.S. dollars are presented at
their original amounts. Non-dollar transactions and balances have been measured
into U.S. dollars in accordance with Statement 52 of the FASB. All transaction
gains and losses from remeasurement of monetary balance sheet items denominated
in non-dollar currencies are reflected in the statement of operations

as financial income or expenses, as appropriate. The average exchange rates
during the years ended December 31, 1998, 1999 and 2000 were NIS 3.8, 4.077 and
4.024 for one dollar U.S., respectively. The exchange rate as of March 31, 2001
was NIS 4.1920 for one dollar.

CURRENT AND FUTURE CAPITAL NEEDS

NUR is currently implementing a plan to improve operational efficiencies
worldwide. As part of this plan, we have recently begun consolidating the
operations of our two wholly owned subsidiaries in North America -- NUR America
and Salsa Digital Printers -- into a single facility. NUR's restructuring
actions are primarily related to the reorganization of operating activities,
such as the centralization of certain manufacturing operations, the relocation
of activities, a reduction in workforce and a reduction in other administrative
costs. The one-time charge in respect of the restructuring plan was $2,500,000.
In addition, NUR incurred one-time inventory write-offs of approximately $4
million, which were associated with more efficient product rationalization.

We believe that our revenues from operations together with ourexisting capital
resources and credit facilities will be sufficient to fund ourNUR's current
activities at their present rate without our
planned expansion through July 2001. If we want to
proceed with the planned

WE NEED TO RAISE MORE expansion of our operations, werate. NUR will
MONEY TO SUCCESSFULLY RUN require additional funds, to be
OUR BUSINESS.
raised through public or private financing of debt or equity, if we seek to
ensureexpand our ability to maintain our
operations after December 2000.operations. If such funds are not raised, we aremay be unable to
raise such funds, we
will have to reduce or eliminate
certain plannedincrease expenditures for research and development, production, or marketing of
our products, any one of which could have a negative impactan adverse effect on our financial results. In this
regard, how much money we will need
depends on numerous factors,
including the success of our
marketing and customer service
efforts, our research and development
activities and the demand for our
products and services. We cannot
guaranteeNUR's business.
There can be no assurance that such additional financing will be available or
that, if available, it will be obtained on terms we find favorable.favorable to NUR. We currently
have no commitments for additional financing.

WE DEPEND ON A FEW KEY Wefinancing and are highly dependentexploring the possibility
of raising additional capital.

In this regard, NUR's capital requirements and level of expenses depend upon
numerous factors, including the sale
PRODUCTS IN A BUSINESSscope and success of our principalmarketing and customer
service efforts, and of our research and development activities, as well as the
demand for NUR's products and services. Moreover, in the NUR
SUBJECT TO RAPID Blueboard printerscourse of the
bankruptcy proceedings of Moshe Nur and the companies controlled by him, NUR Fresco
TECHNOLOGICAL CHANGE. printer. Rapid changes in
technology,
customer preferencesthe future may be exposed to claims arising from the actions of Moshe Nur
despite the settlement of all material claims related to such persons and
evolving
industry standards increasingly
characterize the market for our
printers. As a result of these
factors, our growthentities. Liabilities arising from any such claims may be material.

RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

NUR's research and future
financial performance will depend
upon our ability to develop and
marketdevelopment efforts, which currently engage approximately
80 employees, are focused on developing new products and keep pace
withtechnologies; enhancing
the latest technological
advancesquality and performance relative to price of our existing products; reducing
manufacturing costs; upgrading and expanding our product line through the
development of additional features; and improving functionality in response to
market demand.

There are three research and development facilities, including a facility at
our headquarters in Lod, Israel, a facility in San Antonio, TX (USA) and another
smaller facility in Charleroi, Belgium.

Total research and development expenses, before royalty bearing grants, were
approximately $5.0 million, $5.5 million and $15.0 million in the industry. We must
also improve our existing products to
accommodate technological advancesyears ended
December 31, 1998, 1999 and customer preferences. During 1998
and 1999, we invested approximately
OUR SUCCESS DEPENDS ON THE $5.03 million and $5.53 million
RESEARCH AND DEVELOPMENT OF respectively, in research and
NEW PRODUCTS. development projects of which, in2000, respectively. In the year ended December 31,
1998, $1.95 million wasof these expenses were related to the acquisition of
technology that
causedfrom Meital Technologies Ltd. resulting in a one-time write-off of
technology assigned to research and development. In the year ended December 31,
2000, $4.3 million of these expenses were related to the purchase of assets from
Salsa Digital, resulting in a one time $4.3 million write-off assigned to
research and development. Our
business could seriously suffer if we
failSalsa Digital invested approximately $0.7 million,
$1.8 million and $0.6 million for the years ended December 31, 1998, 1999 and
the first six months of 2000, respectively. Research and development
expenditures are composed principally of salaries for employees, the hiring of
subcontractors, capital investment in infrastructure for software and electronic
designs and prototype material costs. See "ITEM 4: Information on NUR--Research
and Development."

TREND INFORMATION

PRINTERS SALES

NUR has estimated based on our internal market research that the super wide
format industry has grown at a rate of approximately 10-15% during 2000 and is
expected to anticipate or respond
adequately to changes in technology
and customer preferences, or if our
products are delayed in their
development or introduction. Other
events beyond our control could also
hurt our business. For example, onecontinue growing at a rate of our competitors could develop and5-10% during 2001. Originally the
super wide format market a printer that customers
prefer over our printers. We cannot
make assurances that we will
successfully develop any new
products. Finally, we cannot predict
howwas created for print billboard. Currently the main
drive for growth is coming from the introduction of new application such as
mural coverings, truck side printing and exhibition graphics. NUR's growth
during 1998, 1999 and 2000 has exceeded this growth rate, mainly as a result of
NUR's increased market share in the super wide format market and the
introduction of new products. There can be no assurance, however, that NUR will
continue to increase market share in the super wide format market.

NUR started to sell the first NUR Fresco printers to the wide format
professional market in February 2000, and the NUR Salsa wide format series in
July 2000. We believe we will see most of our growth in 2001 in this format
coming from the introduction of our wide format products to the wide format
professional print market.

CONSUMABLES SALES

During the past few years, NUR focused on a recurring revenues strategy for
consumables. Revenues from consumables grew by 69% in 2000 compared to 1999
revenues. The consumable business is made of two families of products --
specialized inks and specialized substrates. NUR believes that during 2001 the
growth rate in the sale of the consumables will be less than in previous years
and will roughly reflect the growth rate of the installed base of the Company's
Printers.

GROSS MARGINS

We expect our competitors will affect salesgross margins to be at levels in 2001 that are similar to
those realized in 2000. Although there is a downward price pressure on NUR's
existing products, there have been certain reductions in the manufacturing cost
of these products. NUR is currently implementing a plan to improve operational
efficiencies worldwide. For example, as part of this plan, we have recently
begun consolidating the operations of our two wholly owned subsidiaries in North
America -- NUR America and Salsa Digital Printers -- into a single facility.

NUR anticipates a launch of our new products at gross margins similar to our
existing products.

OUR NEW PRODUCT, THEINDUSTRY

The out-of-home digital printing industry has undergone significant changes
in the past few years, and additional change is anticipated in the future. The
most noticeable change in the industry has been the adoption of inkjet
technologies by all major competitors in the industry. NUR's major competitors
have each introduced an inkjet-based printer to replace their existing airbrush
printers. The new printers, introduced since the end of 1997, are based on the
drop-on-demand technology. NUR We started sellingbelieves it is the only manufacturer with
printers that use all three printing technologies: the continuous inkjet
printing, drop-on-demand printing and continuous drop-on-demand printing. Though
no assurance can be given for the future, NUR Frescohas been successful to date in
FRESCO, HAS NOT BEEN February 2000. Muchmaintaining and increasing our growth in revenues from the Company's Printers.

With the cost of digital printing expected to decrease and the ability of
digital technology expected to produce shorter runs more economically, we
believe that the use of wide format and super wide format printing, such as that
produced by the Company's Printers, should grow, and that the portion of the
market serviced by digital printing should continue to increase. The ability to
produce wide format and super wide format images digitally has also opened new
media opportunities for advertisers, such as mural printing, carpet printing,
new forms of fleet graphics printing. The growth in demand for wide

format digital printers is fueled both by the replacement of conventional print
methods and the development of new printing applications.

Although we expect the above trends to continue worldwide, the digital
printing penetration rate to new markets may differ geographically.

RESTRUCTURING PLAN

ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

The executive officers, senior managers and directors of NUR are as follows:

NAME AGE POSITION WITH NUR
- ---- -------- ------------------------------------------

Dan Purjes(2)............................. 51 Chairman of the Board of Directors
President, Chief Executive Officer and
Erez Shachar(3)........................... 37 Director
Hilel E. Kremer........................... 39 Chief Financial Officer
Miriam Tal................................ 33 Vice President of Logistics and Operations
Eliahu Shalev............................. 51 Vice President of Research and Development
Ron Michael............................... 33 Vice President of Marketing
Hugo R. Chaufan(1)(2)..................... 57 Director
Robert F. Hussey(1)(2).................... 52 Director
Orit Leitman(1)(4)........................ 42 Director
Gideon Shenholz(1)(4)..................... 47 Director

- ------------------------

(1) Member of NUR's Audit Committee.

(2) Member of NUR's Stock Option and Compensation Committee.

(3) Member of the NUR's Non-Employee Director Share Option Plan Committee.

(4) External Director.

The address of each of our success
WIDELY ACCEPTED IN ITSexecutive officers, senior managers and directors
is c/o NUR Macroprinters Ltd., 12 Abba Hilel Silver St., P.O. Box 1281, Lod
71111, Israel.

DAN PURJES has served as the Chairman of the Board of NUR since April 1997.
Mr. Purjes is Chairman and Chief Executive Officer of Josephthal
Holdings, Inc., the parent company of Josephthal & Co., Inc., an investment
banking and brokerage firm which is a member of the New York Stock Exchange.
Prior to joining Josephthal in 1985, Mr. Purjes was a Vice President with the NUR Fresco depends upon our
INTENDED MARKET. ability to sell this digital printing
systema
number of securities firms, including Bear Stearns & Co. and L.F. Rothschild
Unterberg Towbin, in their corporate finance and brokerage sales divisions. He
began his Wall Street career at Morgan Stanley & Co. in 1978 as a replacement for
traditional screen printersdirector of
their computer systems department. Prior to that, Mr. Purjes was a manager at
Citibank and at Philip Morris International in their computer systems areas.
Mr. Purjes earned B.S. and M.S. degrees in Computer Science from the City
College of New York School of Engineering.

EREZ SHACHAR has served as NUR's President and Chief Executive Officer since
July 1997 and as a Director of NUR since October 1997. Mr. Shachar has also
served as a Director of NUR Europe and NUR America since October 1997, of NUR
Media Solutions since January 1998, of NUR Asia Pacific since January 1999, and
of NUR Pro Engineering since September 1999 and of Salsa Digital Printers since
May 2000. Prior to joining NUR, from 1989 to 1997, Mr. Shachar served in various
research and development, marketing, sales, and senior management positions with
Scitex Corporation. Mr. Shachar's last position with Scitex was Vice President
of Sales and Marketing of Scitex Europe, and prior thereto, Mr. Shachar held
several positions in the wide format marketmarketing organization of Scitex Europe. Prior to
joining Scitex Europe, Mr. Shachar was a software developer within the research
and development group of Scitex. Mr. Shachar holds a B.Sc. in Mathematics and
Computer Science from Tel Aviv University, and an M.B.A. degree from INSEAD,
France. Mr. Shachar is also a director of Eltek Ltd., a publicly held
corporation.

HILEL E. KREMER has served as the Chief Financial Officer and Secretary of
NUR since December 1998. Mr. Kremer has also served as a Director of NUR Europe,
NUR America and NUR Media Solutions since December 1998, as a Director of NUR
Asia Pacific since April 1999, as Director of NUR Pro Engineering since
September 1999 and as a Director of Encre Consumables B.V., of NUR Hungary
Trading and Software Licensing Limited Liability Company and of Salsa Digital
Printers since April 2000 and May 2000, respectively. As of January 2001,
Mr. Kremer has also served as a Director of Signtech Japan. Prior to joining
NUR, from 1993 to 1998, Mr. Kremer served in various management positions with
Scitex Corporation. Mr. Kremer's last position with Scitex was Vice President of
Finance and Chief Financial Officer of Scitex Asia Pacific, and prior thereto
Mr. Kremer held several positions in the finance organization of Scitex Europe.
Prior to joining Scitex, Mr. Kremer held various positions in the budgeting
department of the Israeli Finance ministry. Mr. Kremer holds a B.A. in Economics
from Hebrew University, Jerusalem, and an M.B.A. degree from INSEAD, France.

MIRIAM TAL has served as NUR's Vice President of Logistics and Operations
since March 2000. Ms. Tal has also served as Director of NUR Pro Engineering
since September 2000. Prior to becoming Chief of Operations, Mrs. Tal served at
NUR as Corporate Logistics Manager since March 2000. Prior to joining NUR, from
1996 to 2000, Ms. Tal served as Director of Operations at Neuromedical
Systems Inc. From 1991 to 1996, Mrs. Tal served in various positions in the
Manufacturing Support and Purchasing Divisions of Comverse Network
Systems, Inc. and Intel Corporation. Ms. Tal holds a B.A. in Business and
Economics from Hebrew University, Jerusalem, and an M.B.A. degree from Bar-Ilan
University, Ramat-Gan, Israel.

ELIAHU SHALEV has served as Vice President of Research and Development since
March 2001. Prior to joining NUR, from April 2000 to February 2001, Mr. Shalev
served as corporate Vice President of CreoScitex, heading the Output Division in
Herslia and Vancouver. From May 1981 to March 2000, Mr. Shalev served in various
research and development management positions with Scitex Corporation Ltd.
Mr. Shalev holds a BSC in Electrical Engineering from Ben Gurion University in
Israel and an MSC in Electrical Engineering from Technion Haifa. He also holds
an M.B.A. degree from Tel Aviv University.

RON MICHAEL has served as NUR's Vice President of Marketing since
June 1999. Prior to joining NUR, from 1997 to 1999, Mr. Michael served as
Managing Director of Hygiene Products Ltd., a McCarthy Group company. Prior to
that he held several positions within Strategic Business Development ("SBD"), an
Israeli strategy consulting firm. The last position he held at SBD was Senior
Project Manager, specializing in structural business moves. Prior to that, he
founded and served as Managing Director of Esprit Promotion Systems Ltd., a
company specializing in the development and sales of direct marketing data
bases. Mr. Michael holds a B.A. in Business Administration from Tel-Aviv College
of Administration, an LL.B. degree in Law from Tel-Aviv University and an M.B.A.
degree from INSEAD France.

HUGO R. CHAUFAN has served as a Director of NUR since September 1999. Until
December 31, 2000, Dr. Chaufan was President of ISAL Amlat Investments
(1993) Ltd., Managing Director and co-founder of Isal Investments Co. N.V., Isal
Holland B.V. and Isal Nadlan (1994) Ltd. Dr. Chaufan is Chairman of the Board of
Directors of Project Glilot Ltd., Poster Media (Israel) Ltd., Ain Pei Arutzei
pirsum Ltd., Shnapp Industries Ltd., Sivan Plastic Industries 1991 Ltd.,
Cargal Ltd. and Chemipal Ltd. Prior to becoming Managing Director of Isal Amlat
Investments Co. N.V. in 1987, Dr. Chaufan held the position of Chief Executive
Officer of Israel Chemical Industries Ltd., after holding senior management
positions, including Deputy Director of the Budget Department of the Ministry of
Finance. Dr. Chaufan holds degrees in Accountancy and Certified Accountancy, and
a Ph.D. in Economics.

ROBERT F. HUSSEY has served as a Director of NUR since September 1997.
Mr. Hussey is a private investor. From June 1991 to April 1997, Mr. Hussey
served as the President and Chief Executive Officer of Metrovision of North
America Inc. Prior thereto, from 1984 to 1991, Mr. Hussey served as the
President, Chief Executive Officer and Director of POP Radio Corp., a company
which he helped form. From 1979 to 1984, Mr. Hussey served as the Vice
President/Management Supervisor for shortGrey Advertising, Inc. Mr. Hussey holds a
B.S. in Finance from Georgetown University and medium-run jobs.an M.B.A. in International
Finance from George Washington University. Mr. Hussey is also a director of
Digital Data Networks, Inc., The New World Power Corporation, Digital Lightwave,
Inc. and TheNetDigest.com, Inc., all of which are publicly held corporations.

ORIT LEITMAN has served as an External Director of NUR since November 2000.
Ms. Leitman has served as V.P. Finance of Paradigm Geophysical Ltd. since
April 1999. From 1992 to 1999, Ms. Leitman served as Corporate Treasurer of
Scitex Corporation Ltd. Ms. Leitman holds a B.A. in Economics from Tel-Aviv
University and an M.B.A. from the Tel-Aviv University.

GIDEON SHENHOLZ has served as an External Director of NUR since
November 2000. Mr. Shenholz has served as the Managing Director of Pegasus
Technologies Ltd. since October 1995. Mr. Shenholz is one of the two founders of
Pegasus Technologies Ltd., established in 1991, and one of the major
shareholders in Pegasus Technologies Ltd. Prior thereto, from 1988 to 1991,
Mr. Shenholz was a consultant in electronic warfare (EW), mainly to Tadiran
Systems Ltd (EW division). From 1981 to 1988, Mr. Shenholz served as a senior
manager in Tadiran Systems Ltd (EW division). Mr. Shenholz holds a B.Sc. Degree
in Electronic Engineering from Technion, Haifa (1976) and a B.A. degree in
Psychology from Tel-Aviv University (1982).

COMPENSATION OF OFFICERS AND DIRECTORS

In the year ended December 31, 2000, the aggregate compensation paid by NUR
to the executive officers and directors of NUR (a total of 10 persons) amounted
to approximately $1.2 million. This marketamount includes the amount of compensation
paid and benefits in kind granted to these persons by NUR and our subsidiaries.

The executive officers of NUR received part of the compensation set forth
above under NUR's Management by Objectives (MBO) Compensation Plan. The MBO sets
annual individual goals to be achieved by the executive officers throughout the
year. The percentage of individual achievement determines the percent of the MBO
bonus paid to each executive officer. The MBO plan for the benefit of NUR's
Chief Executive Officer is administered by the Stock Option and Compensation
Committee. The MBO plan for the benefit of the other executive officers is
administered by the Chief Executive Officer. A portion of the bonus amounts is
paid in cash in the year for which they are awarded and the balance is paid in
cash in the year following the financial year for which they are awarded.

In addition, a total of 599,167 options have been granted to executive
officers and directors to purchase ordinary shares. The options granted had a
weighted average exercise price of $7.04 and have expiration dates ranging from
2007 to 2011.

Pursuant to an employment agreement, Mr. Erez Shachar, in his capacity as
President and Chief Executive officer of NUR, earned an annual salary of
$210,000 from January through June 2000. On July 1, 2000, pursuant to the terms
of the employment agreement, Mr. Shachar's annual salary was increased to
$240,000. Mr. Shachar also received a bonus in the year 2000 of $50,000 in
recognition of his contribution to the acquisition of the business of Salsa
Digital, Ltd. In addition, Mr. Shachar received a bonus of $26,000 in the year
2000 for on target performance based on NUR's MBO plan. For the year 2000, under
the 1997 Stock Option Plan, Mr. Shachar was granted options to purchase 30,000
ordinary shares at an exercise price of $10.875 per share. The options will be
exercisable until 2010 and will vest as follows: 10,000 on October 10, 2001,
10,000 on October 10, 2002 and 10,000 on October 10, 2003. In addition, for
various services rendered to NUR Europe S.A. and NUR Media Solutions S.A. by
Sorly Ltd., a company wholly owned by Erez Shachar, NUR Europe S.A. and NUR
Media Solutions S.A. each paid Sorly Ltd. the sum of $9,250 per quarter during
2000.

We pay our non-employee and external Board members remuneration for their
services as directors. This remuneration includes an annual payment of $8,000
and additional payments of approximately $500 per meeting and $250 per committee
meeting. The Chairman of the Board and Chairman of any committee are also
entitled to receive an additional annual fee of $5,000. Each non-employee and
non-external Board member also receives an annual grant of options to purchase
10,000 ordinary shares under the conditions set forth in NUR's 1998 Non-Employee
Director Share Option Plan. Directors who are also employees do not receive
additional compensation for serving as directors. The members of the Board do
not receive any additional remuneration upon termination of their services as
directors.

OUTSTANDING OPTIONS AND WARRANTS

As of December 31, 2000, NUR had outstanding options under NUR's stock
option plans to purchase a total of 2,403,199 of our ordinary shares. Of such
options, 95,900 have been issued under the 1995 Flexible Stock Incentive Plan,
1,521,766 have been issued under the 1997 Stock Option Plan, 108,333 have been
issued under the 1998 Non-Employee Director Share Option Plan and 677,200 have
been issued under the 2000 Stock Option Plan. The options granted under the 1995
Plan, the 1997 and the 2000 Plan are subject to various vesting requirements and
have been issued at exercise prices ranging from $1 to $14.25 per share with
various expiration dates. The options granted under the 1998 Plan have an
exercise price ranging from $2.75 to $13.50 per share, are not subject to
vesting requirements, with various expiration dates. See Note 16 to NUR's
consolidated financial statements included as a part of this annual report on
Form 20-F.

As of December 31, 2000, NUR had outstanding warrants exercisable into a
total of 132,411 ordinary shares. Of such warrants, (i) 55,000 were issued to
Josephthal & Co., Inc. as placement agent in connection with NUR's private
placement between September and December 1997, (ii) 25,000 were issued to
Cruttenden Roth Incorporated in connection with its role as "qualified
independent underwriter" in a registration of ordinary shares on behalf of
certain selling security holders, (iii) 15,000 were issued to Zamir & Barak in
partial consideration for legal services rendered on behalf of NUR and
(iv) 37,411 were issued to Investec Clali Trust Company Ltd. as placement agent
in connection with NUR's private placement in September 2000. The Josephthal
private placement warrants are exercisable at $1.00 per share no later than
September and December 2002. The Cruttenden Roth warrants are exercisable at
$4.50 per share from February 2000 to February 2004. The Zamir & Barak warrants
are exercisable at $2.75 per share from January 2000 to January 2004. The
Investec Clali warrants are exercisable at $13.365 no later than
September 2005. Dan Purjes, the Chairman of NUR,

is also the Chairman of Josephthal. See "ITEM 7: Major Shareholders and Related
Party Transactions."

Of the options and warrants described above, directors and executive
officers of NUR hold options and warrants to purchase an aggregate of 599,167
ordinary shares called for by such securities.

1995 FLEXIBLE STOCK INCENTIVE PLAN

In 1995, NUR adopted the 1995 Flexible Stock Incentive Plan which provides
for grants of stock options to employees of and consultants to NUR. Options to
purchase an aggregate of 500,000 ordinary shares were originally available for
grant under the 1995 Flexible Stock Incentive Plan, as amended, including
service options for future services, options for performance, and options to
consultants for service or performance.

NUR's 1995 Flexible Stock Incentive Plan provides that it may be
administered by the Board or by a committee appointed by the Board and is
currently dominatedadministered by screen
printers. Wethe Stock Option and Compensation Committee subject to
Board approval. The Board determines the employees and consultants who are
granted options under the 1995 Flexible Stock Incentive Plan, the timing of such
grants, the terms thereof and the number of shares to be covered thereby. The
Board also determines the exercise price for ordinary shares subject to the
performance and consultants options under the 1995 Flexible Stock Incentive Plan
and the exercise price for the service options; provided that in no case shall
the exercise price of any service option be less than 80% of the fair market
value of such ordinary shares at the date of grant. Service options usually vest
over a four-year period. One-third of the service options vest after the second
annual anniversary of the date of grant with an additional one-third vesting on
the third and fourth anniversary of the date of grant, respectively. Performance
options vest under the same terms as applicable to the service options.
Consultants options vest over a specified period of time based on past or future
services rendered or performance targets to be achieved by NUR as determined by
the Board. Notwithstanding the foregoing, the consultants options expire ten
years following the date of grant. No option may be assigned or transferred
except by will or the laws of descent and distribution.

Under the 1995 Flexible Stock Incentive Plan, for Israeli employees, options
and ordinary shares issuable upon the exercise of options granted to Israeli
employees of NUR can be held in a trust until the payment of all taxes due with
respect to the grant and exercise (if any) of such options.

1997 STOCK OPTION PLAN

In 1997, NUR adopted the 1997 Stock Option Plan which provides for grants of
stock options to employees, directors of NUR and consultants to NUR. Options to
purchase an aggregate of 2,200,000 ordinary shares were originally available for
grant under the 1997 Stock Option Plan, as amended.

The 1997 Stock Option Plan provides that it is to be administered by the
Board or by a committee appointed by the Board and is currently administered by
the Stock Option and Compensation Committee subject to Board approval. The Board
has broad discretion to determine the persons entitled to receive options under
the 1997 Stock Option Plan, the terms and conditions on which options are
granted, and the number of ordinary shares subject thereto, up to the maximum
aggregate amount permitted under the 1997 Stock Option Plan. The Board also has
discretion to determine the purchase price to be paid upon the exercise of an
option granted under the 1997 Stock Option Plan.

The exercise price of the option shares under the 1997 Stock Option Plan is
determined by the Board; provided, however, that the exercise price of any
option granted shall not be less than eighty percent (80%) of the stock value at
the date of grant of such options. The stock value at any time is equal to the
then current fair market value of NUR's ordinary shares. For purposes of the
1997 Stock Option Plan, the fair market value means, as of any date, the last
reported sale price, on such date, of

the ordinary shares on such principal securities exchange of the most recent
prior date on which a sale of the ordinary shares took place.

The Board determines the term of each option granted under the 1997 Stock
Option Plan; provided, however, that the term of an option shall not be for more
than ten (10) years. Upon termination of employment, all unvested options lapse.
Pursuant to the 1997 Stock Option Plan, options shall vest over a three-year
period, provided that the Board may determine different vesting schedules.

The options granted are subject to restrictions on transfer, sale, or
hypothecation. All options and ordinary shares issuable upon the exercise of
options granted to Israeli employees of NUR are held in trust for a minimum of
two years in accordance with Section 102 of the Israel Income Tax Ordinance.

1998 NON-EMPLOYEE DIRECTOR SHARE OPTION PLAN

In 1998, NUR adopted the 1998 Non-Employee Director Share Option Plan to
provide for grants of options to purchase ordinary shares to non-employee
directors of NUR. The 1998 Plan is administered by the Non-Employee Directors
Share Option Committee subject to Board approval. An aggregate amount of not
more than 250,000 ordinary shares is reserved for grants under the 1998 Plan.
The 1998 Plan will expire on December 8, 2008 (10 years after adoption), unless
earlier terminated by the Board.

Under the 1998 Non-Employee Director Share Option Plan, each non-employee
director that served on the 1998 "Grant Date," as defined below, automatically
received an option to purchase 10,000 ordinary shares on such Grant Date and
will receive an option to purchase an additional 10,000 ordinary shares on each
subsequent Grant Date thereafter provided that he or she is a non-employee
director on the Grant Date and has served as such for the entire period since
the last Grant Date. The "Grant Date" means, with respect to 1998, October 26,
1998, and with respect to each subsequent year, August 1. Directors first
elected or appointed after the 1998 Grant Date, will automatically receive on
such director's first day as a director an option to purchase up to 10,000
ordinary shares prorated based on the number of full months of service between
the prior Grant Date and the next Grant Date. Each such non-employee director
would also automatically receive, as of each subsequent Grant Date, an option to
purchase 10,000 ordinary shares provided he or she is a non-employee director on
the Grant Date and has served for the entire period since the last Grant Date.

The exercise price of the option shares under the 1998 Plan is 100% of the
fair market of such ordinary shares at the date of grant of such options. The
fair market value means, as of any date, the average closing bid and sale prices
of the ordinary shares for the date in question as furnished by the National
Association of Securities Dealers, Inc. through Nasdaq or any similar
organization if Nasdaq is no longer reporting such information, or such other
market on which the ordinary shares are then traded, or if not then traded, as
determined in good faith (using customary valuation methods) by resolution of
the members of the Board of Directors of NUR, based on the best information
available to it. The exercise price is required to be paid in cash.

The term of each option granted under the 1998 Non-Employee Director Share
Option Plan is ten (10) years from the applicable Date of Grant. All options
granted vest immediately after issuance.

The options granted would be subject to restrictions on transfer, sale or
hypothecation. All options and ordinary shares issuable upon the exercise of
options granted to the non-employee directors of NUR could be withheld until the
payment of taxes due with respect to the grant and exercise (if any) of such
options.

2000 STOCK OPTION PLAN

In 2000, NUR adopted the 2000 Stock Option Plan to provide for grants of
service and non-employee options to purchase ordinary shares to officers,
employees, directors and consultants of NUR. The 2000 Stock Option Plan provides
that it may be administered by the Board or by a committee appointed by the
Board and is currently administered by the Stock Option and Compensation
Committee subject to the Board approval. An aggregate amount of not more than
1,000,000 ordinary shares is reserved for grants under the 2000 Stock Option
Plan. The 2000 Stock Option Plan will expire on August 31, 2008, unless
previously terminated or extended by the Board.

The Board has broad discretion to determine the persons entitled to receive
options under the 2000 Stock Option Plan, the terms and conditions on which
options are granted, and the number of ordinary shares subject thereto. The
exercise price of the option shares under the 2000 Stock Option Plan is
determined by the Board; provided, however, that the exercise price of any
option granted shall not be less than eighty percent (80%) of the stock value at
the date of grant of such options. The stock value at any time is equal to the
then current fair market value of NUR's ordinary shares. For purposes of the
2000 Stock Option Plan, the fair market value means, as of any date, the last
reported sale price, on such date, of the ordinary shares on such principal
securities exchange of the most recent prior date on which a sale of the
ordinary shares took place.

The Board determines the term of each option granted under the 2000 Stock
Option Plan; provided, however, that the term of an option shall not be for more
than ten (10) years. Upon termination of employment, all unvested options lapse.
All options granted vest over a three to four-year period at the discretion of
the Board. One third of such options vest after the first or second anniversary
of the date of grant, one third after the second or third anniversary, and the
final third after the third or fourth anniversary of the date of grant.
Notwithstanding the foregoing, the Board may determine different vesting
schedules for consultant options in special circumstances.

The options granted are subject to restrictions on transfer, sale or
hypothecation. Under the 2000 Stock Option Plan, for Israeli employees, options
and ordinary shares issuable upon the exercise of options granted to Israeli
employees of NUR can be held in a trust until the payment of all taxes due with
respect to the grant and exercise (if any) of such options.

INDEMNIFICATION OF EXECUTIVE OFFICERS AND DIRECTORS

The Israeli Companies Law, 5759-1999, authorizes NUR to indemnify an officer
or director for (a) monetary liability imposed upon him or her in favor of other
persons pursuant to a court judgment, including a compromise judgment or an
arbitrator's decision approved by a court, and (b) reasonable litigation
expenses, including attorneys' fees, actually incurred by him or her imposed
upon him or her by a court, in an action, suit or proceeding brought against him
or her by or on behalf of the company or other persons, or in connection with a
criminal action that does not require criminal intent in which he or she was
convicted, in each case in connection with his or her activities as an office
holder.

In addition, a policy of directors' and officers' liability insurance is
maintained by us that insures our directors and officers and those of our
subsidiaries against liability incurred by, arising from or against them for
certain of their acts, errors or omissions.

BOARD PRACTICES

TERMS OF DIRECTORS

The Board of Directors currently consists of six members, including two
external directors. Unless otherwise prescribed by resolution, the Board shall
consist of not less than four (4) nor more than twelve (12) directors. The
members of the Board are elected annually at NUR's general meeting and remain in
office until the next annual general meeting of NUR, unless the director has
previously

resigned, vacated his office, or was removed in accordance with NUR's Articles
of Association. In addition, the Board may elect additional members to the
Board. The members of the Board do not receive any additional remuneration upon
termination of their services as directors.

Pursuant to the Companies Law, the two external directors of the Board serve
for a period of three (3) years unless their office is vacated earlier in
accordance with NUR's then current Articles of Association and the Companies
Law.

ALTERNATE DIRECTORS

The Articles of Association provide that, subject to the Board's approval, a
director may appoint an individual, by written notice to NUR, to serve as an
alternate director. The following persons may not be successfulappointed nor serve as an
alternate director: (i) a person not qualified to be appointed as a director,
(ii) an actual director, or (iii) another alternate director. Any alternate
director shall have all of the rights and obligations of the director appointing
him or her, except the power to appoint an alternate (unless the instrument
appointing him or her expressly provides otherwise). The alternate director may
not act at any meeting at which the director appointing him or her is present.
Unless the appointing director limits the time period or scope of any such
appointment, such appointment is effective for all purposes and for an
indefinite time, but will expire upon the expiration of the appointing
director's term. There are currently no alternate directors.

COMMITTEES OF THE BOARD OF DIRECTORS

APPROVAL OF CERTAIN TRANSACTIONS UNDER THE ISRAELI COMPANIES LAW; AUDIT
COMMITTEE

The Companies Law requires disclosure by an "Office Holder" (as defined
below) to NUR in the event that an Office Holder has a direct or indirect
personal interest in a transaction to which NUR intends to be a party, and
codifies the duty of care and fiduciary duties which an Office Holder has to
NUR. An "Office Holder" is defined in the Companies Law as a director, general
manager, chief business manager, vice general manager, other manager directly
subordinate to the general manager and any other person assuming the
responsibilities of any of the foregoing positions without regard to such
person's title.

The Companies Law requires that certain transactions, actions and
arrangements must be approved by the Audit Committee, by the Board and, in
certain circumstances, by the shareholders of NUR. NUR is also required to
maintain the Audit Committee as a result of the inclusion for quotation of the
ordinary shares on the Nasdaq National Market. The Audit Committee must be
composed of members of the Board who are not employees of NUR, the external
directors and the majority of members of the Audit Committee may not be holders,
directly or indirectly through family members, of more than five percent of the
ordinary shares.

NUR's Audit Committee currently consists of Orit Leitman, Gideon Shenholz,
Hugo Chaufan and Robert F. Hussey. Approval by the Audit Committee and the Board
is required for (i) proposed transactions to which NUR intends to be a party in
which an Office Holder has a direct or indirect personal interest, (ii) actions
or arrangements which may otherwise be deemed to constitute a breach of
fiduciary duty or of the duty of care of an Office Holder to NUR,
(iii) arrangements with directors as to the terms of office or compensation, and
(iv) indemnification of Office Holders. Arrangements with directors as to the
terms of their service or compensation also require shareholder approval. All
arrangements as to compensation of Office Holders who are not directors require
approval of the Board. In certain circumstances, the matters referred to in (i),
(ii), and (iv) may also require shareholder approval.

Office Holders (including directors) who have a personal interest in a
matter which is considered at a meeting of the Board or the Audit Committee may
not be present at such meeting, may not

participate in the discussion, and may not vote on any such matter, except that
such Office Holders may consent in writing to resolutions adopted by the Board
and/or the Audit Committee by unanimous consent.

The requirements of The Nasdaq Stock Market, Inc. provide that the Audit
Committee reports, among other things, that it has reviewed and discussed the
consolidated financial statements for the year ended December 31, 2000 with the
management of NUR.

The Audit Committee has discussed with the independent auditor the matters
covered by Statement on Auditing Standards No. 61, as well as the independence
of the independent auditor and was satisfied as to the independent auditor's
compliance with said standards.

STOCK OPTION AND COMPENSATION COMMITTEE

In March 1998, NUR established a Stock Option and Compensation Committee to
administer NUR's stock option plans, other than the 1998 Non-Employee Director
Share Option Plan. The Stock Option and Compensation Committee is charged with
administering and overseeing the allocation and distribution of stock options
under the approved stock option plans of NUR and the approval of the NUR's
executive officer's annual compensation. The Companies Law provides that the
Board is not entitled to delegate to Board committees its power, among other
things, to allocate shares or securities convertible into shares of NUR.
Accordingly, all recommendations of the Stock Option and Compensation Committee
are subject to the Board approval. The Stock Option and Compensation Committee
is presently composed of three members: Dan Purjes, Hugo Chaufan and Robert F.
Hussey.

NON-EMPLOYEE DIRECTOR SHARE OPTION PLAN COMMITTEE

In February 1999, NUR established a committee to administer the NUR's 1998
Non-Employee Director Share Option Plan (the "NEDSOP Committee"). The NEDSOP
Committee is charged with administering and overseeing the allocation and
distribution of stock options under the 1998 Non-Employee Director Share Option
Plan. The Companies Law provides that the Board is not entitled to delegate to
Board committees its power, among other things, to allocate shares or securities
convertible into shares of NUR. Accordingly, the Non-Employee Director Share
Option Plan Committee recommendations are subject to the Board's approval. The
NEDSOP Committee is presently composed of one member: Erez Shachar.

EMPLOYEES

As of December 31, 2000, we had 528 employees and independent contractors
devoting substantially all of their time to us. Of these individuals, 106 were
in sales and marketing, 80 were in research and development, 111 were in
customer support and, 135 were in operations and production and 96 were in
finance and administration. During the 12-month period ended December 31, 2000,
we added approximately 300 employees. Approximately 110 of these individuals
were previously employed by Salsa Digital, Ltd. and moved to NUR when we
acquired substantially all of the assets and related liabilities of Salsa
Digital, Ltd. in July 2000. As of December 31, 2000, we had 122 employees
located in Israel, 99 employees located in Belgium, 215 employees located in the
U.S. and 92 employees located in Asia Pacific. NUR has recently announced a
restructuring plan of its U.S. operations that is anticipated to result in a
reduction in its workforce. See "ITEM 5: Operating and Financial Review and
Prospects--Restructuring Plan." We believe our relations with employees are
satisfactory.

SHARE OWNERSHIP

The following table sets forth certain information regarding the beneficial
ownership of NUR's ordinary shares as of March 31, 2001 of (i) each director of
NUR and (ii) each executive officer of NUR. All of the information with respect
to beneficial ownership of the ordinary shares is given to the best of NUR's
knowledge and has been furnished in part by the respective directors and
executive officers.

NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY HELD(1) PERCENT OF CLASS
- ------------------------ --------------------------------------- ----------------

Dan Purjes(2)......................... 4,733,171 32.4%
Erez Shachar(3)....................... 229,067 1.5%
Hilel E. Kremer....................... * *
Miriam Tal............................ * *
Eliahu Shalev......................... * *
Ron Michael........................... * *
Hugo R. Chaufan....................... * *
Robert F. Hussey...................... * *
Orit Leitman.......................... * *
Gideon Shenholz....................... * *

- ------------------------

- - Less than one percent of the outstanding ordinary shares.

(1) As used in this table, "beneficial ownership" means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any
security. For purposes of this table, a person is deemed to be the
beneficial owner of securities that can be acquired within 60 days from
March 31, 2001 through the exercise of any option or warrant. Ordinary
shares subject to options or warrants that are currently exercisable or
exercisable within 60 days are deemed outstanding for computing the
ownership percentage of the person holding such options or warrants, but are
not deemed outstanding for computing the ownership percentage of any other
person. The amounts and percentages are based upon 14,593,452 ordinary
shares outstanding as of March 31, 2001.

(2) Mr. Purjes beneficially owned 4,536,263 ordinary shares of NUR, or
35.8 percent of the NUR's ordinary shares, as of April 5, 2000. Mr. Purjes
beneficially owned 4,285,151 ordinary shares of NUR, or 37.3 percent of
NUR's ordinary shares, as of April 16, 1999.

(3) Includes 196,067 options that are exercisable within 60 days of March 31,
2001.

The directors and officers of NUR hold, in the aggregate, options and
warrants exercisable into 599,167 ordinary shares. Under the 1998 Non-Employee
Director Share Option Plan, each of Messrs. Robert Hussey and Dan Purjes, both
of whom are directors of NUR, were granted on October 26, 1998 an option to
purchase 10,000 ordinary shares, and on August 1, 1999, they were granted an
additional option to purchase 10,000 ordinary shares. Mr. Hugo Chaufan, a
director, was granted an option to purchase 8,333 ordinary shares of NUR on
October 1, 1999. Messrs. Robert Hussey, Dan Purjes and Hugo Chaufan were granted
on August 1, 2000 an option to purchase 10,000 ordinary shares. The exercise
price for the underlying shares of such options is the fair market value (as
defined in the 1998 Non-Employee Director Share Option Plan) of the ordinary
shares of NUR at the date of grant. These options expire ten (10) years from the
date of grant.

ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of NUR's ordinary shares as of March 31, 2001, by each person known by
NUR to be the beneficial owner of more than

5% of our outstanding ordinary shares. Each of our shareholders has identical
voting rights with respect to its shares. All of the information with respect to
beneficial ownership of the ordinary shares is given to the best of NUR's
knowledge and has been furnished in part by the beneficial owner.

ORDINARY SHARES PERCENTAGE OF ORDINARY SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED (1)
------------------ -----------------------------

Dan Purjes(2)....................................... 4,733,171 32.4%
Isal Amlat Investment (1993) Ltd.................... 759,600 5.2%

- ------------------------

(1) Based on a total of 14,593,452 ordinary shares outstanding as of March 31,
2001.

(2) Dan Purjes is Chairman of NUR. Mr. Purjes beneficially owned 4,536,263
ordinary shares of NUR, or 35.8 percent of NUR's ordinary shares, as of
April 5, 2000. Mr. Purjes beneficially owned 4,285,151 ordinary shares of
NUR, or 37.3 percent of NUR's ordinary shares, as of April 16, 1999.

As of May 7, 2001, there were 106 record holders of ordinary shares, of
which 61 represented United States record holders holding approximately 89.2% of
the outstanding ordinary shares of NUR.

RELATED PARTY TRANSACTIONS

For various services rendered to NUR Europe S.A. and NUR Media Solutions
S.A. by Sorly Ltd., a company wholly owned by Erez Shachar, NUR Europe S.A. and
NUR Media Solutions S.A. each paid Sorly Ltd. the sum of $9,250 per quarter
during 2000.

See "ITEM 10: Additional Information--Material Contracts" and Note 15 to
NUR's consolidated financial statements, which are included as a part of this
annual report, for a further discussion of transactions and balances with
related parties.

INTERESTS OF EXPERTS AND COUNSEL

Not Applicable.

ITEM 8: FINANCIAL INFORMATION

See pages F-1 to F-39.

ITEM 9: THE OFFER AND LISTING

Not Applicable, except for ITEMS 9A(4) and Item 9C, which are detailed
below.

NUR's ordinary shares are quoted on the Nasdaq National Market under the
symbol "NURM." NUR's ordinary shares have been traded on the Nasdaq National
Market since October 1995.

The prices set forth below are high and low closing bid prices for the
ordinary shares of NUR as reported by Nasdaq National Market for the fiscal year
ended December 31 of each year indicated below, as of the end of each fiscal
quarter indicated below, and for each month for the six-month period ending
April 30, 2001. Such quotations reflect inter-dealer prices, without retail
markup, markdown, or commission and may not necessarily represent actual
transactions.

YEAR HIGH LOW
- ---- -------- --------

1996...................................................... 5.125 1.5
1997...................................................... 2.25 1
1998...................................................... 4.5 1.625
1999...................................................... 13 2.375
2000...................................................... 21 7.3125

QUARTER HIGH LOW
- ------- -------- --------

1999:
First Quarter............................................. 3.75 2.37
Second Quarter............................................ 6.625 2.75
Third Quarter............................................. 9.5 5.4375
Fourth Quarter............................................ 13 7.125

2000:
First Quarter............................................. 21 10.25
Second Quarter............................................ 17.25 11.5
Third Quarter............................................. 15.9375 12.6875
Fourth Quarter............................................ 15 7.3125

2001:
First Quarter............................................. 9 5.9375

MOST RECENT SIX MONTHS HIGH LOW
- ---------------------- -------- --------

April 2001................................................ 5.7812 3.75
March 2001................................................ 9 5.9375
February 2001............................................. 9.75 7.375
January 2001.............................................. 9.625 6.25
December 2000............................................. 12.5 7.3125
November 2000............................................. 15 10.875

NUR does not anticipate that it will pay any cash dividend on its ordinary
shares in the foreseeable future. Dividends, if any, will be paid in NIS.
Dividends paid to shareholders outside Israel will be converted to U.S. dollars,
on the basis of the exchange rate prevailing at the date of payment. NUR has
determined that it will not distribute dividends out of tax-exempt profits.

ITEM 10: ADDITIONAL INFORMATION

SHARE CAPITAL

Not applicable.

MEMORANDUM OF ASSOCIATION AND AMENDED AND RESTATED ARTICLES OF ASSOCIATION

Set forth below is a brief description of certain provisions contained in
the Memorandum of Association, the Amended and Restated Articles of Association
as well as certain statutory provisions of Israeli law. The Memorandum of
Association and the Articles have been filed as exhibits to this annual report
or incorporated by reference herein. The description of certain provisions does
not purport to be a complete summary of these provisions and is qualified in its
entirety by reference to such exhibits.

AUTHORIZED SHARE CAPITAL

The authorized share capital of NUR is NIS fifty million (50,000,000),
divided into fifty million ordinary shares.

PURPOSE AND OBJECTIVE

Pursuant to Section 3.1 of NUR's Articles, our objective is to undertake any
lawful activity, including any objective set forth in our efforts.

OVER THE NEXT TWO YEARS WE In September 1998 we acquired all
WILL MAKE SIGNIFICANT rightsMemorandum of
Association. Pursuant to Section 3.2 of our Articles, our purpose is to operate
in accordance with commercial considerations with the intentions of generating
profits.

BOARD OF DIRECTORS

Under the Israeli Companies Law, 5759-1999, the Board is authorized to set
NUR's strategy and supervise the performance of the duties and actions of NUR's
Chief Executive Officer. The Board may not delegate to a committee of the Board
or the Chief Executive Officer the right to decide on certain drop-on-demand
ROYALTY PAYMENTS. inkjet technology suitable for large
format digital printers. Until
September 2001 we must pay royalty
paymentsof the authorities
vested with it, including determination of NUR's strategy, distributions,
issuances of securities and approval of financial reports. The powers conferred
upon the Board are vested in the Board as a collective body and not in each one
or more of the directors individually. Unless otherwise set forth in a
resolution of the shareholders, the Board shall consist of not less than four
(4) nor more than twelve (12) directors (including any external directors whose
appointment is mandated under the Companies Law).

The directors are elected annually at a general meeting of shareholders and
remain in office until the next annual meeting at which time they shall retire,
unless their office is previously vacated as provided in the Articles. A
retiring director may be reelected. If no directors are elected at the annual
meeting, all of the retiring directors remain in office pending their
replacement at a general meeting. Holders of the ordinary shares do not have
cumulative voting rights in the election of directors. Consequently, the holders
of ordinary shares in the aggregate conferring more than 50% of the voting power
represented in person or by proxy will have the power to elect all the
directors. Pursuant to the sellerIsraeli Companies Law, publicly traded companies must
appoint two external directors to serve on their Board of upDirectors and Audit
Committee. The external directors are appointed for a 3-year term. The election
of external directors requires the vote of the majority of the voting power
represented at the meeting, provided that either (i) such a majority includes at
least one third of the shareholders present who do not qualify as controlling
shareholders (as such term is defined in the Israeli Companies Law) or (ii) the
aggregate number of shares held by non-controlling shareholders voting at the
meeting against such election does not exceed one percent of the outstanding
voting rights of the company.

Subject to $1.3
million. If wethe provisions of Israeli Companies Law, the Board may approve
each of the following transactions that are not detrimental to the best interest
of NUR: (i) a transaction to which NUR is a party to, and in which an officer of
NUR has an interest; (ii) a transaction between NUR and an officer of NUR;
(iii) a private offer of NUR's securities to a holder of five percent (5%) or
more of NUR's shares; or (iv) such other transactions that require special
approval pursuant to the Companies Law. In the event of an extraordinary
transaction or the approval of the terms of service or employment (including any
waiver, insurance or indemnification) of an officer of NUR, such

transaction shall require additional approvals of the Audit Committee, or of the
Audit Committee and of a meeting of shareholders, by regular or special
majority, all as stipulated by the Companies Law. Any officer who has an
interest in a transaction shall not participate in the meeting of the Board or
Audit Committee in which such transaction is considered and shall not vote in
such meeting, provided that if the majority of the members of the Board or the
Audit Committee have an interest in the transaction, they may attend and vote at
the meeting and then the transaction must also be approved by a general meeting.

No person shall be disqualified to serve as a director by reason of his not
holding shares in NUR. Additionally, there is no age limit for the retirement of
directors.

RIGHTS OF SHAREHOLDERS

No preemptive rights are granted to holders of ordinary shares under the
Articles or the Israeli Companies Law. Each ordinary share is entitled to one
vote on all matters to be voted on by shareholders, including the election of
directors. Non-residents of Israel may freely hold and trade the ordinary shares
pursuant to general and specific permits issued under Israel's Currency Control
Law, 1978. Neither the Memorandum of Association nor the Articles make any
distinction between residents and non-residents of Israel with respect to the
ownership of ordinary shares. The Memorandum of Association, the Articles and
Israeli law do not make certain
minimum royalty payments,any distinction between residents and non-residents of
Israel with respect to the sellervoting rights related thereto.

An annual meeting of shareholders must be held once in every calendar year
at such time (within a period of not more than fifteen months after the last
preceding annual meeting) and at such place as may be determined by the Board.
The Board may, at any time, convene general meetings of shareholders, and shall
be obligated to do so upon receipt of a requisition in writing in accordance
with Israeli law. Prior to any general meeting a written notice thereof shall be
delivered to all registered holders and to all other persons entitled to attend,
and shall be otherwise made public as required by Israeli law.

Two or more members present in person or by proxy and holding shares
conferring in the aggregate more than 33 1/3% of the technologytotal voting power attached
to our shares shall constitute a quorum at general meetings. If a meeting is
adjourned due to the lack of a quorum, one or more shareholders, holding not
less than 33 1/3% of all the outstanding voting power attached to the ordinary
shares, present in person or by proxy at the subsequent adjourned meeting, will
constitute a quorum. Unless provided otherwise by the terms of issue of the
shares, no member shall be entitled to be present or vote at a general meeting
(or to be counted as part of the quorum) unless all amounts due as of the date
designated for same general meeting with respect to his shares were paid. To be
deemed adopted, a resolution requires the affirmative vote of shareholders
present and holding in person or by proxy a majority of the shares present.
Certain resolutions (for example, a resolution to amend the Articles or the
Memorandum of Association) require the affirmative vote of shareholders present
in person or by proxy and holding shares conferring at least 75% of the votes to
be deemed adopted.

DIVIDENDS AND PROFITS

The Board may from time to time, subject to the provisions of Israeli
Companies Law, declare and order the payment of a dividend from NUR's accrued
profits at the rate it may deem, provided that there is no reasonable concern
that payment of such dividend may prevent NUR from meeting its current and
expected liabilities when they become due. Subject, if any, to special or
restricted rights conferred upon the holders of shares as to dividends, the
dividends shall be distributed in accordance with the paid-up capital of the
company attributable to the shares for which the dividend has been declared. Our
obligation to pay dividends or any other amount in respect of shares, may be
set-off against any indebtedness, however arising, liquidated or non-liquidated,
of the person entitled to receive the dividend. Any dividend unclaimed within
the period of seven years from the date stipulated

for their payment, shall be forfeited and returned to us, unless otherwise
directed by the Board. In the event of the winding up of the company, then,
subject to provisions of any applicable law and to any special or restricted
rights attached to a share, our assets in excess of our liabilities will be
distributed among the stockholders in proportion to the paid-up capital
attributable to the shares in respect of which the distribution is being made.

MATERIAL CONTRACTS

LOD LEASE AGREEMENT

We entered into a lease agreement with A. Barzilai Investments and Assets
Ltd. and Kamim Investments and Assets Ltd., commencing on November 1, 2000, that
provides for monthly rent payments of $63,750, with each rent payment to be paid
three months in advance. The lease agreement has an initial term of five years.
We have two separate two and one-half year options to extend the lease. The rent
for the first option period will increase 6% from the current rental payment.
The rent for the second option period will increase 7% from the current rental
payment.

NUR PRO ENGINEERING FOUNDERS AGREEMENT

On September 30, 1999, we entered into a Founders Agreement with Gera Eiron
and Ogen DialogiX Ltd. ("Ogen") to form NUR Pro Engineering Ltd., a company
established to assemble the NUR Blueboard and NUR Fresco printers, execute
development works and, subject to a future agreement, assemble additional
printers. Pursuant to the Founders Agreement, NUR Pro Engineering agreed to
assemble the first one hundred Fresco printers exclusively and, subject to
certain conditions, was provided a right of first refusal with respect to
additional assembly of NUR Fresco printers. In order to execute on the assembly
of the printers, NUR Pro Engineering engaged in an agreement with ITS Machine
Development Ltd. pursuant to which, among other things, NUR Pro Engineering
purchased from ITS for $450,000 the fixed assets that ITS previously used in
executing the assembly of the Blueboard printers.

We and Ogen each loaned NUR Pro Engineering $175,000, bearing an annual
interest rate of 3%, to be repaid out of NUR Pro Engineering's profits from time
to time in such a way that will not harm its management and operations. In
addition, we loaned NUR Pro Engineering an additional $100,000, interest free,
which is due upon the earlier of 20 years from the grant date or upon the
liquidation of NUR Pro Engineering.

We own fifty percent of the outstanding capital stock of NUR Pro
Engineering, and Ogen owns the other fifty percent. Transfer of NUR Pro
Engineering's shares by any shareholder is subject to a right of first refusal
to the other shareholder as well as tag-along rights. Each shareholder has
certain preemptive rights as to the issuance of additional equity of NUR Pro
Engineering. Finally, we have the option to buy-backpurchase the technology.

OUR SUCCESS DEPENDS ON OURshares owned by Ogen
under certain circumstances, and Ogen may force our purchase of such shares
under other circumstances.

NUR PRO ENGINEERING ASSEMBLY AGREEMENT

On October 4, 1999, we entered into an Assembly Agreement with NUR Pro
Engineering pursuant to which NUR Pro Engineering has agreed to act as an
independent contractor to assemble the NUR Blueboard printers, NUR Fresco
printers, machines for laminating wide formats and, if agreed to in the future,
other machines. NUR Pro Engineering is entitled to certain payments for the
assembly of the NUR Blueboard printers. The consideration for the work on the
NUR Fresco Printers, laminating machine or other printers is to be determined by
agreement of the parties by adding the direct and indirect costs to NUR Pro
Engineering in implementing the work, plus an amount equal to a percentage of
such costs. Under the terms of the Agreement, NUR Pro Engineering grants an
18 month warranty for its work, including the mechanical operations of the
printers, the functioning of all elements of the printers it supplies, and the
assembly of the printers.

Pursuant to the agreement, we have granted NUR Pro Engineering the exclusive
right to assemble the Blueboard printers, including other printers based on the
engineering design of such printers. We currently purchasealso granted NUR Pro Engineering the
exclusive right to execute the work on the first one hundred NUR Fresco
printers, including other printers based on the engineering design of such
printers. NUR Pro Engineering has right of first refusal on the additional
assembly of NUR Fresco printers upon certain conditions. The agreement remains
in force until the later of (a) the termination of the Blueboard work, (b) the
termination of the execution of the first one hundred Fresco printers and
(c) the termination of the execution of any additional work given to NUR Pro
Engineering. We are entitled to terminate the agreement immediately upon a
fundamental violation of the agreement by NUR Pro Engineering, as further set
forth in the agreement.

SALSA ASSET PURCHASE AGREEMENT

On May 17, 2000, we entered into an Asset Purchase Agreement by and among
Salsa Digital, Ltd. ("Salsa Digital") and Signtech Japan, Ltd., Salsa Digital DO
Brasil, Ltda., Salsa Digital (Guangzhou) Ltd., Salsa Dubai Corp., Salsa
Technology Pte Ltd. (collectively, the "Selling Subsidiaries"), and NUR and
Salsa Digital Printers Ltd. and Nur Hungary Trading and Software Licensing
Limited Liability Company (together the "Purchasing Subsidiaries"). The Asset
Purchase Agreement was amended as of June 30, 2000, to, among other things, add
NUR Asia Pacific Ltd., NUR Europe S.A. and Encre Consumables B.V. as Purchasing
Subsidiaries.

Pursuant to the Asset Purchase Agreement, the Purchasing Subsidiaries
acquired all of the inkrights, title and inkjets usedinterests in Salsa Digital's purchased
assets, and acquired an option to purchase the rights, title and interests in
all or a portion of the purchased assets held by each Selling Subsidiary, or at
our NUR

SUPPLIERS AND SUBCONTRACTORS. Blueboard printers from one supplier,
Imaje, a French manufactureror the Purchasing Subsidiaries' option, 100% of ink-related products, and purchasethe outstanding capital
stock of some or all of our inkjet printheads usedthe Selling Subsidiaries in lieu thereof. Purchased
assets included, without limitation, all cash and cash equivalents, all
furniture, fixtures, improvements, equipment and all other tangible personal
property, all accounts receivable, all claims and rights relating to the
purchased assets, all intellectual property relating to the business of Salsa
Digital, all rights and interests under all contracts, leases or permits which
the Purchasing Subsidiaries elected to assume, and all other assets except for
the excluded assets. Excluded assets included, without limitation, all bank
accounts held by Salsa Digital (with certain enumerated exceptions) and certain
deposits and prepaid expenses. NUR and the Purchasing Subsidiaries are solely
liable for the liabilities related to trade payables, operational liabilities
directly relating to the business of Salsa Digital and/or the purchased assets,
and as further set forth in the Asset Purchase Agreement. All other liabilities
remain the responsibility of Salsa Digital. The purchase price paid was
$30,000,005, which consisted of a cash payment of $20,000,000 and the delivery
of 666,667 NUR Fresco from another supplier.
We have been ableordinary shares to obtain adequate
supplies of ink and inkjets inSalsa Digital. The Purchasing Subsidiaries did
not elect to exercise the past, although Imaje has occasionally
delivered the supplies late. If these
sole suppliers experience any problem
that results in production delays,
our salesoption to new customers and
IMAJE IS OUR ONLY SUPPLIER OF existing customers that rely on our
INK AND INKJETS FOR THE NUR ink and/or inkjet components to
BLUEBOARD PRINTERS. operate their printers could be hurt.
Because the success of our business
depends on the sale of our printers,
such a supply problem could have a
severe effect on our financial
results. Also, if Imaje reduces or
changes the credit or payment terms
it extends to us, our business could
be hurt.

WE RELY ON A LIMITED NUMBER OF We employ a limited number of
SUBCONTRACTORS. unaffiliated subcontractors to
manufacture components for our
printers. The assembly of our NUR
Blueboard printers is currently
conducted by NPE, a 50% owned
subsidiary. Our subcontractors have,
in the past, been late in delivering
components. We have, however, been
able to obtain adequate supplies of
the components and raw materials
necessary to produce our printers and
we have not had any serious problems
with our subcontractors. Because we
rely on subcontractors, we cannot be
sure that we will be able to maintain
an adequate supply of components.
Moreover, we cannot be sure thatpurchase any of the components we purchase will
satisfy our quality standards and be
delivered on time. Our business could
suffer if we fail to maintain our
relationships with our subcontractorspurchased assets or
fail to develop alternative
sources for our printer components.
Also, as our business grows, we will
need to purchase greater quantities
of components on a timely basis, and
any delay in supply could hurt our
sales. We cannot guarantee that we
will develop alternative sources of
production for our products.

OUR BUSINESS IS EXTREMELY The printing equipment industry is
COMPETITIVE. extremely competitive and many of our
competitors have greater management,
financial, technical, manufacturing,
marketing, sales, distribution and
other resources than we do. Our
ability to compete depends on factors
both within and outside of our
control, including the performance
and acceptance of our current
printers and any products we develop
in the future. We compete against
several companies that market digital
WE HAVE NUMEROUS printing systems based on
COMPETITORS IN THE MARKET electrostatic, drop-on-demand inkjet,
FOR OUR PRINTERS. airbrush and other technologies. We
also face competition from existing
conventional wide-format and
super-wide format printing methods,
including hand painting, screen
printing and offset printing. Our
competitors could develop new
products, with existing or new
technology, that could be competitive
in price and performance with our
printers. We can not assure you that
we can compete effectively with any
such products.

WE ALSO FACE COMPETITION We also compete with independent
IN THE MARKET FOR PRINTING manufacturers in the market for
SUPPLIES. printer supplies, in particular, the
inks we supply. In 1998 and 1999, ink
sales accounted for 23.6% and 23.1%
of our total sales, respectively. We
cannot guarantee that we will be able
to remain the exclusive or even
principal ink manufacturer for our
printers. We recently entered the
substrate business, which is also
highly

competitive and characterized by a
large number of suppliers worldwide.
We are developing substrates through
subcontractors that have a high added
value when used with our printers. We
believe we are well positioned, both
in our technical knowledge and in the
minds of our customers, to succeed in
selling high value-added substrates
to our customers. We can not assure
you that we will be able to compete
effectively or achieve significant
revenues in the substrate business.

WE DEPEND ON OUR KEY EMPLOYEES. Our success depends to a significant
extent upon the contributions of key
personnel and our senior executives.
Our business could seriously suffer
if one or more of our key personnel
or senior executives were to leave
our Company. In addition, we do not
have, and do not contemplate getting,
"key-man" life insurance for any of
our key employees. Our future success
will also depend in part on our
continuing ability to retain our key
personnel and senior executives and
to attract other highly qualified
employees. We cannot assure our
continued success in attracting or
retaining highly qualified personnel.

WE RELY ON TRADE SECRETS, PATENTS AND We rely on a combination of trade
PROPRIETARY RIGHTS. secrets, licenses, patents and
non-disclosure and confidentiality
agreements to establish and protect
our proprietary rights in our
products. We cannot guarantee that
our existing patents or any future
patents will not be challenged,
invalidated, or circumvented, or that
our competitors will not
independently develop or patent
technologies that are substantially
equivalent or superior to our
technology. We cannot be sure that we
will receive further patent
protection in Israel, the United
States, or elsewhere, for existing or
new products or applications. Even if
we do secure further patent
protection, we cannot guarantee it
will be effective. In some countries,
meaningful patent protection is not
available. We are not aware of any
infringement claims against us
involving our proprietary rights.
Third parties may assert infringement
claims against us in the future, and
the cost of responding to such
assertions, regardless of their
validity, could be significant. In
addition, such claims could be found
to be valid and result in large
judgments against us. Even if such
claims are not valid, the cost could
be substantial to protect our patent
rights.

IT IS DIFFICULT TO PROTECT OUR We believe that our success is less
PROPRIETARY RIGHTS. dependent upon the legal protection
afforded by patent and other
proprietary rights than on the
knowledge, ability, experience and
technological expertise of our
employees and our key suppliers. Our
policy is to have employees sign
confidentiality agreements, to have
selected parties, including key
suppliers, sub-contractors and
distributors, sign non-competition
agreements and to have third parties
that we deal with sign non-disclosure
agreements. Although we take
precautionary measures to protect our
trade secrets, we cannot guarantee
that others will acquire equivalent
trade secrets or steal our exclusive
technology. Moreover, we may not be
able to meaningfully protect our
rights that are not protected by
patents.

WE RELY ON INTERNATIONAL SALES. Our printers and supplies are sold
worldwide, with revenues generated in
various currencies. There are a
number of risks inherent in
international business activities,
including unexpected changes in
regulatory requirements, political
instability, tariffs and other trade
barriers, as well as the burdens of
complying with different foreign
laws. To date, fortunately, these
risks have not materially affected
our business or financial situation.
We cannot predict, however, when
exchange or price controls or other
restrictions on the conversion of
foreign currencies could impact our
business.

CURRENCY FLUCTUATIONS ARE Because we have revenues and expenses
A RISK WE FACE ON A DAILY in various currencies, including the
BASIS. U.S. dollar, the NIS and certain
European currencies, our financial
results are subject to the effects of
fluctuations of foreign currency
exchange rates. In the future,
currency fluctuations could hurt our
profitability. We do not hedge
against fluctuations in currency
exchange rates, but we may do so in
the future.

ENVIRONMENTAL CONCERNS. We mix the ink used in our NUR
Blueboard printers with a methyl
ethyl-ketone solvent. Methyl
ethyl-ketone solvent is a hazardous
substance and is subject to various
government regulations relating to
its transfer, handling, packaging,
use, and disposal. We store the ink
at warehouses in Europe, the United
States and Israel, and a shipping
company ships it at our direction. We
face potential responsibility for
problems that may arise when we ship
the ink to customers. We believe that
we are in material compliance with
all applicable environmental laws and
regulations. If we fail to comply
with these laws or an accident
involving our ink waste or methyl
ethyl-ketone solvent occurs then our
business and financial results could
be adversely affected.

WE RELY ON GOVERNMENT GRANTS, We have been favorably affected by
TAX BENEFITS AND OTHER FUNDING certain Israeli and Belgian
FROM THIRD PARTIES. Government programs incentives. Our
operations could be and tax
legislation principally related to
research and development and
adversely affected if these programs
sales and marketing grants andoutstanding capital investment or tax benefits
are reduced or eliminated and not
replaced with equivalent programs or
benefits, or if our ability to
participate in these programs were
significantly reduced. We cannot
assure you that such programs and tax
legislation will continue in the
future or that the available benefits
will not be reduced or that we will
continue to meet the conditions to
benefit from such programs and
legislation.

WE RECEIVE TAX BENEFITS Pursuant to the Law of Encouragement
FROM THE ISRAELI of Capital Investments, the Israeli
GOVERNMENT. government has granted "Approved
Enterprise" status to some of our
production facilities. Consequently,
these facilities are eligible for
certain tax benefits for the first
several years in which they generate
taxable income. If we fail to obtain
additional grants, or if our tax
benefits are significantly reduced,
our financial condition could suffer.

WE MUST COMPLY WITH To receive grants and tax benefits,
CONDITIONS TO RECEIVE we must comply with a number of
conditions. If we fail to comply with
these conditions, the grants

GRANTS AND TAX BENEFITS. and tax benefits that we receive
could be partially or fully canceled
and we would be forced to refund the
amountstock of the canceled benefits
received, adjusted for inflation and
interest. We believe that we have
operated and will continueSelling Subsidiaries. NUR filed a registration
statement on Form F-3, which became effective on December 22, 2000, to operate
in compliance withpermit
the required
conditions, although we cannot be
sure. We further believe that the
likelihood is remote that we will be
required to refund grants or tax
benefits that we receive from the
Israeli government, the Marketing
Fund, and under our "Approved
Enterprise" status.

WE HAVE CHANGED OUR LEADERSHIP In April 1997, when Moshe Nur
AND HAVE LIMITED MANAGEMENT transferred control of NUR
RESOURCES TO MANAGE FUTURE Macroprinters, we replaced most of
GROWTH. the members of our board of
directors. We also made several
management changes at such time and
changed our Chief Financial Officer.
Our recent growth has placed, and
will continue to place, a significant
strain on our management team,
facilities and other resources. In
order to support our growth, our new
leadership adopted financial controls
and reporting systems and expanded
our management, facilities, financial
and other resources. To avoid any
negative effects on our business, we
must successfully implement financial
controls, expand our manufacturing,
sales, marketing and service
organizations, and update our
accounting, operational and
management information systems.
Failure to do so effectively could
have a material adverse effect on our
business and financial results.

OUR OPERATING RESULTS TEND TO Our revenues may vary significantly
FLUCTUATE. from quarter to quarter as a result
of, among other factors, the timing
of new product announcements and
releases by our competitors and us.
We do not typically have a material
backlog of orders at the beginning of
each quarter. We generally ship and
record a significant portion of our
revenues for orders placed within the
same quarter, primarily in the last
monthresale of the quarter. We may not
learn of shortfalls in sales until
late in, or shortly after the end of,
such fiscal period. As a result, our
quarterly earnings may be subject to
significant variations.

IMPORTANT FACILITIES AND OPERATIONS ARE Our most important facilities and
LOCATED IN ISRAEL. operations and many of our
subcontractors are located entirely
in the State of Israel. Political and
military conditions in Israel
directly affect operations. Since
Israel was established in 1948, a
state of hostility has existed,
varying in degree and intensity,
between Israel and certain Arab
countries. Although Israel has
entered into agreements with some of
these countries, the Palestine
Liberation Organization and the
Palestinian Authority, and the
feuding parties have signed various
declarations in hopes of resolving
some of the hostilities, we cannot
predict the future of the volatile
Middle East and of Israel in
particular. To date, Israel has not
entered into a peace treaty with
Lebanon or Syria, with whom Israel
shares its northern borders, or with
certain other Arab countries with
which a state of hostility exists.
Any major hostilities involving
Israel, the Palestinian Authority, or
Arab countries in the Middle East
could have a

serious negative impact on our
business operations.

SOME OF OUR OFFICERS AND Furthermore, all nonexempt male adult
EMPLOYEES ARE ON MILITARY citizens of Israel, including some of
RESERVE. our officers and employees, are
obligated to perform military reserve
duty and are subject to being called
for active duty under emergency
circumstances. While we have operated
effectively under these conditions in
the past, we cannot predict the full
impact of such conditions on us in
the future, particularly if emergency
circumstances occur.

WE ARE SENSITIVE TO ECONOMIC CONDITIONS Inflation in Israel and devaluation
IN ISRAEL. of the NIS have an impact on our
financial results. Although Israel
has substantially reduced the rates
of inflation and devaluation in
recent years, they are still
relatively high and we could
experience losses due to inflation or
devaluation. If inflation rates in
Israel increase again and hurt
Israel's economysold as a whole, our
operations and financial condition
could be negatively impacted.

WE DO NOT KNOW THE IMPACTdescribed above.

EXCHANGE CONTROLS

Israeli law limitsplaces limitations on foreign currency
OF RECENT POLICY CHANGES transactions and
transactions between ON FOREIGN CURRENCY Israeli and non-Israeli residents.
TRANSACTIONS.residents, including payment of
dividends. The Controller of Foreign Exchange at the Bank of Israel, through
"general"
and "special" permits, may regulate or waive these limitations. Until
recently, transactions in foreign
currency were strictly regulated. InAs of May 1998, the Bank of Israel
liberalized its foreign currency
regulations by issuing a new "general
permit" pursuant to which foreign
currency transactions are generally permitted, although certain restrictions
still apply. Restricted transactions include foreign currency transactions by
institutional investors, including futures contracts by foreign residents for
periods of more than one month, and investments outside of Israel by pension
funds and insurers. Under the new general permit, all foreign currency transactions must be
reported to the Bank of Israel.

We
cannot currently assess what impact,
if any, this liberalization will have
on us. We also cannot predict its
impact on the value of the NIS
compared to the dollar and the
corresponding effect on our financial
statements.

SERVICE OF PROCESS AND We are organized under the laws of
ENFORCEMENT OF JUDGMENTS. Israel and our headquarters are in
Israel. Certain of our officers and
directors reside outside of the
United States. Therefore, you may not
be able to enforce any judgment
obtained in the U.S. against us or
any of such persons. You may not be
able to enforce civil actions under
U.S. securities laws if you file a
lawsuit in Israel. However, we have
been advised by our Israeli counsel
that subject to certain limitations,
Israeli courts may enforce a final
judgment of a U.S. court for
liquidated amounts in civil matters
after a hearing in Israel. If a
foreign judgment is enforced by an
Israeli court, it will be payable in
Israeli currency.

1949

ITEM 2: DESCRIPTION OF PROPERTY

ISRAEL

The Company's main facilities in Moshav Magshimim, Israel consists of
approximately 13,000 square feet. The Company uses this facility as its
headquarters and for research and development. Lease for the Magshimim property
has been extended until December 1, 2000, when the Company plans to relocate its
headquarters to a leased facility in a high-tech industrial zone in Lod, Israel.
The Lod facility is approximately 14,765 square feet. The initial five-year
lease of the Lod facility provides for monthly rent of $63,750. The lease
agreement grants the Company an option to continue the lease term for two
consecutive periods of 2.5 years.

NPE leases approximately 6,292 square feet in Rosh Ha'ain, Israel, for
the manufacture and assembly of the NUR Blueboard and the NUR Fresco. The Rosh
Ha`ain lease expires in May 2001.

UNITED STATES

NUR America leases office space in Newton, Massachusetts consisting of
4,500 square feet for use as the subsidiary's headquarters, sales and marketing
offices, and demonstration and service center. The Newton lease expires in
October 2008.

BELGIUM

NUR Europe leases approximately 1,970 square feet of office space in
Brussels, Belgium for use as the subsidiary's headquarters and sales office
demonstration and service center. The Brussels lease expires in September 2011.
NUR Europe plans to expand its headquarters space at the above address by
additional 2,460 square feet. The lease for the additional space will expire in
March 2012.

NUR Media Solutions leases approximately 600 square feet office space
in Louvain-la-Neuve, Belgium for use as office space. The Louvain-la-Neuve lease
will expire in December 2002.

Stillachem leases temporary office space in Belgium of approximately
853 square feet. The lease expires in November 2002. Stillachem intends to build
new facilities specially suited for its operations.

ASIA

NUR Shanghai leases approximately 2,067 square feet of space for use as
a warehouse and as a demonstration center in a free trade zone in Shanghai,
China, and occupies office space in a separate location in Shanghai China. The
leases will expire on April 2000 and December 2001 respectively. NUR Shanghai
has the option to extend the warehouse lease for an extended period of 12
months.

NUR Asia Pacific leases office space of approximately 32 square feet
and warehouse space of approximately 32 square feet in Hong Kong. The leases are
terminated upon written notice from NUR Asia Pacific.

NUR Asia Pacific leases office space of approximately 170 square feet
in Singapore. The lease will expire on November 2000.

ITEM 3: LEGAL PROCEEDINGS

In July 1999, the Company entered into a settlement agreement with
Scitex Wide Format Printing Ltd. (formerly Idanit) and a former sales
professional of Idanit currently employed with NUR America. Pursuant to the
settlement agreement, all claims relating to the recruitment of the sales
professional by NUR America, including claims brought in Israel and in
Massachusetts, were settled and withdrawn with prejudice.

ITEM 4: CONTROL OF REGISTRANT

The following table sets forth information regarding the beneficial
ownership of the Company's Ordinary Shares as of April 5, 2000, by (i) each
person known by the Company to be the beneficial owner of more than 10% of the
outstanding Ordinary Shares and (ii) all of the Company's executive officers and
directors as a group (10 persons). All of the information with respect to
beneficial ownership of the Ordinary Shares is given to the best of the
Company's knowledge and has been furnished in part by the respective directors,
executive officers, or beneficial owners, as the case may be.

ORDINARY SHARES PERCENTAGE OF ORDINARY SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED(1)

Dan Purjes (2) 4,536,263 35.8%

All current executive officers and
directors as a group (10 persons)(3) 5,692,225 43.8%

- ----------
(1) Based on a total of 12,003,073 Ordinary Shares outstanding
(2) Dan Purjes is Chairman of the Company
(3) Includes the holdings of Dan Purjes

ITEM 5: NATURE OF THE TRADING MARKET

The Company's Ordinary Shares are quoted on the Nasdaq National Market
under the symbol NURM. There is no non-United States trading market for the
shares.

As of April 5, 2000, there were 103 record holders of Ordinary Shares,
of which 81 represented United States record holders holding approximately 85.4%
the outstanding Ordinary Shares of the Company.

The prices set forth below are high and low closing bid prices for the
Ordinary Shares of the Company as reported by Nasdaq National Market. Such
quotations reflect inter-dealer prices, without retail markup, markdown, or
commission and may not necessarily represent actual transactions.

QUARTER HIGH LOW
------- ---- ---

1998
First quarter 3 1/8 1 11/16
Second quarter 4 1/2 2 1/4
Third quarter 3 1/8 1 15/16
Fourth quarter 3 3/8 1 3/4

1999
First quarter 3 5/16 2 1/2
Second quarter 3 23/32 2 7/8
Third quarter 5 1/2 9
Fourth quarter 7 5/16 12 15/16

2000
First quarter 18 15/16 10 5/8
Second quarter (through 15 7/8 12 1/8
May 2, 2000)

The Company does not anticipate that it will pay any cash dividend on
its Ordinary Shares in the foreseeable future. Dividends, if any, will be paid
in NIS. Dividends paid to shareholders outside Israel will be converted to U.S.
dollars, on the basis of the exchange rate prevailing at the date of payment.
The Company has determined that it will not distribute dividends out of
tax-exempt profits.

ITEM 6: EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

Non-residents of Israel will be able to receive dividends, if declared,
and any amounts payable upon the dissolution, liquidation or winding-up of the
affairs of the Company. Any such payments will be paid in freely repatriable
non-Israeli currencies (including U.S. dollars). Such payments, if made, shall
be made pursuant to a general permit issued by the Controller under the Currency
Control Law, 1978 (the "Currency Control Law").

In May 1998, a new "general permit" was issued, which removed most of
the restrictions prohibited under the law, and thus enabled Israeli citizens to
freely invest outside of Israel and freely convert Israeli currency into
non-Israeli currencies.

There are no limitations on the right of non-resident or foreign owners
to hold or vote their Ordinary Shares of the Company that are imposed by the
Company's Articles of Association or by Israeli law, other than certain
limitations imposed by Israeli Law upon countries who are in a state-of-war with
the State of Israel and upon individual or entities residing, incorporated or
carrying out business in such countries.

ITEM 7:
TAXATION

CAPITAL GAINS AND INCOME TAXES APPLICABLE TO NON-ISRAELI SHAREHOLDERS

The following is a summary of the current tax laws of the State of Israel as
they relate to the CompanyNUR and itsour shareholders. This summary does not discuss all
aspects of Israeli tax law that may be relevant to a particular investor in
light of his personal investment circumstances or to certain types of investors
subject to special treatment under Israeli law (for example, traders in
securities, businesses in Israel or persons that own, directly or indirectly,
10% or more of the Company'sNUR's outstanding voting stock). The following also includes a
discussion of certain Israeli government programs benefiting 22

various Israeli
businesses such as the Company.NUR. To the extent that the discussion is based on new
legislation yet to be subject to judicial or administrative interpretation,
there can be no assurance that the views expressed herein will accord with any
such interpretation in the future. This discussion is not intended and should
not be construed as legal or professional tax advice, and does not cover all
possible tax considerations.

GENERAL CORPORATE TAX STRUCTURE

The CompanyNUR is subject to corporate tax in Israel. Commencing in the tax year 1993
through and including 1996, the regular rate of corporate tax to which Israeli
companies are subject decreased by 1% each year, i.e., from 39% in 1993 down to
36% in 1996 and thereafter. However, the effective rate payable by a company
which derives income from an "Approved Enterprise" (as further discussed below)
may be considerably less. See "--Law for the Encouragement of Capital
Investments, 1959."

TAXATION UNDER INFLATIONARY CONDITIONS

The Income Tax Law (Adjustment for Inflation), 1985 (the "Adjustment for
Inflation Law") attempts to overcome some of the problems experienced in a
traditional tax system by an economy experiencing rapid inflation, which was the
case in Israel at the time the Adjustment for Inflation Law was enacted.
Generally, the Adjustment for Inflation Law was designed to neutralize for
Israeli tax purposes the erosion of capital investments in businesses and to
prevent unintended tax benefits resulting from the deduction of inflationary
financing expenses. The Adjustment for Inflation Law applies a supplementary set
of inflationary adjustments to taxable profit computed according to regular
historical cost principles.

The Adjustment for Inflation Law introduced a special tax adjustment for the
preservation of equity based on changes in the Israeli CPI whereby certain
corporate assets are classified broadly into fixed (inflation resistant) assets
and non-fixed assets. Where shareholders' equity, as defined in the Adjustment
for Inflation Law, exceeds the depreciated cost of fixed assets, a corporate tax
deduction which takes into account the effect of inflationary change on such
excess inis allowed (up to a ceiling of 70% of taxable income for companies in any
single tax year, with the unused portion permitted to be carried forward on a
linked basis with no ceiling). If the depreciated cost of fixed assets exceeds
shareholders' equity, then such excess multiplied by the annual rate of
inflation is added to taxable income. Due to the zero inflation that prevailed
in Israel in 2000, such adjustments to taxable income will not be required for
the year 2000.

In addition, subject to certain limitations, depreciation on fixed assets
and losses carried forward are adjusted for inflation based on changes in the
Israeli CPI. The net effect of the Adjustment for Inflation Law on the
CompanyNUR might be
that the Company'sNUR's taxable income, as determined for Israeli corporate tax purposes,
will be different than the Company'sNUR's U.S. dollar income, as reflected in itsour
consolidated financial statements, due to the difference between the annual
changes in the CPI and in the NIS exchange rate with respect to the U.S. Dollar,
causing changes in the effective tax rate.

50
LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXES), 1969

The CompanyNUR currently qualifies as an "Industrial Company" within the definition of
the Law for the Encouragement of Industry (Taxes), 1969 (the "Industry
Encouragement Law"). According to the Industry Encouragement Law, an "Industrial
Company" is a company resident in Israel, which at least 90% of theits income of
which in any tax year (exclusive of income from any defense loans, capital
gains, interest and dividends), is derived from an "Industrial Enterprise" owned
by it. An "Industrial Enterprise" is defined by that law as an enterprise whose
major activity in a given tax year is industrial production activity.

Included among the tax benefits for an Industrial Company are deductions of
12.5% per annum of the purchase price of a good-faith acquisition of a patent or
of know-how, an election under certain conditions to file a consolidated return
and accelerated depreciation rates on equipment and buildings.

Eligibility for the benefits under the Industry Encouragement Law is not
subject to receipt of prior approval from any governmental authority. No
assurance can be given that the CompanyNUR will continue to qualify as an "Industrial
Company" or that the benefits described above will be available in the future.

LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959

The Law for the Encouragement of Capital Investments, 1959, as amended (the
"Investment Law"), provides that a capital investment in production facilities
(or other eligible facilities) may, upon application to the Israel Investment
Center, be designated as an Approved Enterprise. Each certificate of approval
for an Approved Enterprise relates to a specific program delineated both by its
financial scope, including its capital sources, and its physical
characteristics, I.E., the equipment to be purchased and utilized pursuant to
the program. The tax benefits derived from any such certificate of approval
relate only to taxable profits attributable to the specific Approved Enterprise.

Taxable income of a company derived from an Approved Enterprise designated
as such is subject to corporate tax at the rate of 25% or less based on the
percentage of foreign ownership of the company (rather than the regular
corporate tax rate of 36%) throughout the "Benefit Period"--a period of seven
years commencing with the year in which the Approved Enterprise first generated
taxable income (limited to the earlier of twelve years from the commencement of
production or fourteen years from the date of approval) and under certain
circumstances, extending to a maximum of ten years therefrom. In the event a
company operates under more than one approvalapproved plan or only part of its capital
investments are approved (a "Mixed Enterprise"), its effective corporate tax
rate is the result of a weighted combination of the various applicable rates.

In addition, a company owning an Approved Enterprise approval may elect to
forego certain government grants extended tofor its Approved Enterprise in exchange for an
"alternative package" of tax benefits (the "Alternative Package"). Under the
Alternative Package, a company's undistributed income derived from an Approved
Enterprise will be exempt from corporate tax for a period of between two and ten
years, depending on the geographic location of the Approved Enterprise within
Israel, and such company will be eligible for the tax benefits under the
Investment Law described above for the remainder of the Benefits Period.

Part of the Company'sNUR's production facilities have been granted the status of
"Approved Enterprise" under the Investment Law, under twothree separate investment
plans. The implementation of the investments under the first plan was finalizedcompleted
in 1993. The implementation of the second plan was finalized in 1999. NUR's
application for a third plan was approved in 2000.

According to the provisions of the Investment Law, the CompanyNUR chose to enjoy
"alternative benefits"--waiver of grants in return for tax exemption.benefits.
Accordingly, the Company'sNUR's income from the Approved Enterprise will be tax-exempt for a
period of two and four years for the first and the third plans and for a period of four
years for the second plans,
respectively,plan, commencing with the year it first earns taxable
income, and subject to corporate tax at the rate of 25%20% (or less based on the
percentage of foreign ownership of the

51
company), for additional periods of five, six and threeeight years, for the first,
second and secondthird plans, respectively.

The period of tax benefits, detailed above, is subject to limits of 12twelve
years from the commencement of production, or 14fourteen years from receiving the
approval, whichever is earlier. Given the above mentioned conditions, the period
of benefits for the first plan commenced in the year 1994 and will terminateterminated in the
year 2000, and the period of benefits for the second plan commenced in the year
1999 and will terminate in the year 2005.2006. The period of benefits for the third
plan has not yet been determined.

If dividends are distributed out of such tax-exempt profits the
Companyderived from "Approved
Enterprise", NUR will be liable for corporate tax at the rate, which would have
been applied if it had not chosen the alternative tax benefits (currently 15% or 25%to
20% based on the percentage of foreign ownership of the companyNUR for an "Approved

Enterprise"). Therefore, income derived from the Company'sNUR's "Approved Enterprise"
statustax-exempt profits, is not available for distribution to shareholders as a
dividend. See Note 20(a)17(a) to the Company's Financial Statements.NUR's consolidated financial statements, which are
included as a part of this annual report on Form 20-F.

The dividend recipient is taxed at the reduced rate applicable to dividends
from Approved Enterprises (15%), if the dividend is distributed during the tax
exemptionbenefits period or within a specifiedtwelve years period thereafter, or for an unlimited
period in the case of a "Foreign Investors' Company" - a--a company over 25%
foreign-owned with an approved enterprise. This tax must be withheld by the
company at source, regardless of whether the dividend is converted into foreign
currency. See "--Capital Gains and Income Taxes Applicable to Non-Israeli
Shareholders."

Subject to certain provisions concerning income subject to the Alternative
Package, all dividends are considered to be attributable to the entire
enterprise, and the effective tax rate is the result of a weighted combination
of the various applicable tax rates.

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

Grants and certain other incentives received by a company in accordance with
the Investment Law remain subject to final ratification by the Israel Investment
Center, such ratification being conditional upon fulfillment of all terms of the
approved program. Failure to comply with all such terms may require the return
of such grants and incentives (inclusive of interest as of the date of the
grant).

Receipt of grants and tax benefits from the OCS and the Marketing Fund
and under the Company'sNUR's existing "Approved Enterprise" status and any new programs, if and
when approved, are or will be, as the case may be, subject to various conditions. The tax benefits derived from
the Company'sNUR's "Approved Enterprise" status are conditioned upon fulfillment of the
conditions stipulated by the Investment Law, the regulations promulgated
thereunder and the criteria set forth in the certificate of approval issued
pursuant to the Investment Law. In the event of a failure by the CompanyNUR to comply with
these conditions and criteria, the grants and tax benefits could be canceled, in
whole or in part, and the CompanyNUR would be required to refund the amount of the canceled
benefits, adjusted for inflation, interest and interest.penalties. Management believes
that the CompanyNUR has operated and will continue to operate in compliance with all the
"Approved Enterprise" conditions and criteria applicable to itus from the OCS,Office
of Chief Scientist, the Marketing Fund and itsour "Approved Enterprise" status,
although there can be no assurance of this, and that the likelihood is remote
that itwe will be required to refund grants or tax benefits that it deriveswe derive from
the OCS,Office of Chief Scientist, the Marketing Fund and under itsour "Approved
Enterprise" status. There can be no assurance that the funding and tax benefits
will continue. See "Item 1: Description of
Business--Research"ITEM 4: Information on NUR--Research and DevelopmentDevelopment" and
--Risk"ITEM 3: Key Information--Risk Factors--We Rely Upon Government
Grants, Tax Benefits,rely upon government grants, tax
benefits, and Other Funding From Third Parties.other funding from third parties."

CAPITAL GAINS AND INCOME TAXES APPLICABLE TO NON-ISRAELI SHAREHOLDERS

Under existing regulations, any capital gain realized by a shareholder with
respect to the Ordinary Sharesordinary shares acquired on or after the registration of such
shares will be exempt from Israeli Capital Gains

52
Tax if the Ordinary Sharesordinary shares are listed on an approved foreign securities market
(which term includes the Nasdaq in the United States) and provided that the CompanyNUR
continues to qualify as an Industrial Company under Israeli law, and provided
the shareholder does not hold such shares for business purposes.

Proposals exist to impose capital gains tax on individuals at a rate of 25%
and on companies at up to 36%, subject to any applicable tax treaty. Under the
U.S.-Israel tax treaty, U.S. residents may be exempt from Israeli capital gains
tax, if they held under 10% of the voting stock throughout the twelve months
preceding a sale or disposition of stock in an Israeli company.

Upon a distribution of dividends other than bonus shares (stock dividends),
income tax is generally withheld at source at the rate of 25% (or the lower rate
payable with respect to Approved Enterprises, see "--Law for the Encouragement
of Capital Investments, 1959"), unless a double taxation treaty is in effect
between Israel and the shareholder's country of residence that provides for a
lower tax rate in Israel on dividends.

A tax treaty between the United States and Israel (the "Treaty"), effective
since January 1, 1995, provides for a maximum tax of 25% on dividends paid to a
resident of the United States (as defined in the Treaty). Dividends distributed
by an Israeli company and derived from the income of an approved enterprise are
subject to a 15% dividend withholding tax. The Treaty further provides that a
12.5% Israeli dividend withholding tax would apply to dividends paid to a United
States corporation owning 10% or more of an Israeli company's voting stock. The
12.5% rate applies only on dividends from a company that does not have an
"Approved Enterprise" in the applicable period.

A non-resident of Israel who has had dividend income derived or accrued in
Israel from which tax was withheld at source is currently exempt from the duty
to file an annual Israeli tax return with respect to such income, provided such
income was not derived from a business carried on in Israel by such non-resident
and that such non-resident does not derive other non-passive income from sources
in Israel.

Proposals are being formulated to expand the requirement
to file annual Israeli tax returns.

TAX BENEFITS FOR RESEARCH AND DEVELOPMENT

Israeli tax law allows under certain conditions a tax deduction in the year
incurred for expenditures (including non-depreciable capital expenditures) in
scientific research and development projects, if the expenditures are approved
by the relevant Israeli Government Ministry (determined by the field of
research) and the research and development is for the promotion of the
enterprise and is carried out by or on behalf of the company seeking such
deduction. Expenditures not so approved are deductible over a three-year period.
However, according to Israeli Supreme Court decisions, expenditures made out of
the proceeds of government grants are not deductible, i.e., the CompanyNUR will be able to
deduct the unfunded portion of the research and development expenditures and not
the gross amount.

U.S. TAX CONSIDERATIONS REGARDING ORDINARY SHARES

The following summary describes certain of the principal United States
federal income tax consequences relating to an investment in Ordinary Sharesordinary shares as
of the date hereof. The summary is based on the Internal Revenue Code of 1986
(the "Code"), and existing final, temporary and proposed Treasury Regulations,
Revenue Rulings and judicial decisions, all of which are subject to prospective
and retroactive changes. The CompanyNUR will not seek a ruling from the Internal Revenue
Service (the "IRS") with regard to the United States federal income tax
treatment relating to an investment in Ordinary Sharesordinary shares and, therefore, there can
be no assurance that the IRS will agree with the conclusions set forth below.
The summary does not purport to address all federal income tax consequences that
may be relevant to particular investors. For example, the summary applies only
to holders who hold Ordinary Sharesordinary shares as a capital asset within the meaning of
Section 1221 of the Code, and does not address the tax consequences that may be
relevant to investors in special tax situations (including, for example,
insurance companies, tax-exempt organizations, corporations owning ten percent
or more (by vote or value) of the Company's ordinary shares, dealers in
securities or currency, banks or other financial

53
institutions, or investors that hold Ordinary
Sharesordinary shares as part of a hedge,
straddle or conversion transaction). Further, it does not address the
alternative minimum tax consequences of an investment in Ordinary Sharesordinary shares or the
indirect consequences to Holdersholders of equity interests in investors in Ordinary Shares.ordinary
shares. ACCORDINGLY, PERSONS CONSIDERING THE PURCHASE OF ORDINARY SHARES SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES
FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION, TO THEIR PARTICULAR SITUATIONS.

For purposes of this discussion, "Company" refers to NUR
Macroprinters Ltd., and "U.S. Holder" means a holder of Ordinary Sharesordinary shares that is
a citizen or resident of the United States, a partnership or corporation created
or organized in the United States or any State thereof (including the District
of Columbia), or an estate or trust the income of which is subject to United
States federal income tax on a net income basis with respect to Ordinary Shares.ordinary shares.
The term "non-U.S. Holder" refers to any holder of Ordinary Sharesordinary shares other than a
U.S. Holder.

TAXATION OF U.S. HOLDERS

DISTRIBUTIONS ON ORDINARY SHARES. Distributions made by the CompanyNUR with respect to
Ordinary Sharesordinary shares generally will constitute dividends for federal income tax
purposes and will be taxable to a U.S. Holder as ordinary income to the extent
of the Company'sNUR's undistributed current or accumulated earnings and profits (as
determined for United States federal income tax purposes). Distributions in
excess of the Company'sNUR's current or accumulated earnings and profits will be treated
first as a nontaxable return of capital reducing the U.S. Holder's tax basis in
the Ordinary Shares,ordinary shares, thus increasing the amount of any gain (or reducing the
amount of any loss) which might be realized by such Holder upon the sale or
exchange of such Ordinary Shares.ordinary shares. Any such distributions in excess of the U.S.
Holder's tax basis in the Ordinary Sharesordinary shares will be treated as capital gain to the
U.S. Holder and will be either long term or short term capital gain depending
upon the U.S. Holder's federal income tax holding period for the Ordinary Shares.ordinary
shares. Dividends paid by the CompanyNUR generally will not be eligible for the dividends
received deduction available to certain United States corporate shareholders
under Code Sections 243 and 245. The amount of any cash distribution paid in a
foreign currency will equal the U.S. dollar value of the distribution,
calculated by reference to the exchange rate in effect at the time the dividends
are received. A U.S. Holder should not recognize any foreign currency gain or
loss if such foreign currency is converted into U.S. dollars on the day
received. If a U.S. Holder does not convert the foreign currency into U.S.
dollars on the date of receipt, however, such Holder may recognize gain or loss
upon a subsequent sale or other disposition of the foreign currency (including
an exchange of the foreign currency for U.S. dollars). Such gain or loss, if
any, will be ordinary income or loss for United States federal income tax
purposes.

Subject to certain conditions and limitations, any Israeli withholding tax
imposed upon distributions which constitute dividends under United States income
tax law will be eligible for credit against a U.S. Holder's federal income tax
liability. Alternatively, a U.S. Holder may claim a deduction for such amount,
but only for a year in which a U.S. Holder elects to do so with respect to all
foreign income taxes. The overall limitation on foreign taxes eligible for
credit is calculated separately with respect to specific classes of income. For
this purpose, dividends distributed by the CompanyNUR with respect to Ordinary Sharesordinary shares will
generally constitute "passive income."

SALE OR EXCHANGE OF ORDINARY SHARES. A. U.S. Holder of Ordinary Sharesordinary shares
generally will recognize capital gain or loss upon the sale or exchange of the
Ordinary Sharesordinary shares measured by the difference between the amount realized and the
U.S. Holder's tax basis in the Ordinary Shares.ordinary shares. Gain or loss will be computed
separately for each block of shares sold (shares acquired separately at
different times and prices). The gain or loss on such disposition will be
long-term capital gain or loss if the Ordinary Shares had been held for more
than one year. The deductibility of capital losses is restricted
and generally may only be used to reduce capital gains to the extent thereof.
However, individual taxpayers generally may deduct annually $3,000 of capital
losses in excess of their capital gains.

PASSIVE FOREIGN INVESTMENT COMPANY. A foreign corporation generally will be
treated as a "passive foreign investment company" ("PFIC") if, after applying
certain "look-through" rules, either (i) 75% or more of its gross income is
passive income or (ii) 50% or more of the average value of its assets is
attributable to assets that produce or are held to produce passive income.
Passive income for this purpose generally includes dividends, interest, rents,
royalties and gains from securities and commodities transactions. The
look-through rules require a foreign corporation that owns at least 25%, by
value, of an operating subsidiarythe stock of another corporation to treat that proportiona proportionate amount of the subsidiaries
assets and income as held or received directly by the foreign parent.

The Companycorporation.

NUR does not believe that it is currently a PFIC nor does it anticipate that
it will be a PFIC in the future because it expects that less than 75% of its
annual gross income will be passive income and less than 50% of its assets will
be passive assets, based on the look-through rules, the current income and
assets of the CompanyNUR and its subsidiaries, and the manner in which the CompanyNUR and its
subsidiaries are anticipated to conduct their businesses in the future. However,
there can be no assurance that the

CompanyNUR is not or will not be treated as a PFIC in
the future. If the CompanyNUR were to be treated as a PFIC, all U.S. Holders may be
required, in certain circumstances, to pay an interest charge together with tax
calculated at maximum rates on certain "excess distributions," including any
gain on the sale of Ordinary Shares.ordinary shares. In order to avoid this tax consequence, a
U.S. Holder (i) may be permitted to make a "qualified electing fund" election,
in which case, in lieu of such treatment, such holder would be required to
include in theirits taxable income certain undistributed amounts of the Company'sNUR's income or
(ii) may elect to mark-to-market the Ordinary Sharesordinary shares and recognize ordinary
income (or possible ordinary loss) each year with respect to such investment and
on the sale or other disposition of the Ordinary Shares.ordinary shares. Neither the CompanyNUR nor its
advisors have the duty to or will undertake to inform U.S. Holders of changes in
circumstances that would cause the CompanyNUR to become a PFIC. U.S. Holders should consult
their own tax advisors concerning the status of the CompanyNUR as a PFIC at any point in
time after the date of this Form. The CompanyNUR does not currently intend to take the
action necessary for a U.S. Holder to make a "qualified electing fund" election
in the event the CompanyNUR is determined to be a PFIC.

FOREIGN PERSONAL HOLDING COMPANY. A foreign corporation may be classified
as a foreign personal holding company (a "FPHC") for federal income tax purposes
if both of the following tests are satisfied: (i) at any time during the taxable
year five or fewer individuals who are United States citizens or residents own
or are deemed to own (under certain attribution rules) more than 50% of its
stock (vote or value) and (ii) at least 60% (50% for years subsequent to the
year in which it becomes a FPHC) of its gross income (regardless of its source),
as specifically adjusted, "is foreign personal holding company income," which
includes dividends, interest, rents, royalties and gain from the sale of stock
or securities.

The CompanyNUR does not believe that it is currently a FPHC nor does it anticipate that
it will be a FPHC in the future; however, no assurance can be given that the CompanyNUR is
not or will not become a FPHC as a result of future changes of ownership or
changes in the nature of the income of the Company.NUR. If the CompanyNUR were to be classified as a
FPHC, each U.S. Holder would be required to include in income as a taxable
constructive dividend its pro rata share of the Company'sNUR's undistributed foreign personal
holding company income.

CONTROLLED FOREIGN CORPORATION. If more than 50% of the Ordinary Sharesordinary shares
(vote or value) of the CompanyNUR is owned, directly or indirectly, by U.S. Holders each of whom ownsthat
own or isare deemed to own under certain attribution rules 10% or more of the
total combined voting power of all classes of stock of the
CompanyNUR ("10% Shareholder"),
the CompanyNUR could be treated as a "controlled foreign corporation" (a "CFC") under
Subpart F of the Code. It is unclear how controlling blocks of stock will be
valued for these purposes. Accordingly, the
CompanyNUR may be treated as a CFC for United
States federal income tax purposes even though 10% Shareholders do not own more
than 50% of the outstanding Ordinary Shares.

The Companyordinary shares.

NUR does not believe that it is currently a CFC; however, no assurance can
be given that the CompanyNUR will not become a CFC as a result of future changes in its
ownership. If the CompanyNUR were to be treated as a CFC, each 10% Shareholder would be
required to include in its taxable income as a constructive dividend its pro
rata share of certain undistributed income of the
Company,NUR, and all or a portion of the
gain from the sale or exchange of the Ordinary Sharesordinary shares may be treated under
Section 1248 of the Code as dividend income. Neither the CompanyNUR nor its advisors have
the duty to or will undertake to inform U.S. Holders of changes in circumstances
that would cause the CompanyNUR to become a CFC. U.S. Holders should consult their own tax
advisors concerning the status of the CompanyNUR as a CFC.

INFORMATION REPORTING. Any U.S. Holder who owns 10% or more (in voting
power or value) of the Ordinary Shares of the Company may be required to file
IRS Form 5471 with the IRS to report certain acquisitions or dispositions of
Ordinary Shares. In addition, annual filings of IRS Form 5471 would be required
(i) by any U.S. Holder of 10% or more (of the voting power in the case of a CFC,
or value in the case of a FPHC) of the Ordinary Shares of the Company, and (ii)
by any U.S. Holder owning more than 50%, in voting power or value, of the
Ordinary Shares of the Company. In addition, forFor taxable years beginning after February 5, 1999,
U.S. Holders are required to report certain acquisitions of Ordinary Sharesordinary shares from
the CompanyNUR to the IRS on IRS Form 926, and that nonreporting may subject the U.S.
28

Holder to substantial penalties. Potential investors of the Sharesordinary shares
should consult with their own tax advisors regarding the necessity of filing
information returns.

TAXATION OF NON-U.S. HOLDERS

DISTRIBUTIONS ON ORDINARY SHARES. Distributions made by the CompanyNUR with respect to
the Ordinary Sharesordinary shares to non-U.S. Holders who are not engaged in the conduct of a
trade or business within the United States will be subject to United States
federal income tax only if 25% or more of the gross income of the
CompanyNUR (from all
sources for the three-year period ending with the close of the taxable year
preceding the declaration of the distribution) was effectively connected with
the conduct of a trade or business in the United States by the
Company. The CompanyNUR. NUR does not
anticipate engaging in the conduct of a trade or business within the United
States, except through its subsidiaries. However, if the 25% threshold for such
period is exceeded, a portion of any distribution paid by the CompanyNUR to a non-U.S.
Holder could be subject to federal income tax withholding at the rate of 30%;
the portion of the distribution that could be subject to withholding would
correspond to the portion of the Company'sNUR's gross income for the period that is
effectively connected to its conduct of a trade or business within the United
States.

SALE OR EXCHANGE OF ORDINARY SHARES. A non-U.S. Holder will not be subject
to United States federal income tax on any gain realized upon the sale or
exchange of Ordinary Sharesordinary shares if such Holder has no connection with the United
States other than holding the Ordinary Sharesordinary shares and in particular (i) such gain is
not effectively connected with a trade or business in the United States of the
non-U.S. Holder and (ii) in the case of a non-U.S. Holder who is an individual,
which has a "tax home" (as defined in Section 911(d)(3) of the Code) in the
United States,
such non-U.S. Holder is not present in the United States for 183 days or more in
the taxable year of such disposition, and (iii) the Company is
not and has not been at any time within 5 years preceding such disposition a
"U.S. real property holding corporation" (a "USRPHC") for federal income tax
purposes.

The Company believes that it is not and does not currently intend to
become a USRPHC, but no assurance can be given that the Company is not or will
not become a USRPHC in the future. In general, if the Company is determined to
be a USRPHC then non-U.S. Holders may be subject to United States federal income
tax on the sale or exchange of the Ordinary Shares, and to withholding at a rate
of 10% on any such disposition. However, a non-U.S. Holder will not be subject
to these special rules even if the Company is determined to be a USRPHC provided
that (i) such non-U.S. Holder did not at any time during the five years ending
on the date of sale or disposition actually or constructively own more than 5%
of the Ordinary Shares of the Company and (ii) the Ordinary Shares are then
"regularly traded" on an established securities market in the United States.
Since the Ordinary Shares are traded on the Nasdaq stock market and since it is
regularly quoted by broker dealers, the Ordinary Shares should be considered to
be "regularly traded" on an established securities market. However, it is
possible to interpret the current Temporary Regulations as concluding that the
Ordinary Shares will not be considered "regularly traded" at any time during
which 50% or more thereof is owned by 100 or fewer persons, which will be the
case as of the date of this Form.

UNITED STATES BUSINESS. A non-U.S. Holder engaged in a trade or business in
the United States whose income from the Ordinary Sharesordinary shares (including gain from the
sale or exchange thereof) is effectively connected with the conduct of such
trade or business will generally be subject to regular United States federal
income tax on such income in the same manner as if it were a U.S. Holder. In
addition, if such a Holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments.

BACKUP WITHHOLDING

Distributions made by the CompanyNUR with respect to the Ordinary Sharesordinary shares and the gross
proceeds received from the disposition of the Ordinary Sharesordinary shares may be subject to
certain information reporting to the IRS and to a 31% backup withholding tax.
However, backup withholding generally will not apply to

payments made to certain
exempt recipients (such as a corporation or financial institution) or to a
Holder who furnishes a correct taxpayer identification number or provides a
certificate of foreign status and provides certain other required information.
If backup withholding applies, the amount withheld is not an additional tax, but
is credited against such Holder's United States federal income tax liability.

ITEM 8: SELECTED CONSOLIDATED FINANCIAL DATA

STATEMENTS OF OPERATIONS
(IN U.S. DOLLARS)
(IN THOUSANDS, EXCEPT PER SHARE56

DIVIDENDS AND SHARE DATA)

1995 1996(1) 1997(1) 1998(1) 1999(2)
------- ------- ------- ------- -------

Revenues:
Sales of printers and related products $13,824 $13,639 $18,874 $31,905 58,259
Sales of printed materials(3) -- 2,998 3,085 4,540 2,460
------- ------- ------- ------- -------
13,824 16,637 21,959 36,445 60,719
------- ------- ------- ------- -------

Cost of revenues:
Cost of sales of printers and related 9,374 11,528 9,627 16,368 30,440
products
Cost of sales of printed materials -- 2,008 1,684 2,579 1,344
------- ------- ------- ------- -------
9,374 13,536 11,311 18,947 31,784
------- ------- ------- ------- -------

Gross profit 4,450 3,101 10,648 17,498 28,935
------- ------- ------- ------- -------

Research and development expenses 1,040 1,530 1,726 5,027 5,530
Less royalty-bearing grants 306 372 43 818 721
------- ------- ------- ------- -------
Research and development expenses, net 734 1,158 1,683 4,209 4,809
------- ------- ------- ------- -------

Selling and marketing expenses, net 1,039 4,823 4,620 5,829 9,485
General and administrative expenses 1,187 2,560 3,439 5,084 6,275
Write-off of debts from related parties -- 3,757 -- - --
------- ------- ------- ------- -------
2,226 11,140 8,059 10,913 15,760
------- ------- ------- ------- -------

Operating income (loss) 1,490 (9,197) 906 2,376 8,366
Financial expenses, net 205 589 320 501 683
Gain (loss) on marketable securities 12 22 -- (92) 67
Other income (expenses), net 110 76 (8) (19) 176
------- ------- ------- ------- -------

1995 1996(1) 1997(1) 1998(1) 1999(2)
--------- --------- --------- ---------- ----------

Income (loss) before taxes on income 1,407 (9,688) 578 1,764 7,926
Taxes on income 221 400 67 264 798
--------- --------- --------- ---------- ----------
Income (loss) after taxes on income 1,186 (10,088) 511 1,500 7,128
Minority interest in earnings of subsidiary -- -- (26) 43 (28)
Equity in losses of 50% owned joint venture(4) (1,125) -- -- -- 75
--------- --------- --------- ---------- ----------
Net income (loss) for the period $61 $(10,088) $485 $1,457 7,175
--------- --------- --------- ---------- ----------
Basic earnings (loss) per share $0.01 $(1.47) $0.07 $0.13 $0.64
--------- --------- --------- ---------- ----------
Diluted earnings (loss) per share $0.01 $(1.47) $0.07 $0.13 $0.56
--------- --------- --------- ---------- ----------
--------- --------- --------- ---------- ----------
Weighted average number of shares used in
computing basic earnings (loss) per share 4,904,118 6,880,000 7,293,640 10,880,000 11,181,137
--------- --------- --------- ---------- ----------
--------- --------- --------- ---------- ----------
Weighted average number of shares used in
computing diluted earnings (loss) per share 4,904,118 6,880,000 7,293,640 11,451,389 12,722,600
--------- --------- --------- ---------- ----------
--------- --------- --------- ---------- ----------

- ----------
(1) Represents financial informationPAYING AGENTS

Not Applicable.

STATEMENT BY EXPERTS

Not Applicable.

DOCUMENTS ON DISPLAY

Any statement in this annual report about any of our contracts or other
documents is not necessarily complete. If the contract or document is filed as
an exhibit to a registration statement, the contract or document is deemed to
modify the description contained in this annual report. You must review the
exhibits themselves for the Company together with its
subsidiaries NUR Media Solutions, NUR America, NUR Europe, and NUR Germany.

(2) Represents financial information for the Company together with its
subsidiaries NUR Media Solutions, NUR America, NUR Europe, NUR Shanghai,
NUR Asia Pacific and NUR Germany (NUR Germany first 6 months).

(3) Represents 84% of NUR Germany's income for the first 6 months of 1999, an
operation that was sold during the third quarter of 1999.

(4) Represents equity in Stillachem and NPE.

BALANCE SHEET DATA
(IN U.S. DOLLARS)
(IN THOUSANDS)

1995 1996(1) 1997(1) 1998(1) 1999(2)
------- -------- -------- -------- --------

Working capital............ $10,597 $690 $ 4,674 $5,441 16,017
Total assets............... 16,759 12,161 13,783 21,995 39,648
Total liabilities.......... 4,945 10,325 7,998 14,565 21,785
Total shareholders' equity. $11,814 $1,836 $ 5,785 $7,430 17,863

- ----------
(1) Represents financial information for the Company together with its
subsidiaries NUR Media Solutions, NUR America, NUR Europe, and NUR Germany.

(2) Represents financial information for the Company together with its
subsidiaries NUR Media Solutions, NUR America, NUR Europe, NUR Shanghai, NUR
Asia Pacific and NUR Germany (NUR Germany first 6 months).

ITEM 9: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

The Company is a world leader in the market for the sale of WF and SWF
digital printing systems. The Company develops, manufactures, sells, and
services digital, inkjet color printing systems for on demand, production, WF
and SWF printing. The Company also supplies inks and substrates which are
consumable products for the operationcomplete description of the Company's Printers. The Company's
total revenues grew from approximately $22 million incontract or document.

You may review a copy of our filings with the year ended December
31, 1997, to approximately $36.4 million inSEC, including exhibits and
schedules, at the year ended December 31, 1998 and
$60.7 million in the year ended December 31, 1999. Excluding NUR Germany's
results, revenues in 1999 were $58.3 million compared to $31.9 million in 1998
and $18.9 million in 1997.

The Company carries out its main research and development center for
the printers at itsSEC's public reference facilities in Moshav Magshimim. The Company's main salesRoom 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and service activities are carried out through its wholly owned subsidiaries, NUR
Europe, located in Brussels, Belgium, NUR America, located in Newton,
Massachusetts, inat the United States, NUR Asia Pacific located in Shanghai,
China, and through its NUR Middle East and Africa unit located in Belgium. The
Company also wholly owns NUR Media Solutions, located in Brussels, Belgium,
which develops advanced consumables forregional
offices of the Company's Printers. The Company owns
50% of Stillachem, located in Charleroi Belgium, which is a digital ink factory
producing inks for the NUR Fresco printers, and 50% of NPESEC located at Rosh
Ha'ain Israel which is its main subcontractor for7 World Trade Center, 13th Floor, New York, New
York 10048 and at the assemblyNorthwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You may also obtain copies of such
materials from the Public Reference Section of the Company's
Printers.SEC, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at proscribed rates. You
may call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The Company, incorporated as an Israeli corporation on July 29, 1987,
started operation in June 1991,SEC maintains a web site (http://www.sec.gov) that contains
reports, proxy and since October 1995, the Company's Ordinary
Shares are traded on Nasdaq National Market. The Company is currently quoted on
Nasdaq National Market under the symbol NURM.

Revenues from the Company's Printers and related materials are derived
from the sale of the Company's Printers, inks, substrates, spare parts, and
related services. Revenues from printed materials were derived from NUR
Germany's printing and advertising display services, a company that was sold
during the third quarter of 1999.

Cost of sales of printers and related materials include costs related
to product shipments including materials, labor, overhead,information statements and other directinformation regarding
registrants that file electronically with the SEC. Although we make many of our
filings with the SEC electronically, as a foreign private issuer we are not
obligated to do so.

You may read and copy any reports, statements or allocated costs involved inother information that we
file with the manufacture, warehousing, delivery, support,SEC at the addresses indicated above and maintenance of products. Research and development expenses include mainly labor,
materials consumed, expenses by sub-contractors, consultants, and others.
Research and development expensesyou may also access them
electronically at the web site set forth above. These SEC filings are carriedalso
available to the statement of operations as
incurred. Grants are nettedpublic from research and development costs on an accrual
basis as the related expenses are incurred.

The sales and marketing expenses include the costs associated with the
staff of the sales and marketing force of the Company and its subsidiaries,
advertising and promotion of existing and new products, trade shows,
commissions, and other marketing activities. During 1999, the Company expended
significant financial and management resources to expand its business and
product offerings. The Company invested in strengthening the service and sales
organizations in NUR Europe and NUR America, by hiring additional sales and
service staff in both territories. The Company also invested in the creation and
set-up of NUR Asia Pacific, NUR Shanghai and NUR Middle East and Africa, the
Company's new sales and service organizations, replacing Scitex, its distributor
in these territories until the end of 1998. The Company also invested in the
continuation of the development of NUR Media

Solutions, a subsidiary dedicated to the development and marketing of
consumables, mainly substrates, inks and clear coat varnishes for the use with
the Company's products. The Company also established two new joint ventures,
NPE, an assembly subcontractor for the Company's Printers located in Israel, and
Stillachem, an ink factory for the NUR Fresco inks located in Belgium.

CERTAIN ACCOUNTING POLICIES

The main sources of revenues for the Company are sales of the Company's
Printers and related consumable products. Sales are recognized upon shipment of
the product to customers, when no significant vendor obligation remains and
collection is deemed probable.

The accompanying consolidated financial statements have been prepared
in U.S. dollars. The U.S. dollar is the currency of the primary economic
environment in which the operations of the Company and NUR America are
conducted. The U.S. dollar is the functional and reporting currency of the
Company. The majority of sales are made in U.S. dollars and the majority of
purchases of materials and components are invoiced and paid in U.S. dollars. In
addition, a substantial number of other expenses are incurred outside Israel in
U.S. dollars or paid in U.S. dollars or in New Israeli Shekels ("NIS") linked to
the exchange rate of the U.S. dollar.commercial document retrieval services.

SUBSIDIARY INFORMATION

See note 2 to the Company's Financial Statements included as a partITEM 4.C. of this annual report for a discussion of the Company's accounting policy for
determining rate of exchange and linkage based amounts.

The Company's transactions and balances denominated in U.S. dollars are
presented in their original amounts. Non-dollar transactions and balances have
been remeasured into U.S. dollars in accordance with Statement 52 of the
Financial Accounting Standards Board ("FASB"). All transaction gains and losses
from remeasurement of monetary balance sheet items denominated in non-dollar
currencies are reflected in the statement of operations as financial income or
expenses, as appropriate.

The functional currencies of NUR Media Solutions and NUR Europe are
their local currencies. The balance sheets of these subsidiaries are translated
into U.S. dollars at the exchange rate prevailing on the date of the balance
sheet. The statements of operations and cash flows are translated at weighted
average exchange rates during each year presented. Translation adjustments are
recorded in a separate component of shareholders' equity.

The Company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in Israel. As
applicable to the Company's financial statements, generally accepted accounting
principles in the U.S. and Israel are identical in all material respects.

The Company accounts for stock-based compensation in accordance with
the requirements of Accounting Principles Board Opinion No. 25 ("APB 25")
"Accounting for Stock Issued to Employees." Under APB 25, when the exercise
price of the Company's employee options is less than the fair value of the
underlying shares on the date of grant, compensation expense is recognized.

In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock Based Compensation" were applied. According to FASB 123,
the fair value of these options was estimated at the grant date using
Black-Scholes options pricing model.

CURRENT AND FUTURE TRENDS

PRINTERS SALES

SWF: The Company has estimated based on its own market research that
the SWF industry has grown at a rate of 15-20% annually for the last three
years. Originally the SWF market was created for

print billboard. Currently the main drive for growth is coming from the
introduction of new application such as mural coverings, truck side printing and
exhibition graphics. The Company's growth during 1998 and 1999 has exceeded this
growth rate, mainly as a result of the Company's increased market share in the
SWF market and the introduction of new products. The Company believes it will
maintain a similar level of revenues in the SWF market of its business during
2000.

WF: In February 2000, the Company started to sell the first NUR Fresco
printers to the WF professional market. The Company believes it will see most of
its growth in 2000 coming from the introduction of this product to the WF
professional print market.

CONSUMABLES SALES

During 1998 and 1999, the Company focused on its consumable recurring
revenues strategy. During 1999 this part of the business has grown by 116%
compared to 1998. The consumable business is made of two families of products,
specialized inks and specialized substrates. The Company believes that during
2000 the growth rate in the sale of the consumables will be less than in 1999
and will only reflect the growth rate of the installed base of the Company's
Printers.

GROSS MARGINS

The gross margins of the Company are expected to be at similar levels
in 2000 as in 1999. Although there is a downward price pressure on the Company's
existing products, there have been certain reductions in the manufacturing cost
of these products. The Company anticipates a launch of its new products at gross
margins similar to its existing products.

INDUSTRY

The out-of-home digital printing industry has undergone significant
changes in the past few years, and additional change is anticipated in the
future. The most noticeable change in the industry has been the adoption of
inkjet technologies by all major competitors in the industry. The Company's
major competitors have each introduced an inkjet-based printer to replace their
existing airbrush printers. The new printers, introduced since the end of 1997,
are based on the D-O-D technology. The Company believes it is the only
manufacturer with printers that use CIJ and DOD printing technology. To date,
the Company has been successful in maintaining and increasing its growth in
revenues from the Company's Printers.

With the cost of digital printing expected to decrease and the ability
of digital technology expected to produce shorter runs more economically, the
Company believes that the use of WF and SWF printing, such as that produced by
the Company's Printers, should grow, and that the portion of the market serviced
by digital printing should increase. The ability to produce WF and SWF images
digitally has also opened new media opportunities for advertisers, such as mural
printing, carpet printing, new forms of fleet graphics printing. The growth in
demand for SWF digital printers is fueled both by the replacement of
conventional print methods and the development of new printing applications.

GEOGRAPHIC BREAKDOWN OF REVENUES

The Company sells its products and services around the world. Revenues
are generally recognized at the location of the sale of the product or service.
The table below shows the breakdown of revenues (dollars in thousands) by
categories of activities and into geographic markets in the years ended December
31, 1999, 1998 and 1997. The "Other" category, below, includes, among other
things, revenues generated by the service of the Company's printers. With the
sale of NUR Germany in the third quarter of 1999, the Company no longer derives
significant revenues from the sale of printed materials.

YEAR ENDED PRINTERS INK SUBSTRATES PRINTED MATERIALS OTHERS TOTAL
DECEMBER 31, 1999 (55.1%) (23.1%) (12.1%) (4%) (5.7%) (100%)
REGION $ % $ % $ % $ % $ % $ %
- ------------------------------------------------------------------------------------------------------------------------------------

Middle-East & 2,408 7.2% 1,428 10.2% 785 10.8% -- -- 330 9.5% 4,951 8.2%
Africa............. 6,357 19% 2,792 19.9% 468 6.4% -- -- 378 10.9% 9,995 16.5%
Asia............... 11,017 32.9% 3,533 25.1% 2,898 39.8% 2,460 100% 1,540 44.4% 21,448 35.3%
Europe
North & Latin
America.......... 13,692 40.9% 6,291 44.8% 3,123 43% -- -- 1,219 35.2% 24,325 40%

Total Revenues..... 33,474 100% 14,044 100% 7,274 100% 2,460 100% 3,467 100% 60,719 100%
------ ---- ------- ---- ----- ---- ------ ---- ------ ---- ------ ----
------ ---- ------- ---- ----- ---- ------ ---- ------ ---- ------ ----

YEAR ENDED PRINTERS INK SUBSTRATES PRINTED MATERIALS OTHERS TOTAL
DECEMBER 31, 1998 (52.3%) (23.6%) (2.4%) (12.5%) (9.2%) (100%)
REGION $ % $ % $ % $ % $ % $ %
- -----------------------------------------------------------------------------------------------------------------------------------

Middle-East &
Africa............ 916 4.8% 858 9.9% 156 17.5% -- -- 308 9.2% 2,238 6.1%

Asia.............. 1,762 9.2% 1,286 15.1% -- -- -- -- 278 8.3% 3,326 9.1%

Europe 7,369 39% 2,388 28% 460 51.5% 4,540 100% 1,484 44.4% 16,241 44.6%

North & Latin
America........... 9,005 47% 4,087 47% 278 31% -- -- 1,270 38.1% 14,640 40.2%

Total Revenues..... 19,052 100% 8,619 100% 894 100% 4,540 100% 3,340 100% 36,445 100%
------ ---- ------- ---- ----- ---- ------ ---- ------ ---- ------ ----
------ ---- ------- ---- ----- ---- ------ ---- ------ ---- ------ ----

YEAR ENDED PRINTERS INK SUBSTRATES PRINTED MATERIALS OTHERS TOTAL
DECEMBER 31, 1997 (55%) (21%) (0%) (14%) (10%) (100%)
REGION $ % $ % $ % $ % $ % $ %
- -----------------------------------------------------------------------------------------------------------------------------------

Middle-East &
Africa............ 1,344 11% -- --

Asia.............. -- -- 1,122 25% -- -- 0 0% 583 26% 3,049 14%

Europe............ 6,353 53% 1,549 34% -- -- 3,085 100% 862 38% 11,849 54%

North & Latin
America......... 4,326 36% 1,900 42% -- -- 0 0% 835 37% 7,061 32%

Total Revenues.... 12,023 100% 4,571 100% -- -- 3,085 100% 2,280 100% 21,959 100%
------ ---- ------- ---- ----- ---- ------ ---- ------ ---- ------ ----
------ ---- ------- ---- ----- ---- ------ ---- ------ ---- ------ ----

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain line
items from the Company's statement of operations as a percentage of the
Company's sales:

YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1996(1) 1997(1) 1998(1) 1999(2)
-----------------------------------------------
(IN PERCENTS)
-----------------------------------------------

REVENUES ...................................... 100% 100% 100% 100% 100%
Cost of sales of printers and related ....... 68 69 43.9 44.9 50.1
products
Cost of sales of printed materials ......... -- 12 7.6 7.1 2.2
Gross profit ............................... 32 19 48.5 48 47.7
Research and development expenses .......... 8 9 7.8 13.8 9.1
Research and development expenses net ...... 5 7 7.7 11.5 7.9
Selling expenses, net ...................... 7 29 21 16 15.6
General and administrative expenses ........ 9 15 15.7 14 10.3
Write-off debts of related parties ......... -- 23 -- --
Operating income (loss) .................... 11 (55) 4.1 6.5 13.8
Financial expenses, net .................... 2 4 1.5 1.4 1
Gain (loss) on marketable securities ....... -- -- -- 0.2 --
Other income (expense) ..................... 1 -- -- 0.05 0.3
Taxes on income (tax benefit) .............. 2 2 0.3 0.7 1.3
Minority interest in earnings of subsidiary -- -- 0.1 0.1 0.05
Equity in loss of a 50% owned subsidiary ... (8) -- -- -- 0.1
Net income (loss) .......................... -- (61) 2.2 4 11.8

- ----------
(1) Represents the Company on a consolidated basis with its subsidiaries NUR
Media Solutions, NUR America, NUR Europe and NUR Germany.

(2) Represents the Company on a consolidated basis with its subsidiaries NUR
Media Solutions, NUR America, NUR Europe, NUR Germany, NUR Shanghai and NUR
Asia Pacific (NUR Germany first six months of 1999).

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998

REVENUES. Total revenues increased by 66.6%, to approximately $60.7
million in the year ended December 31, 1999 from approximately $36.44 million in
the year ended December 31, 1998, mainly as a result of the introduction of the
NUR Blueboard HiQ and market acceptance of the NUR Blueboard printers and as a
result of the continued move to direct distribution by the Company of the
Company's products in the Middle East, Africa and Asia. Growth was also fueled
by the growth of sales of the ink as a result of the growth of the installed
base of the Company's Printers and substrates a new business started in the
third quarter of 1999. Excluding NUR Germany's results from the year ended
December 31, 1998 (a company that was sold during the third quarter of 1999),
revenues in 1999 were $58.26 million, an increase of 82.6% compared to $31.9
million in 1998.

EXPENSES. Research and development costs, net of the OCS grants, were
approximately $4.8 million in the year ended December 31, 1999, compared to $4.2
million in the year ended December 31, 1998. The increase is mainly as a result
of increased efforts in developing new products. The Company expects to continue
to invest significant resources in its research and development programs for new
products and enhancements of existing products. The Company expects that
research and development expenses will continue to increase in absolute dollar
terms as compared to previous years.

Selling and marketing expenses were approximately $9.5 million in the
year ended December 31, 1999 compared to approximately $6.1 million in the year
ended December 31, 1998. The Company received $0.13 million in the year ended
December 31, 1999 from the Marketing Fund for selling and marketing expenses as
compared to $0.11 million in the year ended December 31, 1998. The Company will
not be eligible for support from the Marketing Fund commencing in 2000 due to
the Company reaching the maximum allowed export revenues. The majority of sales
and marketing expenses are incurred by the distribution subsidiaries, NUR
Europe, NUR America, NUR Shanghai and NUR Asia Pacific.

General and administrative expenses were approximately $6.27 million in
the year ended December 31, 1999, compared to approximately $4.8 million in the
year ended December 31, 1998, representing an approximately 30.7% increase. This
increase was due primarily to building of the financial and administrative
infrastructures of the Company and the opening of the new subsidiaries in the
Far East.

Financial expenses, net increased to $0.61 million in the year ended
December 31, 1999 from $0.50 million in the year ended December 31, 1998.

GROSS PROFIT. Gross profit was approximately $28.9 million in the year
ended December 31, 1999, an increase of 65.4% from $17.5 million in the year
ended December 31, 1998. Gross profit as percentage of sales was 47.6% in the
year ended December 31, 1999 compared to 48% in the year ended December 31,
1998. Excluding NUR Germany's results from the year ended December 31, 1998
gross profit increased to $27.82 million (47.75% as percentage of sales) from
$15.54 million (48.7% as percentage of sales) in 1998, an increase of 79%.

TAXES. Taxes on income were $0.798 million in the year ended December
31, 1999 as compared to $0.264 million in the year ended December 31, 1998.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

REVENUES. Total revenues increased by 66%, to approximately $36.44
million in the year ended December 31, 1998 from approximately $21.96 million in
the year ended December 31, 1997, mainly as a result of the introduction of the
NUR Blueboard 2 and market acceptance of the NUR Blueboard printers and as a
result of the continued move to direct distribution by the Company of the
Company's products in Europe and the United States, the Company's two major
markets. Growth was also fueled by the growth of sales of the ink as a result of
the growth of the installed base of the Company's Printers.

SALES. Sales of the Company's Printers and related products increased
by 69% to approximately $31.9 million in the year ended December 31, 1998 from
approximately $18.9 million in the year ended December 31, 1997. This increase
was attributed primarily to the introduction and market acceptance of the NUR
Blueboard and to increased revenues due to the move from sales through
distributors to direct sales to end users through the Company's subsidiaries in
Europe and the United States.

EXPENSES. Research and development costs, net of the OCS grants, were
approximately $4.2 million in the year ended December 31, 1998, compared to
$1.68 million in the year ended December 31, 1997. The increase is mainly due to
acquired in process research and development in the amount of $1.95 million and
as a result of increased efforts in developing new products. The Company expects
to continue

to invest significant resources in its research and development programs for new
products and enhancements of existing products. The Company expects that
research and development expenses will continue to increase in absolute dollar
terms as compared to previous years.

Selling and marketing expenses were approximately $6.1 million in the
year ended December 31, 1998 compared to approximately $4.6 million in the year
ended December 31, 1997. The Company received $0.11 million in the year ended
December 31, 1998 from the Marketing Fund for selling and marketing expenses as
compared to $0.2 million in the year ended December 31, 1997. The Company will
not be eligible for support from the Marketing Fund commencing in 1999 due to
the Company reaching the maximum allowed export revenues. The majority of sales
and marketing expenses are incurred by the distribution subsidiaries, NUR Europe
and NUR America.

General and administrative expenses were approximately $4.8 million in
the year ended December 31, 1998, compared to approximately $3.4 million in the
year ended December 31, 1997, representing an approximately 50% increase. This
increase was due primarily to legal and extra-ordinary audit costs resulting
from the change in control and management of the Company, and to the re-building
of the financial and administrative infrastructures of the Company.

Financial expenses, net increased to $0.5 million in the year ended
December 31, 1998 from $0.32 million in the year ended December 31, 1997.

TAXES. Taxes on income were $0.264 million in the year ended December
31, 1998 as compared to $0.067 million in the year ended December 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES

Since the commencement of the Company's activities in the second half
of 1991 through mid-1993, the Company financed its operations primarily through
loans and injection of equity by shareholders. In October 1993, the Company
raised, through a private placement, approximately $6 million (approximately $3
million in equity and $3 million in convertible debentures). Following the 1993
private placement, the Company financed its operations primarily through cash
generated from operations. In the year ended December 31, 1995, the Company's
major source of cash was the $6.86 million of net proceeds from the Company's
initial public offering in October 1995.

The Company incurred a loss of approximately $10.1 million in the year
ended December 31, 1996. This loss was comprised of approximately $4.8 million
in losses due to increased expenses associated with the setup of direct sales
and marketing efforts by the Company in Europe and in the United States, and to
the assumption of international support and service; approximately $1.2 million
in research and development expenses; approximately $0.6 million in financing
expenses; approximately $0.4 million in elimination of deferred taxes; and
approximately $3.8 million in losses due to the write-off of debts to the
Company associated with Moshe Nur and companies controlled by him. These debts
resulted, in part, from ineffective controls that failed to prevent unauthorized
transactions and failed to detect the misappropriation of funds. As a result,
the Company's shareholders' equity was reduced to approximately $1.8 million as
of December 31, 1996.

In the year ended December 31, 1997, the Company's net income was
$0.485 million. In 1997, additional capital was needed to fund accrued debts to
suppliers during the year ended December 31, 1996 and the beginning of 1997, and
to increase the Company's working capital and equity base. In the third and
fourth quarters of 1997, the Company completed a private placement of $4.0
million of

Ordinary Shares, from which the Company received net proceeds of approximately
$3.51 million (the "Private Placement").

In the year ended December 31, 1997, the Company's major source of cash
was the $3.51 million of net proceeds from the Private Placement.

In the year ended December 31, 1998, net cash provided by operating
activities was approximately $2.9 million. Cash provided from financing activity
was $1.7 million primarily from additional use of short-term credit line
totaling $2.3 million.

In the year ended December 31, 1999, net cash provided by operating
activities was approximately $3.8 million.

In September 1999, the Company raised $3.3 million through a private
placement of 600,000 of its Ordinary Shares and warrants to purchase 150,000 of
its Ordinary Shares, in the aggregate, to ISAL Amlat Investments (1993) Ltd.
("Isal") and Dovrat & Co Ltd. In February 2000, Isal and Dovrat exercised the
warrants issued under the investment agreement at an exercise price of $8.00 per
share resulting in the payment of an additional $1.2 million to the Company.

The Company has future royalty obligations to Meital, which will not
exceed $1.3 million, payable during the two years ending September 2001. Such
commitment is part of the purchase price for technology acquired by the Company
from Meital.

As part of the Matan Settlement Agreement, the Company was obligated to
pay a total of $880,000, plus interest and tax, assuming timely payments, to the
Matan Parties. During 1999, the Company had already paid $293,000 to Matan. The
remaining sum of $586,000 has been fully reserved and is payable by the Company
to the Matan Parties in equal quarterly installments ending December 2001.

OPERATING ACTIVITIES

In the year ended December 31, 1997, the Company had net income of
$0.485 million. Net cash used by operating activities was approximately $2.05
million. The main changes in the Company's working capital were (i) an increase
of approximately $1.8 million in trade accounts receivable, (ii) a decrease of
approximately $1.24 million in trade payables, and (iii) a decrease of
approximately $1.3 million in customer advances.

In the year ended December 31, 1998, the Company had net income of
$1.457 million. Net cash provided by operating activities was approximately $2.9
million. The main changes in the Company's working capital were (i) an increase
of approximately $3.03 million in trade accounts receivable, (ii) an increase of
approximately $1.3 million in trade inventories, and (iii) an increase of
approximately $4.1 million in trade payables.

In the year ended December 31, 1999, the Company had net income of $7.2
million. Net cash provided by operating activities was approximately $3.8
million. The main changes in the Company's working capital were (i) an increase
of approximately $3.6 million in trade accounts receivable, (ii) an increase of
approximately $6.66 million in trade inventories, (iii) an increase of
approximately $2.65 million in trade payables, and (iv) an increase of
approximately $3.1 million in accrued expenses and other liabilities.

INVESTING ACTIVITIES

Net cash used in investing activities was approximately $1.61 million
in the year ended December 31, 1997. The Company invested approximately $3.58
million in the year ended December 31, 1998, consisting of $2.54 million for
equipment and $1.3 million for the acquisition of technology and

approximately $1.20 million in the year ended December 31, 1999, including $0.7
million provided by realization of investment in a subsidiary.

FINANCING ACTIVITIES

Net cash provided by financing activities in the year ended December
31, 1999 was approximately $4.45 million.

The Company maintains long and short-term credit facilities in an
aggregate amount of approximately $8.15 million at December 31, 1999. At
December 31, 1999, the Company had approximately $2.775 million in long-term
loans from banks and others, $0.832 million of which is payable within 12 months
and $2.743 in short term loans. The Company's long term loans are linked to the
U.S. dollar and the Belgian Franc bearing interest at a rate ranging between
4.32% and 7.5%.

As of December 31, 1999, total current assets of the Company amounted
to approximately $35.1 million, out of which $9.19 million was in cash, cash
equivalents and marketable securities, compared with total current liabilities
of approximately $19.1 million. The increase in current assets is attributable
primarily to growth in inventories resulting from the growth in the Company's
revenues and the build up for the NUR Fresco production. The increase of the
current liabilities is attributable primarily to the increase of trade payables
and short term loans.

Net cash provided by financing activities in the years ended December
31, 1997, 1998, and 1999 was approximately $3.08, $ 1.7 and $4.45 million,
respectively.

The Company has granted several security interests in its assets to
various banks and leasing companies to secure bank credit lines and lease
facilities.

IMPACT OF INFLATION, DEVALUATION AND FLUCTUATION OF CURRENCIES

Most of the Company's sales are in U.S. dollars. In addition, a
substantial number of other expenses are incurred outside Israel in U.S. dollars
or paid in U.S. dollars or in NIS linked to the exchange rate of the U.S.
dollar. Approximately 50% of these costs are denominated in U.S. dollars. Costs
not effectively denominated in U.S. dollars are translated to U.S. dollars, when
recorded, at prevailing exchange rates for the purposes of the Company's
financial statements, and will increase if the rate of inflation in Israel
exceeds the devaluation of the Israeli currency against the U.S. dollar or if
the timing of such devaluations were to lag considerably behind inflation.
Consequently, the Company is and will be affected by changes in the prevailing
NIS/U.S. dollar exchange rate.

The Company might also be affected by the U.S. dollar exchange rate to
the major European currencies mainly the German Mark and the Belgian Franc.

During 1992 and 1993, the value of the U.S. dollar increased relative
to major currencies and the rate of inflation in Israel exceeded the rate in the
United States. In 1995 and 1996, the value of the U.S. dollar decreased relative
to major currencies, and the rate of inflation in Israel exceeded the rate in
the United States. The annual rate of inflation in Israel in 1995 was 8.1%,
which increased to 10.6% in 1996 and decreased to 7.0% in 1997 to 8.6% in 1998
and to 1.3% in the year ended December 31, 1999. The NIS was devalued against
the U.S. dollar by approximately 3.9%, 3.7%, 8.8%, 17.6% in 1995, 1996, 1997,
1998 respectively and reevaluated against the U.S. dollar by approximately 0.16%
in 1999. The Company cannot predict whether the rate of devaluation of the NIS
against the U.S. dollar will continue to exceed the rate of inflation in the
future and whether these conditions will have a material adverse effect on the
Company.

The representative dollar exchange rate for converting the NIS to
dollars, as reported by the Bank of Israel, was NIS 4.153 for one dollar US on
December 31, 1999 (NIS 4.16 on December 31, 1998, NIS 3.536 on December 31,
1997, NIS 3.251 on December 31, 1996 and NIS 3.135 on December 31, 1995).

The Company's transactions and balances denominated in U.S. dollars are
presented at their original amounts. Non-dollar transactions and balances have
been measured into U.S. dollars in accordance with Statement 52 of the FASB. All
transaction gains and losses from remeasurement of monetary balance sheet items
denominated in non-dollar currencies are reflected in the statement of
operations as financial income or expenses, as appropriate. The average exchange
rates during the years ended December 31, 1995, 1996, 1997, 1998 and 1999 were
NIS 3.011, 3.187, 3.449, 3.8 and 4.138 for one dollar US, respectively. The
exchange rate as of March 31, 2000 was NIS 4.026 for one dollar.

CURRENT AND FUTURE CAPITAL NEEDS

The Company believes that its revenues from operations together with
its existing capital resources and credit facilities will be sufficient to fund
the Company's current activities at their present rate without the Company's
planned expansion through July 2001. The Company will require additional funds,
to be raised through public or private financing of debt or equity, in order to
ensure its ability to proceed with the planned expansion of its operations after
December 2000. If such funds are not raised, the Company may have to reduce or
eliminate planned expenditures for research and development, production, or
marketing of its products, any one of which could have an adverse effect on the
Company's business. There can be no assurance that such additional financing
will be available or that, if available, it will be obtained on terms favorable
to the Company. The Company currently has no commitments for additional
financing and is exploring the possibility of raising additional capital.

In this regard, the Company's capital requirements and level of
expenses depend upon numerous factors, including the scope and success of the
Company's marketing and customer service efforts, and of its research and
development activities, as well as the demand for the Company's products and
services. Moreover, in the course of the bankruptcy proceedings of Moshe Nur and
the companies controlled by him, the Company in the future may be exposed to
claims arising from the actions of Moshe Nur despite the recent settlement of
all material claims related to such persons and entities. Liabilities arising
from any such claims may be material.report.

ITEM 9A11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The CompanySee "ITEM 5: Operating and Financial Review and Prospects--Impact of
Inflation, Deflation and Fluctuation of Currencies." NUR does not otherwise
believe the disclosure otherwise required by Item
9AITEM 11 of Form 20-Fthis annual report to be material
to the Company.

ITEM 10: DIRECTORS AND OFFICERS OF REGISTRANT

The executive officers and directors of the Company are as follows:

NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------

Dan Purjes(1) 50 Chairman of the Board of Directors
Erez Shachar(2) 36 President, Chief Executive Officer and Director
Yoram Ben-Porat(2) 45 Director and President of NUR Media Solutions
Hilel E. Kremer 38 Chief Financial Officer
Eyal I. Israeli 45 Vice President of Operations
Efraim M. Weinreb 42 Vice President of Research and Development
Ron Michael 32 Vice President of Marketing
Robert L. Berenson(3) 60 Director
Hugo R. Chaufan (1)(3) 56 Director
Robert F. Hussey(1)(3) 51 Director

- ---------
(1) Member of the Company's stock option and compensation committee
(2) Member of the Company's Non-Employee Director Share Option Plan committee
(3) Member of the Company's audit committee

DAN PURJES has served as the Chairman of the Board of the Company since
April 1997. Mr. Purjes is Chairman and Chief Executive Officer of Josephthal, an
investment banking and brokerage firm which is a member of the New York Stock
Exchange. Prior to joining Josephthal in 1985, Mr. Purjes was a Vice President
with a number of securities firms, including Bear Stearns & Co. and L.F.
Rothschild Unterberg Towbin, in their corporate finance and brokerage sales
divisions. He began his Wall Street career at Morgan Stanley & Co. in 1978 as a
director of their computer systems department. Prior to that, Mr. Purjes was a
manager at Citibank and at Philip Morris International in their computer systems
areas. Mr. Purjes earned B.S. and M.S. degrees in Computer Science from the City
College of New York School of Engineering.

EREZ SHACHAR has served as the Company's President and Chief Executive
Officer since July 1997 and as a Director of the Company since October 1997. Mr.
Shachar has also served as a Director of NUR Europe and NUR America since
October 1997, of NUR Media Solutions since January 1998, of NUR Asia Pacific
since January 1999, and of NPE since September 1999. Mr. Shachar is also a
Director of Eltek Ltd., a publicly held corporation. Prior to joining the
Company, from 1989 to 1997, Mr. Shachar served in various research and
development, marketing, sales, and senior management positions with Scitex
Corporation. Mr. Shachar's last position with Scitex was Vice President of Sales
and Marketing of Scitex Europe, and prior thereto Mr. Shachar held several
positions in the marketing organization of Scitex Europe. Prior to joining
Scitex Europe, Mr. Shachar was a software developer within the research and
development group of Scitex. Mr. Shachar holds a B.Sc. in Mathematics and
Computer Science from Tel Aviv University, and a M.B.A. degree from INSEAD,
France.

HILEL E. KREMER has served as the Chief Financial Officer and
Secretary of the Company since December 1998. Mr. Kremer has also served as a
Director of NUR Europe, NUR America and NUR Media Solutions since December 1998
and as a Director of NUR Asia Pacific and NPE since April and September 1999,
respectively. Prior to joining the Company, from 1993 to 1998 Mr. Kremer served
in various management positions with Scitex Corporation. Mr. Kremer's last
position with Scitex was Vice President of Finance and Chief Financial Officer
of Scitex Asia Pacific, and prior thereto Mr. Kremer held several positions in
the finance organization of Scitex Europe. Prior to joining Scitex Europe, Mr.
Kremer held various positions in the budgeting department of the Israeli Finance
ministry. Mr. Kremer holds a B.A. in Economics from Hebrew University,
Jerusalem, and an M.B.A. degree from INSEAD, France.

YORAM BEN-PORAT has served as a Director of the Company since March
1991. Since October 1993, Mr. Ben-Port has served as Director and President of
NUR Media Solutions. Since October 1993, Mr. Ben-Porat has served as the Chief
Executive Officer and Deputy Chairman of the Board of Directors of NUR
International. He was among the founders of the Company and between January and
September 1993, he served as the Chief Executive Officer of the Company. From
1987 until December 1992, Mr. Ben-Porat served as Research and Development and
Business Development Manager of NUR Outdoor and NUR Focus. Prior thereto, he was
an independent consultant to metal finishing process companies in the high
technology industry. Mr. Ben-Porat holds a degree in Economics and Marketing
from the Tel Aviv College of Management and Administration.

EYAL I. ISRAELI has served as the Vice President of Operations since
May 1996. From January 1995 until he joined the Company, Mr. Israeli served as
the Director of Customer Support for Indigo Electronic Printing Systems Ltd.
From February 1993 to January 1995, Mr. Israeli served as the Manager of
Corporate Customer Support for Orbotech Ltd. In addition, from January 1987 to
February 1993, Mr. Israeli served as Vice President of Customer Support for
Optrotech Inc., the U.S. subsidiary of Optrotech Ltd. Mr. Israeli holds a B.Sc.
in Electronic Engineering from Ben-Gurion University, a M.Sc. in Electronic
Systems from Tel Aviv University and a joint M.B.A. from Northwestern and Tel
Aviv Universities.

EFRAIM M. WEINREB has served as Vice President of Research and
Development since July 1998. Prior to joining the Company, from January 1997 to
July 1998, Mr. Weinreb served as Vice President of

Research and Development of AutoMedia, a start-up company that developed digital
video solutions. From 1983 to 1996, Mr. Weinreb served in various research and
development management positions with Scitex Corporation Ltd. Mr. Weinreb's last
position with Scitex was research and development manager of Brisque Front-End.
Mr. Weinreb holds a B.A. in Economics and Computer Science from Bar - Ilan
University.

RON MICHAEL has served as the company's Vice President of Marketing
since June 1999. Prior to joining the Company, from 1997 to 1999, Mr. Michael
served as Managing Director of Hygiene Products Ltd., a McCarthy Group company.
Prior to that he held several positions within Strategic Business Development
("SBD"), a leading Israeli strategy consulting firm. The last position he held
at SBD was Senior Project Manager, specializing in structural business moves.
Prior to that, he founded and served as Managing Director of Esprit Promotion
Systems Ltd., a company specializing in the development and sales of direct
marketing data bases. Mr. Michael holds a B.A. in Business Administration from
Tel-Aviv College of Administration, an LL.B. degree in Law from Tel-Aviv
University and an MBA degree from INSEAD France.

ROBERT L. BERENSON has served as a Director of the Company since July
1998. Mr. Berenson is President of Grey Advertising Inc., the second largest
advertising agency in the United States and sixth largest in the world. He
joined Grey in 1964 as an Assistant Account Executive, rose through the ranks to
become the youngest Executive Vice President in the Company's history in 1977
and took his present position as President in 1989. Mr. Berenson is also a
Director of the Better Business Bureau of New York, the Advertising Educational
Foundation and the Federal Law Enforcement Foundation. He holds a B.S./B.A.
degree in Journalism and Marketing from Syracuse University and an M.S. in
Journalism from the Medill School at Northwestern University.

HUGO R. CHAUFAN has served as a Director of the Company since September
1999. Dr. Chaufan is President of ISAL Amlat Investments (1993) Ltd., managing
director and co-founder of Isal Investments Co. N.V., Isal Holland B.V. and Isal
Nadlan (1994) Ltd. Dr. Chaufan is chairman of the board of directors of Project
Glilot Ltd., Poster Media (Israel) Ltd., Ain Pei Arutzei pirsum Ltd., Shnapp
Industries Ltd., Sivan Plastic Industries 1991 Ltd., Cargal Ltd. and Chemipal
Ltd. Prior to becoming managing Director of Isal Amlat Investments Co. N.V. in
1987, Dr. Chaufan held the position of C.E.O. of Israel Chemical Industries
Ltd., after holding senior management positions, including Deputy Director, at
the Budget Department of the Finance Ministry. Dr. Chaufan holds a degree on
Accountancy, Certified Accountancy and a Ph.D. in Economics.

ROBERT F. HUSSEY has served as a Director of the Company since
September 1997. Prior to joining the Company, from June 1991 to April 1997, Mr.
Hussey served as the President and Chief Executive Officer of Metrovision of
North America Inc. Prior thereto, from 1984 to 1991, Mr. Hussey served as the
President, Chief Executive Officer and Director of POP Radio Corp., a company
which he helped form. From 1979 to 1984, Mr. Hussey served as the Vice
President/Management Supervisor for Grey Advertising, Inc. From 1977 to 1979,
Mr. Hussey was the Director of Financial Advertising for E.F. Hutton. Prior
thereto, from 1973 to 1977, Mr. Hussey served as a Senior Financial Analyst and
Product Manager for American Home Products, Inc. Mr. Hussey is also a Director
of Digital Data Networks Inc., a publicly held corporation. Mr. Hussey holds a
B.S. in Finance from Georgetown University and a M.B.A. in International Finance
from George Washington University.

TERMS OF DIRECTORS

The members of the Board are elected annually at the Company's general
meeting and remain in office until the next annual general meeting of the
Company, unless the director has previously resigned, vacated his office, or was
removed in accordance with the Company's Articles of Association. In addition,
the Board may elect additional members to the Board.

ALTERNATE DIRECTORS

The Articles of Association provide that, subject to the Board's
approval, a director may appoint, by written notice to the Company, any
individual (whether or not such person is then a member of the Board) to serve
as an alternate director. Any alternate director shall have all of the rights
and obligations of the director appointing him or her, except the power to
appoint an alternate (unless the instrument appointing him or her expressly
provides otherwise). The alternate director may not act at any meeting at which
the director appointing him or her is present. Such alternate may act as the
alternate for several directors and have the corresponding number of votes.
Unless the appointing director limits the time period or scope of any such
appointment, such appointment is effective for all purposes and for an
indefinite time, but will expire upon the expiration of the appointing
director's term. There are currently no alternate directors.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Articles of Association provide that the Board may
delegate all of its powers to committees of the Board as it deems appropriate,
subject to the provisions of the Israeli Companies Ordinance (New Version) 1983,
as amended (the "Companies Ordinance"). As of February 2000, the new Israeli
Companies Law, 1999 (the "Companies Law") came into effect, replacing most of
the provisions of the Companies Ordinance (other than provisions relating to
liens and liquidation of companies). The Companies Law will require the Company
to introduce certain amendments to its Articles of Association (including the
Company's requirement to have two Israeli "Outside Directors" meeting specific
independence criteria, as elected members of its Board) and will bring into
effect new procedures for the approval of certain transactions.

APPROVAL OF CERTAIN TRANSACTIONS UNDER THE COMPANIES LAW; AUDIT
COMMITTEE

The Companies Law requires disclosure by an "Office Holder" or a
"Controlling Shareholder" (both as defined below) to the Company in the event
that an Office Holder or Controlling Shareholder has a direct or indirect
personal interest in a transaction to which the Company intends to be a party,
and codifies the duty of care and fiduciary duties which an Office Holder has to
the Company. An "Office Holder" is defined in the Companies Law as a director,
managing director, chief business manager, executive vice president, vice
president, other manger directly subordinate to the managing director and any
other person assuming the responsibilities of any of the foregoing positions
without regard to such person's title, and a Controlling Shareholder is defined
as a holder having the ability to control the affairs of the Company or the
holder of at least 25% of the shares of the Company (if there is no other holder
of at least 50% of the shares).

The Companies Law requires that the Company appoint an audit committee
of the Company's Board (the "Audit Committee") meeting certain criteria defined
in the Companies Law and that certain transactions, actions, and arrangements
must be approved by the Audit Committee. The Company is also required to
maintain the Audit Committee as a result of the inclusion for quotation of the
Ordinary Shares on the Nasdaq National Market. In certain circumstances,
shareholder approval is also required. The Audit Committee must be comprised of
members of the Board who are not employees of the Company, and the majority of
members of the Audit Committee may not be holders, directly or indirectly
through family members, of more than five percent of the Ordinary Shares.

The Company has appointed an Audit Committee consisting of Robert L.
Berenson, Hugo Chaufan, and Robert F. Hussey. Approval by the Audit Committee
and the Board is required for (i) proposed transactions to which the Company
intends to be a party in which an Office Holder or Controlling Shareholder has a
direct or indirect personal interest, (ii) actions or arrangements which may
otherwise be deemed to constitute a breach of fiduciary duty or of the duty of
care of an Office Holder to the Company, (iii) arrangements with directors as to
the terms of office or compensation, and (iv) indemnification of Office Holders.
Arrangements with directors as to the terms of their service or compensation
also require shareholder approval. All arrangements as to compensation of Office
Holders

who are not directors require approval of the Board. In certain circumstances,
the matters referred to in (i), (ii), and (iv) may also require shareholder
approval.

Office holders (including directors) who have a personal interest in a
matter which is considered at a meeting of the Board or the Audit Committee may
not be present at such meeting, may not participate in the discussion, and may
not vote on any such matter, except that such Office Holders may consent in
writing to resolutions adopted by the Board and/or the Audit Committee by
unanimous consent.

STOCK OPTION AND COMPENSATION COMMITTEE

In March 1998, the Company established a committee to administer the
Company's stock option plans, other than the 1998 Non-Employee Director Share
Option Plan (the "Stock Option and Compensation Committee"). The Stock Option
and Compensation Committee is charged with administering and overseeing the
allocation and distribution of stock options under the approved stock option
plans of the Company and the approval of the Company's executive officer's
annual compensation. The Stock Option and Compensation Committee is presently
comprised of three members: Dan Purjes, Hugo Chaufan and Robert F. Hussey.

NON-EMPLOYEE DIRECTOR SHARE OPTION PLAN COMMITTEE

In February 1999, the Company established a committee to administer the
Company's 1998 Non-Employee Director Share Option Plan (the "NEDSOP Committee").
The NEDSOP Committee is charged with administering and overseeing the allocation
and distribution of stock options under the 1998 Non-Employee Director Share
Option Plan. The NEDSOP Committee is presently comprised of two members: Erez
Shachar and Yoram Ben-Porat

ITEM 11: COMPENSATION OF DIRECTORS AND OFFICERS

In the year ended December 31, 1999 the aggregate compensation paid by
the Company to the directors and executive officers of the Company (a total of
10 persons) amounted to approximately $1,041,000.

The executive officers of the Company received part of the compensation
set forth above under the Company's Management by Objectives Compensation Plan
("MBO"). The MBO sets annual individual goals to be achieved by the executive
officers throughout the year. The percentage of individual achievement
determines the percent of the MBO bonus paid to each executive officer. The MBO
plan for the benefit of the Company's Chief Executive Officer is administered by
the Stock Option and Compensation Committee. The MBO plan for the benefit of the
other executive officers is administered by the Chief Executive Officer.

The Company pays its Board members who are not employees of the Company
remuneration for their services as directors. This remuneration includes an
annual payment of $5,000 and an additional payment of approximately $250 per
meeting. Each non-employee Board member also receives an annual grant of options
to purchase 10,000 Ordinary Shares under the conditions set forth in the
Company's 1998 Non-Employee Director Share Option PlanNUR.

ITEM 12: OPTIONS TO PURCHASEDESCRIPTION OF SECURITIES FROM REGISTRANT OR SUBSIDIARIES
OUTSTANDING OPTIONS AND WARRANTS

As of March 31, 2000, the Company had outstanding options, under the
Company's stock option plans, to purchase a total of 1,985,399 of its Ordinary
Shares. Of such options, 212,966 have been issued under the Flexible Stock
Incentive Plan (the "1995 Plan"), 1,694,100 have been issued under the 1997

Stock Option Plan (the "1997 Plan"), and 78,333 have been issued under the 1998
Non-Employee Director Share Option Plan (the "1998 Plan"). The options granted
under the 1995 Plan and the 1997 Plan are subject to various vesting
requirements and have been issued at exercise prices ranging from $0.30 to
$11.375 per share with various expiration dates. The options granted under the
1998 Plan have an exercise price of $2.75 per share, are not subject to vesting
requirements and expire on October 26, 2008. See Note 19 to the Company's
financial statements included as a part of this Form 20-F. The Company has also
granted to Meital, in connection with a consulting arrangement, an option to
acquire 100,000 Ordinary Shares at $1.00 per share in September 1998.

As of March 31, 2000, the Company had outstanding warrants exercisable
into a total of 595,000 Ordinary Shares. Of such warrants, (i) 155,000 were
originally issued to Josephthal as representative of the underwriters in
connection with the Company's initial public offering in October 1995 (the "IPO
Warrants"), (ii) 400,000 were originally issued to Josephthal as placement agent
in connection with the Company's private placement between September and
December 1997 (the "Private Placement Warrants"), (iii) 25,000 were issued to
Cruttenden Roth Incorporated in connection with its role as "qualified
independent underwriter" in a registration of Ordinary Shares on behalf of
certain selling security holders (the "QIU Warrants"), and (iv) 15,000 were
issued to Zamir & Barak in partial consideration for legal services rendered on
behalf of the Company (the "ZB Warrants"). The IPO Warrants are exercisable at
$7.20 per share no later than October 2000. The Private Placement Warrants are
exercisable at $1.00 per share no later than September and December 2002. The
QIU Warrants are exercisable at $4.50 per share from February 2000 to February
2004. The ZB Warrants are exercisable at $2.25 per share from January 2000 to
January 2004. Dan Purjes, the Chairman of the Company is also the Chairman of
Josephthal. See "Item 13: Interest of Management in Certain Transactions."

Of the options and warrants described above, directors and executive
officers of the Company hold options and warrants to purchase an aggregate of
906,333 Ordinary Shares called for by such securities.

1995 STOCK OPTION PLAN

In 1995, the Company adopted the 1995 Plan which provides for grants of
stock options to employees of and consultants to the Company. Options to
purchase an aggregate of 500,000 Ordinary Shares were originally available for
grant under the 1995 Plan, as amended, including options for future services
(such options, "Service Options"), options for performance (such options,
"Performance Options"), and options to consultants for service or performance
(such options, "Consultant Options").

The Company's 1995 Plan provides that it may be administered by the
Board or by a committee appointed by the Board and is currently administered by
the Stock Option and Compensation Committee. The Stock Option and Compensation
Committee determines the employees and consultants who are granted options under
the 1995 Plan, the timing of such grants, the terms thereof, and the number of
shares to be covered thereby. Such committee also determines the exercise price
for Ordinary Shares subject to the Performance and Consultants Options under the
1995 Plan and the exercise price for the Service Options, provided that in no
case shall the exercise price of any Service Option be less than 80% of the fair
market value of such Ordinary Shares at the date of grant (the "Date of Grant").
Service Options usually vest over a four-year period. One-third of the Service
Options vest after the second annual anniversary of the Date of Grant with an
additional one-third vesting on the third and fourth anniversary of the Date of
Grant, respectively. Performance Options vest under the same terms as applicable
to the Service Options. Consultants Options vest over a specified period of time
based on past or future services rendered or performance targets to be achieved
by the Company as determined by the Board. Notwithstanding the foregoing, the
Consultants Options vest ten years following the Date of Grant. No option may be
assigned or transferred except by will or the laws of descent and distribution.

Under the 1995 Plan for Israeli employees, options and Ordinary Shares
issuable upon the exercise of options granted to Israeli employees of the
Company can be held in a trust until the payment of all taxes due with respect
to the grant and exercise (if any) of such options.

1997 STOCK OPTION PLAN

In 1997, the Company adopted the 1997 Plan which provides for grants of
stock options to employees of and consultants to the Company. Options to
purchase an aggregate of 2,200,000 Ordinary Shares were originally available for
grant under the 1997 Plan, as amended.

The 1997 Plan provides that it is to be administered by the Board or by
a committee appointed by the Board and is currently administered by the Stock
Option and Compensation Committee. The Stock Option and Compensation Committee
has broad discretion to determine the persons entitled to receive options under
the 1997 Plan, the terms and conditions on which options are granted, and the
number of Ordinary Shares subject thereto, up to the maximum aggregate amount
permitted under the 1997 Plan. The Stock Option and Compensation Committee also
has discretion to determine the purchase price to be paid upon the exercise of
an option granted under the 1997 Plan.

The exercise price of the option shares under the 1997 Plan is
determined by the Stock Option and Compensation Committee; provided, however,
that the exercise price of any option granted shall not be less than eighty
percent (80%) of the Stock Value (as defined below) at the time of the issuance
of such options (the "Date of Grant"). The "Stock Value" at any time is equal to
the then current Fair Market Value (as defined below) of the Company's Ordinary
Shares. For purposes of the 1997 Plan, the "Fair Market Value" means, as of any
date, the last reported sale price, on such date, of the Ordinary Shares on such
principal securities exchange of the most recent prior date on which a sale of
the Ordinary Shares took place.

The Stock Option and Compensation Committee determines the term of each
option granted under the 1997 Plan; provided, however, that the term of an
option shall not be for more than ten (10) years. Upon termination of
employment, all unvested options lapse. Pursuant to the 1997 Plan options shall
vest over a four-year period, provided that the Stock Option and Compensation
Committee may determine different vesting schedules. Some of the Options granted
are subject to a three-year vesting period, with one third of the options
vesting after each year.

The options granted are subject to restrictions on transfer, sale, or
hypothecation. All options and Ordinary Shares issuable upon the exercise of
options granted to Israeli employees of the Company are held in trust for a
minimum of two years in accordance with Section 102 of the Israel Income Tax
Ordinance.

1998 NON-EMPLOYEE DIRECTOR SHARE OPTION PLAN

In 1998 the Company adopted the 1998 Plan to provide for grants of
options to purchase Ordinary Shares to non-employee directors of the Company.
The 1998 Plan is administered by the Non-Employee Share Option Plan Committee.
An aggregate amount of not more than 250,000 Ordinary Shares is reserved for
grants under the 1998 Plan. The 1998 Plan will expire on December 8, 2008 (10
years after adoption), unless earlier terminated by the Board.

Under the 1998 Plan, each non-employee director that served on the 1998
"Grant Date," as defined below, automatically received an option to purchase
10,000 Ordinary Shares on such Grant Date and will receive an option to purchase
an additional 10,000 Ordinary Shares on each subsequent Grant Date thereafter
provided that he or she is a non-employee director on the Grant Date and has
served as such for the entire period since the last Grant Date. The "Grant Date"
means, with respect to 1998, October 26, 1998, and with respect to each
subsequent year, August 1. Directors first elected or appointed after the 1998
Grant Date, will automatically receive on such director's first day as a
director an option to purchase up to 10,000 Ordinary Shares prorated based on
the number of full months of service

between the prior Grant Date and the next Grant Date. Each such non-employee
director would also automatically receive, as of each subsequent Grant Date, an
option to purchase 10,000 Ordinary Shares provided he or she is a non-employee
director on the Grant Date and has served for the entire period since the last
Grant Date.

The exercise price of the option shares under the 1998 Plan is 100% of
the Fair Market Value (as defined below) of such Ordinary Shares at the time of
issuance of such options (the "Date of Grant"). The "Fair Market Value" means,
as of any date, the average closing bid and sale prices of the Ordinary Shares
for the date in question as furnished by the National Association of Securities
Dealers, Inc. through Nasdaq or any similar organization if Nasdaq is no longer
reporting such information, or such other market on which the Ordinary Shares
are then traded, or if not then traded, as determined in good faith (using
customary valuation methods) by resolution of the members of the Board of
Directors of the Company, based on the best information available to it. The
exercise price is required to be paid in cash.

The term of each option granted under the 1998 Plan is ten (10) years
from the applicable Date of Grant. All options granted vest immediately after
issuance.

The options granted would be subject to restrictions on transfer, sale
or hypothecation. All options and Ordinary Shares issuable upon the exercise of
options granted to the non-employee directors of the Company could be withheld
until the payment of taxes due with respect to the grant and exercise (if any)
of such options.

ITEM 13: INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONSOTHER THAN EQUITY SECURITIES

Not applicable

49Applicable.

PART II

ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable.

ITEM 14: DESCRIPTIONMATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES TO BE REGISTEREDSECURITY HOLDERS AND USE OF
PROCEEDS

Not applicableApplicable.

ITEM 15: RESERVED

ITEM 16: RESERVED

PART III

ITEM 15: DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 16: CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES

Not applicable

PART IV

ITEM 17: FINANCIAL STATEMENTS

Not applicableApplicable.

ITEM 18: CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements and related notes thereto
included after the signature page hereto pursuantSee pages F-1 to Item 19: "Consolidated
Financial Statements and Exhibits" are incorporated herein by reference.

50F-39.

ITEM 19: CONSOLIDATED FINANCIAL STATEMENTS AND EXHIBITS

A. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements and related notes thereto
included after the signature page hereto are incorporated herein by reference.

B. EXHIBITS

NUMBER DESCRIPTION
- ------ -----------

3.1 Memorandum of Association of the Registrant, in Hebrew with
a translation to English1English(1)

3.2 Amended and Restated Articles of Association of the
Registrant

3.3 Certificate of Name Change 3Change(2)

4.1 Specimen Certificate for Ordinary Shares 1Shares(1)

4.2 Representative's Warrant Agreement dated October 12, 1995 11995(1)

4.3 Form of Representative's Warrant Certificate 1Certificate(1)

4.4 Forms of Placement Agent's Warrant Agreement and
Certificate 4Certificate(3)

4.5 Forms of Qualified Independent Underwriter's Warrant
Agreement and Certificate 4Certificate(3)

4.6 Form of Warrant Agreement between the Registrant and Barak
Zamir, AdvocatesAdvocates(4)

10.1 1995 Stock Option / Stock Purchase Plan 1Plan(1)

10.2 Amendment to the 1995 Stock Option / Stock Purchase Plan 4Plan(3)

10.3 1997 Stock Option Plan 5Plan(5)

10.4 1998 Non-Employee Director Share Option Plan 6Plan(6)

10.5 Lease Agreement between the Registrant and Mr. Moshe Nur
dated October 4, 1993, as amended on May 29, 1995, in Hebrew
with a translation to English 1English(1)

10.6 Lease Agreement for office space in Brussels, Belgium
between Nivellease, S.A. and the Registrant dated
November 25, 1996 41996(3)

10.7 Lease Agreement for office space in Newton Centre,
Massachusetts between WHTR Real Estate Limited Partnership
and the Registrant dated July 10, 1998 4

10.91998(3)

10.8 Distribution Agreement between Imaje S.A. and the Registrant
dated June 26, 1995 1

10.101995(1)

10.9 Settlement Agreements relating to Moshe Nur and his
affiliated companies 4

10.16companies(3)

10.10 Bank Hapoalin revolving loan agreement 4, 7

10.17agreement(3)(7)

10.11 Agreement between I.T.S. Machinery Development Ltd. and the
Registrant dated February 10, 1997 4

10.181997(3)

10.12 Form of confidentiality agreement 4

10.19agreement(3)

10.13 Agreement dated September 13, 1998 between "Meital"
Electronic Technology Ltd. and Markowitz Yaakov and the
Registrant(3)

10.14 The Founders Agreement dated September 30, 1999 among Gera
Eiron, Ogen Dialogix Ltd. and the Registrant

10.15 Assembly Agreement dated October 4, 211999 between NUR Pro
Engineering and the Registrant

10.16 Lod Lease Agreement dated January 11, 2000 between A.
Barzilai Investments and Assets Ltd. and Kamim Investments
and Assets Ltd. and the Registrant

NUMBER DESCRIPTION
- ------ -----------

10.17 Asset Purchase Agreement dated May 17, 2000 by and among
Salsa Digital, Ltd., Signtech Japan, Ltd., Salsa Digital DO
Brasil, Ltda., Salsa Digital (Guangzhou) Ltd., Salsa Dubai
Corp., Salsa Technology Pte Ltd., as sellers, and NUR
Macroprinters Ltd., Salsa Digital Printing Ltd. and Nur
Hungary Trading and Software Licensing Limited Liability
Company, as puchasers(8)

10.18 Amendment No. 1 to Asset Purchase Agreement dated as of
June 30, 2000(9)

21.1 List of Subsidiaries of the Registrant

23.1 Consent of Kost Forer & Gabbay (S-8)

23.2 Consent of Kost Forer & Gabbay (F-3)

23.3 Consent of Willy Knyrim (F-3)

23.4 Consent of Willy Knyrim (S-8)

27.1 Financial Data Schedule as of and for the year ended December 31, 1995 5

27.2 Financial Data Schedule as of and for the year ended December 31, 1996 6

27.3 Financial Data Schedule as of and for the year ended December 31, 1997 7

27.4 Financial Data Schedule as of and for the year ended December 31, 1998 8

27.5 Financial Data Schedule as of and for the year ended
December 31, 19992000

- ----------
1/------------------------

(1) Previously filed with the Company's Registration StatementNUR's F-1 (File No. 33-93160) on Form F-1 and incorporated by
reference herein.

2/(2) Previously filed with the Company's Form F-3 (File No. 333-92493) and
incorporated by reference herein.
3/ Previously filed with the Company'sNUR's Form 6-K dated January 7, 1998 and incorporated
by reference herein
4/herein.

(3) Previously filed with the Company'sNUR's Form F-1 (File No. 333-66103) and incorporated
by reference herein.

5/(4) Previously filed with NUR's Form 20-F for the Company'syear ended December 31, 1999
and incorporated by reference herein.

(5) Previously filed with NUR's Form 20-F for the year ended December 31, 1997
and incorporated by reference herein.

6/(6) Previously filed with the Company'sNUR's Form 6-K dated November 13, 1998 and
incorporated by reference herein.

7/(7) Filed in summary form. Original filed in paper format pursuant to Form SE.

8/(8) Previously filed with the Company'sNUR's Form 20-F for the year ended December
31, 19986-K/A dated May 22, 2000 and incorporated
by reference herein.

Financial Statement Schedules(9) Previously filed with NUR's Form 6-K/A dated July 7, 2000 and incorporated
by reference herein.

FINANCIAL STATEMENT SCHEDULES

Other than as set forth below, all schedules have been omitted as the
required information is either not applicable or presented in the financial
statements or notes thereto.

5360

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this Amendment to its Annual Reportannual report to be signed on its behalf
by the undersigned, thereunto duly authorized.

NUR MACROPRINTERS LTD.

By: /s/ Erez Shachar
-------------------------------------
Erez Shachar
President
NUR MACROPRINTERS LTD.

By: /s/ EREZ SHACHAR
-----------------------------------------
Erez Shachar
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: May 10, 2001

EXHIBIT INDEX

B. EXHIBITS

NUMBER DESCRIPTION
- ------ -----------

3.1 Memorandum of Association of the Registrant, in Hebrew with
a translation to English(1)

3.2 Amended and Restated Articles of Association of the
Registrant

3.3 Certificate of Name Change(2)

4.1 Specimen Certificate for Ordinary Shares(1)

4.2 Representative's Warrant Agreement dated October 12, 1995(1)

4.3 Form of Representative's Warrant Certificate(1)

4.4 Forms of Placement Agent's Warrant Agreement and
Certificate(3)

4.5 Forms of Qualified Independent Underwriter's Warrant
Agreement and Certificate(3)

4.6 Form of Warrant Agreement between the Registrant and Barak
Zamir, Advocates(4)

10.1 1995 Stock Option / Stock Purchase Plan(1)

10.2 Amendment to the 1995 Stock Option / Stock Purchase Plan(3)

10.3 1997 Stock Option Plan(5)

10.4 1998 Non-Employee Director Share Option Plan(6)

10.5 Lease Agreement between the Registrant and Mr. Moshe Nur
dated October 4, 1993, as amended on May 29, 1995, in Hebrew
with a translation to English(1)

10.6 Lease Agreement for office space in Brussels, Belgium
between Nivellease, S.A. and the Registrant dated
November 25, 1996(3)

10.7 Lease Agreement for office space in Newton Centre,
Massachusetts between WHTR Real Estate Limited Partnership
and the Registrant dated July 10, 1998(3)

10.8 Distribution Agreement between Imaje S.A. and the Registrant
dated June 26, 1995(1)

10.9 Settlement Agreements relating to Moshe Nur and his
affiliated companies(3)

10.10 Bank Hapoalin revolving loan agreement(3)(7)

10.11 Agreement between I.T.S. Machinery Development Ltd. and the
Registrant dated February 10, 1997(3)

10.12 Form of confidentiality agreement(3)

10.13 Agreement dated September 13, 1998 between "Meital"
Electronic Technology Ltd. and Markowitz Yaakov and the
Registrant(3)

10.14 The Founders Agreement dated September 30, 1999 among Gera
Eiron, Ogen Dialogix Ltd. and the Registrant

10.15 Assembly Agreement dated October 4, 1999 between NUR Pro
Engineering and the Registrant

10.16 Lod Lease Agreement dated January 11, 2000 between
A. Barzilai Investments and Assets Ltd. and Kamim
Investments and Assets Ltd. and the Registrant

NUMBER DESCRIPTION
- ------ -----------

10.18 Amendment No. 1 to Asset Purchase Agreement dated as of
June 30, 2000(9)

21.1 List of Subsidiaries of the Registrant

23.1 Consent of Kost Forer & Gabbay (S-8)

23.2 Consent of Kost Forer & Gabbay (F-3)

27.5 Financial Data Schedule as of and for the year ended
December 31, 2000

- ------------------------

(1) Previously filed with NUR's F-1 (File No. 33-93160) and Chief Executive Officer

Dated:incorporated by
reference herein.

(2) Previously filed with NUR's Form 6-K dated January 7, 1998 and incorporated
by reference herein.

(3) Previously filed with NUR's Form F-1 (File No. 333-66103) and incorporated
by reference herein.

(4) Previously filed with NUR's Form 20-F for the year ended December 31, 1999
and incorporated by reference herein.

(5) Previously filed with NUR's Form 20-F for the year ended December 31, 1997
and incorporated by reference herein.

(6) Previously filed with NUR's Form 6-K dated November 13, 1998 and
incorporated by reference herein.

(7) Filed in summary form. Original filed in paper format pursuant to Form SE.

(8) Previously filed with NUR's Form 6-K/A dated May 4,22, 2000 54and incorporated
by reference herein.

(9) Previously filed with NUR's Form 6-K/A dated July 7, 2000 and incorporated
by reference herein.

REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF
M.NUR MARKETING & COMMUNICATION GmbHGMBH

We have audited the accompanying balance sheets of M.Nur Marketing &
Communication GmbH ("the Company") as of December 31, 1997 and 1998 and the
related statements of operations, changes in shareholders equity and cash flows
for each of the two years in the period ended December 31, 1998 and the
company's statement of operations changes in shareholders equity and cash flows
for the year ended December 1996. 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 generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance as to whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the Company's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1997 and 1998 and the related results of their
operations and cash flows for each of the two years in the period ended
December 31, 1998, and the Company's resultsresult of operations and cash flows for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles in Germany. As applicable to the Company's financial statements,
generally accepted accounting principles in the United States and in Germany are
identical in all material aspects.

Kassel, Germany
April 21, 1999

Yours truly,

(Willy Knyrim Seal)

[LOGO] Yours truly,

[LOGO]
WILLY KNYRIM
Certified Public Accountants
(Germany)

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 19992000
IN U. S. DOLLARS
INDEX

INDEX

PAGE
-------------------------

REPORT OF INDEPENDENT AUDITORS F-2

CONSOLIDATED BALANCE SHEETSReport of Independent Auditors.............................. F-3

Consolidated Balance Sheets................................. F-4 - F-4

CONSOLIDATED STATEMENTS OF INCOME F-5

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITYConsolidated Statements of Income........................... F-6

CONSOLIDATED STATEMENTS OF CASH FLOWSStatements of Changes in Shareholders' Equity............... F-7

Consolidated Statements of Cash Flows....................... F-8 - F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-10

Notes to Consolidated Financial Statements.................. F-11 - F-38F-39

- - - - - - - - - - - -F-1

[LOGO]ERNST & YOUNG |X| KOST FORER & GABBAY |X| Phone: 972-3-6232525
2 Kremenetski St. Fax: 972-3-5622555
Tel-Aviv 67899, Israel(This page has been left blank intentionally.)

F-2

REPORT OF INDEPENDENT AUDITORS
To the Shareholders ofTO THE SHAREHOLDERS OF
NUR MACROPRINTERS LTD.

We have audited the accompanying consolidated balance sheets of NurNUR
Macroprinters Ltd. ("the Company") and its subsidiaries as of December 31, 19981999
and 19992000 and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999.2000. 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 did not audit the financial
statements of a subsidiary, M. Nur Marketing & Communication GmbH, which
statements reflect total assets constituting
4.2% of total consolidated assets as of December 31, 1998, and total revenues constituting 14% and 12% of the total consolidated
revenues for the two yearsyear ended December 31, 1997 and 1998, respectively.1998. These statements were audited by
other auditors whose reportsreport have been furnished to us, and our opinion, insofar
as it relates to data included for this subsidiary,M. Nur Marketing & Communication GmbH, is
based solely on the reports of the other auditors.

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

In our opinion, based on our audits and the reportsreport of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company and its
subsidiaries as of December 31, 19981999 and 19992000 and the consolidated results of
their operations and their cash flows for each of the three years in the period ended
December 31, 1999,2000, in conformity with accounting principles generally accepted accounting principles
in the United States.

Tel-Aviv, Israel KOST FORER & GABBAY
February 16, 2000
Tel-Aviv, Israel KOST FORER & GABBAY
February 12, 2001 A Member of Ernst & Young International
F-2

F-3

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

- --------------------------------------------------------------------------------U.S. DOLLARS IN THOUSANDS

ASSETS

DECEMBER 31,
-------------------------------------
1998-------------------
1999 ------- -------
U.S. DOLLARS IN THOUSANDS
-------------------------------------

ASSETS2000
-------- --------

CURRENT ASSETS:
Cash and cash equivalents (Note 3) 2,327equivalents................................. $ 9,190 Marketable securities 63 --$ 19,219
Trade receivables (net of allowance for doubtful accounts: $ 644
thousandaccounts
of $1,290 and $ 1,290 thousand$4,593 as of December 31, 19981999 and 1999,2000,
respectively) 9,091........................................... 11,647 43,126
Other accounts receivable and prepaid expenses
(Note 4) 2,756 3,6733)................................................ 3,447* 6,336
Inventories (Note 5) 3,6994)...................................... 10,689 ------ ------23,547
------- --------
TOTAL current assets 17,936 35,199
- -----
------ ------assets........................................ 34,973 92,228
------- --------
LONG-TERM INVESTMENTS:
Long-term trade receivables (Note 5)...................... -- 2,387
Investments in affiliates (Note 6) -- 623........................ 849* 342
Restricted long-term bank deposit 337(Note 7)................ 367 Deferred income taxes262
Related parties (Note 15a)................................ -- 125618
Severance pay fund........................................ 514 696
Long-term prepaid expenses 59expenses................................ -- Severance pay fund 369 514
------ ------208
------- --------
TOTAL long-term investments 765 1,629
- -----
------ ------investments................................. 1,730 4,513
------- --------
PROPERTY AND EQUIPMENT, NET (Note 7) 3,0588)........................ 2,723 ------ ------7,046
------- --------
OTHER ASSETS, NET (Note 8) 2369).................................. 97 ------ ------15,994
------- --------
DEFERRED INCOME TAXES (Note 17g)............................ 125 225
------- --------
TOTAL assets 21,995 39,648
- ----- ====== ======assets................................................ $39,648 $120,006
======= ========

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

F-3

NUR MACROPRINTERS LTD.

CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------

DECEMBER 31,
--------------------------------------
1998 1999
------- -------

U.S. DOLLARS IN THOUSANDS
--------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-term bank credit and loans (Note 10) 2,972 2,743
Current maturities of long-term bank loans (Note 12) 224 832
Trade payables 6,104 8,243
Accrued expenses and other liabilities (Note 11) 2,926 5,573
Customer advances 269 1,791
------- -------

TOTAL current liabilities 12,495 19,182
- -----
------- -------

LONG-TERM LIABILITIES:

Long-term loans, net (Note 12) 950 1,650
Long-term liability (Note 13) 587 293
Accrued severance pay 464 660
------- -------

TOTAL long-term liabilities 2,001 2,603
- -----
------- -------

MINORITY INTEREST 69 --
------- -------

CONTINGENT LIABILITIES (NOTE 14)

SHAREHOLDERS' EQUITY:
Share capital (Note 17):

Ordinary shares of NIS 1 par value:

Authorized: 20,000,000 shares as of December 31, 1998 and 1999;
Issued and outstanding:

10,880,000 and 11,774,573 shares as of December 31, 1998 and
1999, respectively 2,729 2,940
Additional paid-in capital 14,376 17,702
Accumulated comprehensive income (loss) 165 (114)
Accumulated deficit (9,840) (2,665)
------- -------

TOTAL shareholders' equity 7,430 17,863
- -----
------- -------

TOTAL liabilities and shareholders' equity 21,995 39,648
- ----- ======= =======
------------------------

* Reclassified.

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

F-4

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------BALANCE SHEETS (CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

LIABILITIES AND SHAREHOLDERS' EQUITY

YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1998-------------------
1999 ------- ------- -------
U.S. DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS
----------------------------------------------------------2000
-------- --------

RevenuesCURRENT LIABILITIES:
Short-term bank credit and short-term loans (Note 19a-c)10)..... $ 2,743 $ 667
Current maturities of long-term loans (Note 12)........... 832 864
Trade payables............................................ 8,243 17,657
Trade payables from related parties (Note 15b)............ -- 2,565
Other accounts payable and accrued expenses (Note 11)..... 5,573 13,290
Customer advances......................................... 1,791 1,999
------- --------
Total current liabilities................................... 19,182 37,042
------- --------
LONG-TERM LIABILITIES:
Long-term loans, net of current maturities (Note 12)...... 1,650 33,847
Long-term liability (Note 13)............................. 293 --
Excess of losses over investment in an affiliate
(Note 6b)............................................... -- 212
Accrued severance pay..................................... 660 980
------- --------
Total long-term liabilities................................. 2,603 35,039
------- --------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 14)
SHAREHOLDERS' EQUITY:
Share capital (Note 16):
SalesOrdinary shares of printersNIS 1 par value:
Authorized: 50,000,000 shares as of December 31, 1999
and related products 18,874 31,905 58,259
Sales2000; Issued and outstanding: 11,774,573 and
14,525,918 shares as of printed materials 3,085 4,540 2,460December 31, 1999 and 2000,
respectively.......................................... 2,940 3,618
Additional paid-in capital................................ 17,702 39,057
Accumulated other comprehensive loss...................... (114) (578)
Retained earnings (accumulated deficit)................... (2,665) 5,828
------- --------
TOTAL shareholders' equity.................................. 17,863 47,925
------- -------

21,959 36,445 60,719
------- ------- -------
Cost of revenues:

Cost of sales of printers--------
TOTAL liabilities and related products 9,627 16,368 30,440
Cost of sales of printed materials 1,684 2,579 1,344
------- ------- -------

11,311 18,947 31,784
------- ------- -------

Gross profit 10,648 17,498 28,935
------- ------- -------

Research and development expenses 1,726 5,027 5,530
Less - grants and royalty-bearing grants 43 818 721
------- ------- -------

Research and development expenses, net 1,683 4,209 4,809
------- ------- -------

Selling and marketing expenses, net (Note 20a) 4,620 6,111 9,485
General and administrative expenses 3,439 4,802 6,275
------- ------- -------

8,059 10,913 15,760
------- ------- -------

Operating income 906 2,376 8,366
Financial expenses, net (Note 20b) 320 501 683
Gain (loss) on marketable securities -- (91) 67
Other income (expenses), net (8) (20) 176
------- ------- -------

578 1,764 7,926
Taxes on income (Note 18d) 67 264 798
------- ------- -------

Income after taxes on income 511 1,500 7,128
Equity in earnings of affiliates, net -- -- 75
Minority interest in earnings of subsidiary (26) (43) (28)
------- ------- -------

Net income 485 1,457 7,175shareholders' equity.................. $39,648 $120,006
======= ======= =======

Basic earnings per share (Note 17b) 0.07 0.13 0.64
======= ======= =======

Diluted earnings per share (Note 17b) 0.07 0.13 0.56
======= ======= ===============

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

F-5

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGESINCOME

U.S. DOLLARS IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------THOUSANDS (EXCEPT PER SHARE DATA)

ACCUMULATED
NUMBER OF OTHER
ORDINARY ADDITIONAL COMPREHENSIVE
SHARES SHARE PAID-IN INCOME ACCUMULATED
OUTSTANDING CAPITAL CAPITAL (LOSS) DEFICIT
----------- ---------- ---------- ------------- -----------
U.S. DOLLARS IN THOUSANDS
----------------------------------------------------------YEAR ENDED DECEMBER 31,
------------------------------
1998 1999 2000
-------- -------- --------

Balance asRevenues (Note 18):
Sales of January 1, 1997 6,880,000 1,593 11,916 109 (11,782)
Comprehensive income:
Net incomeprinters and related products.................... $31,905 $58,259 $121,924
Sales of printed materials................................ 4,540 2,460 --
------- ------- --------
Total revenues.......................................... 36,445 60,719 121,924
------- ------- --------
Cost of revenues:
Cost of sales of printers and related products (a)........ 16,368 30,440 64,107
Cost of sales of printed materials........................ 2,579 1,344 --
------- ------- --------
Total cost of revenues.................................. 18,947 31,784 64,107
------- ------- --------
Gross profit................................................ 17,498 28,935 57,817
------- ------- --------
Operating expenses:
Research and development, net (Note 19a).................. 4,209 4,809 14,626
Selling and marketing, net (Note 19b)..................... 6,111 9,485 17,385
General and administrative................................ 4,802 6,275 12,765
Amortization of goodwill and other intangible assets
resulting from the acquisition of Salsa Group
(Note 9)................................................ -- -- 1,452
------- ------- --------
Total operating expenses................................ 15,122 20,569 46,228
------- ------- --------
Operating income............................................ 2,376 8,366 11,589
Financial expenses, net (Note 19c).......................... (592) (616) (1,423)
Other income (expenses), net................................ (20) 176 25
------- ------- --------
Income before taxes on income............................... 1,764 7,926 10,191
Taxes on income (Note 17)................................... 264 798 1,244
------- ------- --------
Income before equity in earnings (losses) of affiliates and
minority interest in earnings of a subsidiary............. 1,500 7,128 8,947
Equity in earnings (losses) of affiliates, net.............. -- 75 (454)
Minority interest in earnings of a subsidiary............... (43) (28) --
485
Other comprehensive loss:

Foreign currency translation adjustments -- -- -- (139) --

Comprehensive income -- -- -- -- --

Issuance of shares,------- ------- --------
Net income.................................................. $ 1,457 $ 7,175 $ 8,493
======= ======= ========
Basic net 4,000,000 1,136 2,376 -- --
Amortization of deferred stock compensation -- -- 91 -- --
---------- ---------- ---------- ---------- ----------

Balance as of December 31, 1997 10,880,000 2,729 14,383 (30) (11,297)
Comprehensive income:
Net income -- -- -- -- 1,457
Other comprehensive income:

Foreign currency translation adjustments -- -- -- 195 --

Comprehensive income -- -- -- -- --

Share capital issuance expenses -- -- (128) -- --
Amortization of deferred stock compensation -- -- 121 -- --
---------- ---------- ---------- ---------- ----------

Balance as of December 31, 1998 10,880,000 2,729 14,376 165 (9,840)
Comprehensive income:
Net income -- -- -- -- 7,175
Other comprehensive loss:

Foreign currency translation adjustments -- -- -- (279) --

Comprehensive income -- -- -- -- --

Issuance of shares,earnings per share (Note 19d)..................... $ 0.13 $ 0.64 $ 0.65
======= ======= ========
Diluted net 600,000 141 2,764 -- --
Exercise of options 294,573 70 395 -- --
Amortization of deferred stock compensation -- -- 167 -- --
---------- ---------- ---------- ---------- ----------

Balance as of December 31, 1999 11,774,573 2,940 17,702 (114) (2,665)
========== ========== ========== ========== ==========earnings per share (Note 19d)................... $ 0.13 $ 0.56 $ 0.57
======= ======= ========

TOTAL
COMPREHENSIVE SHAREHOLDERS'
INCOME (LOSS) EQUITY
------------- -------------

------------------------------

Balance as of January 1, 1997 1,836
Comprehensive income:
Net income 485 485
Other comprehensive loss:

Foreign currency translation adjustments (139) (139)
----------

Comprehensive income 346 --
==========
Issuance of shares, net 3,512
Amortization of deferred stock compensation 91
----------

Balance as of December 31, 1997 5,785
Comprehensive income:
Net income 1,457 1,457
Other comprehensive income:

Foreign currency translation adjustments 195 195
----------

Comprehensive income 1,652 --
==========
Share capital issuance expenses (128)
Amortization of deferred stock compensation 121
----------

Balance as of December 31, 1998 7,430
Comprehensive income:
Net income 7,175 7,175
Other comprehensive loss:

Foreign currency translation adjustments (279) (279)
----------

Comprehensive income 6,896 --
==========
Issuance of shares, net 2,905
Exercise of options 465
Amortization of deferred stock compensation 167
----------

Balance as of December 31, 1999 17,863
==========
- ------------------------

(a) Cost of sales include purchases from related parties for the years ended
December 31, 1998, 1999 and 2000 were $0, $1,494 and $16,378, respectively.

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

F-6

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

ACCUMULATED
NUMBER OF OTHER RETAINED
ORDINARY ADDITIONAL COMPREHENSIVE EARNINGS TOTAL TOTAL
SHARES SHARE PAID-IN INCOME (ACCUMULATED COMPREHENSIVE SHAREHOLDERS'
OUTSTANDING CAPITAL CAPITAL (LOSS) DEFICIT) INCOME EQUITY
----------- -------- ---------- ------------- ------------ ------------- -------------

Balance as of January 1,
1998....................... 10,880,000 $2,729 $14,383 $ (30) $(11,297) $ 5,785
Comprehensive income:
Net income................. -- -- -- -- 1,457 $1,457 1,457
Other comprehensive income:
Foreign currency
translation
adjustments............ -- -- -- 195 -- 195 195
------
Total comprehensive income... -- -- -- -- -- $1,652 --
======
Share capital issuance
expenses................... -- -- (128) -- -- (128)
Amortization of deferred
stock compensation and
compensation of options
granted to a consultant.... -- -- 121 -- -- 121
---------- ------ ------- ----- -------- -------
Balance as of December 31,
1998....................... 10,880,000 2,729 14,376 165 (9,840) 7,430
Comprehensive income:
Net income................. -- -- -- -- 7,175 $7,175 7,175
Other comprehensive loss:
Foreign currency
translation
adjustments............ -- -- -- (279) -- (279) (279)
------
Total comprehensive income... -- -- -- -- -- $6,896 --
======
Issuance of shares, net.... 600,000 141 2,764 -- -- 2,905
Exercise of options........ 294,573 70 395 -- -- 465
Amortization of deferred
stock compensation......... -- -- 167 -- -- 167
---------- ------ ------- ----- -------- -------
Balance as of December 31,
1999....................... 11,774,573 2,940 17,702 (114) (2,665) 17,863
Comprehensive income:
Net income................. -- -- -- -- 8,493 $8,493 8,493
Other comprehensive loss:
Foreign currency
translation
adjustments............ -- -- -- (464) -- (464) (464)
------
Total comprehensive income... -- -- -- -- -- $8,029 --
======
Issuance of shares related to
the acquisition of Salsa
Group, net (Note 1b)....... 666,667 164 9,274 -- -- 9,438
Issuance of shares related to
a private placement, net... 748,223 186 9,255 -- -- 9,441
Exercise of warrants, net.... 597,487 147 1,694 -- -- 1,841
Exercise of options.......... 738,968 181 1,080 -- -- 1,261
Amortization of deferred
stock compensation......... -- -- 52 -- -- 52
---------- ------ ------- ----- -------- -------
Balance as of December 31,
2000....................... 14,525,918 $3,618 $39,057 $(578) $ 5,828 $47,925
========== ====== ======= ===== ======== =======

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

F-7

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

- --------------------------------------------------------------------------------U.S. DOLLARS IN THOUSANDS

YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997------------------------------
1998 1999 ------ ------ ------
U.S. DOLLARS IN THOUSANDS
----------------------------------------------------------2000
-------- -------- --------

Cash flows from operating activities:CASH FLOWS FROM OPERATING ACTIVITIES:

Net income 485income.................................................. $ 1,457 $ 7,175 $ 8,493
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Minority interest in earnings of subsidiary 26a subsidiary............. 43 28 --
Depreciation and amortization 644amortization............................. 792 932 3,156
Loss (gain) fromon sale of property and equipment 8equipment............. 20 (44) (25)
Gain from saleon realization of a subsidiarysubsidiary....................... -- (132) -- (132)
Loss (gain) on trading marketable securities --securities.............. 91 (67) --
Deferred income taxes, net 27net................................ (34) (867) 26
Amortization of deferred stock compensation 91compensation............... 121 167 52
Accrued severance pay, net (18)net................................ (1) 51 138
Equity in earningslosses (earnings) of affiliates, netnet............ -- (75) 719
Write-off of technology................................... 1,950 -- --
(75)
Write-off of technology assigned toIn process research and development write-off............. -- 1,950 -- Marketable4,300
Trading marketable securities, net --net........................ (154) 130 --
Increase in trade receivables (1,783)receivables............................. (3,026) (3,645) Decrease (increase)(25,683)
Increase in other accounts receivable and prepaid
expenses 41expenses................................................ (953) (563)(337)* (2,519)
Increase in inventories................................... (1,447) (6,664) (9,409)
Increase in long-term trade receivables................... -- -- (2,387)
Increase in long-term related parties' accounts........... -- -- (618)
Decrease (increase) in inventories 317 (1,447) (6,664)
Decrease in long-term prepaid expenses 231expenses......... 78 59 (155)
Increase (decrease)in trade payables................................ 2,933 2,650 7,216
Increase in trade payables (1,248) 2,933 2,650from related parties........... -- -- 2,565
Increase in other accounts payable and accrued expenses and other liabilities 502expenses... 463 3,093 4,722
Increase (decrease) in customer advances (1,328)advances.................. 59 1,522 (829)
Increase in long term liability --liability........................... 504 -- ------ ------ --------
------- ------- --------
Net cash provided by (used in) operating activities (2,005)activities......... 2,896 3,750
------ ------ ------3,976* (10,238)
------- ------- --------

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

F-7

NUR MACROPRINTERS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1998 1999
------ ------ ------
U.S. DOLLARS IN THOUSANDS
--------------------------------------------------------

Cash flows from investing activities:

Restricted long term bank deposit
Purchase of property and equipment (150) (187) (30)
Proceeds from sale of property and equipment (1,479) (2,541) (1,498)
Purchase of other assets 15 191 188
Investments in affiliates -- -- (11)
Investment grants received -- -- (548)
Acquisition of technology -- 266 --
Proceeds from sale of investment in a subsidiary net -- (1,307) --
of cash in the subsidiary at the time it ceased being
consolidated (a)
-- -- 702
------ ------ ------
Net cash used in investing activities
(1,614) (3,578) (1,197)
------ ------ ------
Cash flows from financing activities:

Share capital issuance expenses
Proceeds from issuance of shares, net -- (128) --
Proceeds from exercise of options 3,512 -- 2,905
Short-term bank credit and loans, net -- -- 465
Proceeds from principal of long-term loans (810) 2,320 (229)
Repayment of principal of long-term loans 1,263 106 2,000
(886) (535) (692)
------ ------ ------
Net cash provided by financing activities
3,079 1,763 4,449
------ ------ ------
Effect of exchange rate changes on cash
and cash equivalents
36 12 (139)
------ ------ ------
Increase (decrease) in cash and cash equivalents
(504) 1,093 6,863
Cash and cash equivalents at the beginning of the year
1,738 1,234 2,327
------ ------ ------
Cash and cash equivalents at the end of the year
1,234 2,327 9,190
====== ====== ======
------------------------

* Reclassified.

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

F-8

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------(CONTINUED)

U.S. DOLLARS IN THOUSANDS

YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1997------------------------------
1998 1999 --------------- --------------- ---------------2000
-------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in restricted long-term bank deposit............. (187) (30) --
Proceeds from restricted long-term bank deposit............. -- -- 105
Purchase of property and equipment.......................... (2,541) (1,498) (3,227)
Proceeds from sale of property and equipment................ 191 188 14
Purchase of other assets.................................... -- (11) --
Investments in affiliates................................... -- (774)* --
Investment grants received.................................. 266 -- --
Acquisition of technology................................... (1,307) -- --
Payment for the acquisition of Salsa Group(1)............... -- -- (18,674)
Proceeds from sale of investment in a subsidiary net of cash
in the subsidiary at the time it ceased being
consolidated(2)........................................... -- 702 --
------- ------- --------
Net cash used in investing activities....................... (3,578) (1,423)* (21,782)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:

Share capital issuance expenses............................. (128) -- --
Proceeds from issuance of shares, net....................... -- 2,905 8,879
Proceeds from exercise of options and warrants, net......... -- 465 3,102
Short-term bank credit and short-term loans, net............ 2,320 (229) (2,076)
Proceeds from long-term loans............................... 106 2,000 35,646
Principal payment of long-term loans........................ (535) (692) (3,417)
------- ------- --------
Net cash provided by financing activities................... 1,763 4,449 42,134
------- ------- --------
Effect of exchange rate changes on cash and cash
equivalents............................................... 12 (139) (85)
------- ------- --------
Increase in cash and cash equivalents....................... 1,093 6,863 10,029
Cash and cash equivalents at the beginning of the year...... 1,234 2,327 9,190
------- ------- --------
Cash and cash equivalents at the end of the year............ $ 2,327 $ 9,190 $ 19,219
======= ======= ========

- ------------------------

* Reclassified.

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

F-9

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

-------------------------------------------------------

(a)
YEAR ENDED DECEMBER 31,
------------------------------
1998 1999 2000
-------- -------- --------

(1) Payment for the acquisition of Salsa Group:
Estimated fair value of assets acquired and liabilities
assumed at the date of acquisition was as follows
Working capital (excluding cash and cash equivalents)....... $ 4,666
Property and equipment...................................... 2,216
Long-term prepaid expenses.................................. 53
Technology.................................................. 9,672
Assembled work-force........................................ 1,478
Customer list............................................... 3,094
Goodwill.................................................... 3,195
In-process research and development......................... 4,300
--------
28,674
Less -- amount acquired by issuance of shares............... (10,000)
--------
$ 18,674
========
(2) Proceeds from sale of investment in a subsidiary net of cash
in the subsidiary at the time it ceased being
consolidated:
Working capital (excluding cash) -- -- 499
Fixed assets, net -- --cash and cash equivalents)....... $499
Property and equipment...................................... 168
Minority interest -- --interest........................................... (97)
Gain fromon realization of a subsidiary -- --subsidiary......................... 132
---------------- ---------------- ----------------

-- -- 702
================ ================ ================----
$702
====
Supplemental disclosure of cash flows activities:...........

Cash paid during the year for:

Interest 367 174 333
================ ================ ================Interest.................................................... $174 $333 $ 585
==== ==== ========
Income taxes 74 110taxes................................................ $110 $ -- ================ ================ ================$ 423
==== ==== ========
Non-cash investing activities:

Accrued expenses and other liabilities incurred upon the
acquisition of technology $643 $ -- 643$ --
================ ================ ==================== ==== ========
Purchase of property and equipment.......................... $ -- $ -- $ 483
==== ==== ========
Assignment from fixed assetsproperty and equipment to inventoryinventory......... $ -- $666 $ --
666
================ ================ ==================== ==== ========

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

F-9F-10

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------U.S. DOLLARS IN THOUSANDS

NOTE 1:- GENERAL--GENERAL

a. Organization:

1. NUR Macroprinters Ltd. ("the Company") is an Israeli Corporation. The
Company develops, manufactures, sells and provides services of digital printing
systems for on-demand, short-run, wide format and super-wide format printing as
well as related consumable products. The principal markets of the Company and
its subsidiaries are located in Europe, the Americas and Asia.

The Company operates through wholly-owned subsidiaries for sales, support
services and marketing of the Company's products in their country or region of
domicile. Such entities include NUR Europe S.A. ("NUR Europe") in Belgium, NUR
America Inc. ("NUR America") in the U.S., NUR Asia Pacific Ltd. ("NUR Asia
Pacific") in Hong Kong and NUR Macroprinters (Shanghai) Co. Ltd. ("NUR
Shanghai") in the People's Republic of China.

NUR Media Solutions S.A. ("NUR Media Solutions"), a wholly-owned subsidiary,
is engaged in developing and marketing consumables for the Company's printers.

In October 1999, the Company entered into a joint venture with a third
party--NUR Pro Engineering Ltd., for the assembly of the Company's printers, in
which the Company has 50% holdings (see Note 6a). Under the establishment
agreements, the Company has the option to purchase the other 50% of NUR Pro
Engineering or to sell its 50%, if certain conditions as described in the
agreements, are met.

In December 1999, the Company established Stillachem S.A. ("Stillachem"), a
joint venture with a third party of which the Company owns 50.1%. Stillachem is
engaged in development and manufacture of special inks for digital printing
systems (see Note 6b).

In December 1997, the Company, through NUR Media Solutions, purchased 84% of
the shares of M. NUR Marketing & Communication GmbH ("NUR Germany"). During the
third quarter of 1999, the Company sold its shares in NUR Germany and recorded
$132 as a capital gain.

In July 2000, the Company established a wholly-owned subsidiary named Salsa
Digital Printers Ltd. ("Salsa Digital Printers") in San Antonio, Texas, as part
of the Salsa Group acquisition (See Note 1b). In addition, the Company
established a wholly-owned subsidiary in Hungary named NUR Hungary Trading and
Software Licensing LLC. ("HOC").

As part of the Salsa Group acquisition, the Company acquired the shares of
Signtech Japan, Ltd. ("Signtech Japan"), a wholly-owned subsidiary in Japan. In
November 2000, the Company established a wholly-owned subsidiary in Brazil named
NUR Do Brazil Ltda. ("Nur Brazil"). Both companies are engaged in the marketing
of the Company's products as well as in providing support services in the
country of domicile.

b. Acquisition of Salsa Group:

On May 17, 2000 the Company entered into an acquisition agreement with a
U.S. partnership, Salsa Ltd., and its wholly-owned subsidiaries ("Salsa Group").
According to the agreement, the Company and its subsidiaries acquired as of
July 3, 2000, all the assets and assumed certain liabilities of the Salsa Group
and all of the outstanding shares of Signtech Japan in consideration of $20,000
in cash and $10,000 through the issuance of 666,667 Ordinary shares of the
Company. In addition, the Company incurred other costs directly related to the
acquisition amounted to approximately $400. The total acquisition cost amounted
to $30,400.

F-11

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT PER SHARE DATA)

Salsa Group was engaged in the development, manufacturing and selling of
digital printing systems for on-demand, short-run, wide format and super wide
format printing, as well asand also in selling of related consumable products.

The Company maintains wholly-owned
subsidiaries in Europe, United States and in Asia
for sales support and marketing. The Company's
productsoperations generated by the acquired net assets of Salsa Group are
sold by a network of dealers and
distributors. The principal markets of the Company
and its subsidiaries are located in Europe, America
and Asia.

2. NUR Media Solutions S.A. ("Nur Media Solutions"):

In April 1998, the Company renamed its previously
wholly-owned subsidiary Nur International S.A. to
Nur Media Solutions S.A., which is engaged in
developing and marketing of consumables for the
Company's printers as well as for printers of other
manufacturers (see Note 16c).

3. NUR America Inc. ("Nur America"):

In 1996, the Company established a wholly-owned
subsidiaryincluded in the United States - Nur America, which
is engaged in the marketing of the Company's
products and related consumable products in South
America and North America.

4. NUR Europe S.A. ("Nur Europe"):

In 1996, the Company established a wholly-owned
subsidiary in Belgium - Nur Europe which is engaged
in the marketing of the Company's products and
related consumable products in Europe.

5. M. NUR Marketing & Communication GmbH
("Nur Germany"):

In December 1997, the Company purchased the shares
of Nur Germany, a 84% owned subsidiary, that were
held by Nur Media Solutions. Nur Germany is engaged
in selling and marketing of consumable printed
materials. Duringconsolidated statements commencing the third quarter of 19992000.

The acquisition was accounted for by the purchase method of accounting.
Accordingly, the purchase price has been allocated according to the fair value
of the assets acquired and liabilities assumed and resulted in the recording of
goodwill of approximately $3,195, which is being amortized on a straight-line
basis over a 10-year period.

In connection with the above-mentioned acquisition, the Company sold its shares in Nur Germany and recorded
$ 132 thousand as a capital gain.

6. NUR Asia Pacific Ltd. ("Nur Asia Pacific"):

In January 1999, the Company established a
wholly-owned subsidiary in Hong-Kong, Nur Asia
Pacific, which is engaged in
the marketingthird quarter of 2000, a one-time research and development expense of $4,300
to write-off the in-process research and development acquired from Salsa Group,
for which technological feasibility has not yet been established and for which
no alternative future use exists.

Other intangible assets acquired had an estimated fair value of $14,244 as
shown in Note 9.

The following is a summary of the Company's products and related consumable products
as well as support servicesfair value of the assets acquired:

Working capital, net........................................ $ 6,392
Property and equipment...................................... 2,216
Long-term prepaid expenses.................................. 53
Goodwill and other intangible assets (See Note 9)........... 17,439
In-process research and development......................... 4,300
-------
$30,400
=======

The following represents the unaudited pro-forma results of operations for
the Company's
products in Asia.

F-10

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

7. NUR Macroprinters (Shanghai) Co., Ltd.
("Nur Shanghai"):

In Mayyears ended December 31, 1999 and 2000, assuming that the Company established a wholly-owned
subsidiary in the People's RepublicSalsa Group
acquisition had been consummated as of China
("China"), which is engaged in the marketing of the
Company's productsJanuary 1, 1999 and related consumable products
as well as support services for the Company's
products in China.

8. Stillachem S.A. ("Stillachem"):

In December 1999, the Company established
Stillachem, a joint venture in which the Company
owns 50.1%. Stillachems is engaged in development
and manufacture of special inks for digital printing
systems.

9. NUR Pro Engineering Ltd.

In October 1999, the Company established a 50% owned
affiliate, named Nur Pro Engineering, for the
assembly of the Company's printers.

b.January 1, 2000,
respectively:

YEAR ENDED
DECEMBER 31,
-------------------
1999 2000
-------- --------
UNAUDITED

Revenues................................................. $93,789 $139,422
======= ========
Net income............................................... $ 3,927 $ 12,620
======= ========
Basic net earnings per share............................. $ 0.33 $ 0.94
======= ========
Diluted net earnings per share........................... $ 0.29 $ 0.83
======= ========

c. Acquisition of technology:

In December 1997, the Company signed an agreement with Meital Electronic
Technologies Ltd. ("Meital"), which iswas engaged in research and development in
fields related to the Company's activity.

F-12

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

In accordance with the agreement, the Company provided loans to Meital in 1997 and 1998
totaling $ 50 thousand and $ 350 thousand, respectively.$350. During 1997 and 1998, the Company recorded a provision in respect of the
aforementioned amounts since Meital iswas in the development stage, and there was
an uncertainty regarding its ability to repay the loans.

In September 1998, the Company acquired from Meital all rights (including
all related assets) to Meital's piezo DoDdrop on demand inkjet technologies for
application in wide format digital printers for approximately $3.0 million,$3,000, consisting
of an up-front payment, of $750 thousand, the assumption of certain liabilities including those
that relate to the legal dispute between Idanit Technologies Ltd. ("Idanit") and
Meital (see Note 13) and future royalties which are
based on sales.to be paid upon success of such
technology (not exceeding $1,300). The Meital acquisition in 1998 resulted in a
one-time
charge to research and development in the amount of $1.95 million. The$1,950 in respect of
technology write-off, since feasibility was not established at the date of
acquisition. During 2000, the Company has future contingent royalty
obligations, based on future sales until September 2001,reached the maximum royalties
liability of Meital's technology-based printers, which will not exceed
$1.3 million.$750 was paid in cash and $550 was provided for. If certain minimum royalties arethe
provision amount of $550 is not paid, Meital has the option to buy back the
technology in the aggregate amount of royalties paid by the Company. c. Concentration of risks that may have a significant impact on
the Company:

Suppliers:The Company
intends to pay such amounts in 2001.

d. The Company purchases allsome of the ink and ink-jetsall of the ink-jet
printerheads used in its super wide format printers from one supplier.a single supplier for each series of
printers. The Company's customers rely on the ink and ink-jet printerheads to
operate their printers.

F-11

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------- Because the Company's business depends on the inkthese items
for sale and maintenance of its printers, a failure in supplying or a change in
credit-termscredit terms could have a severematerial adverse effect on the Company's results of
operations and financial results.

Subcontractors:position.

e. The Company employs a limited number of unaffiliated subcontractors to
manufacture components for its printers. The Company currently employs one 50%
owned affiliated sub-contractor to assemble some of its printers.

Because the Company relies on a limited number of subcontractors, its business
could suffer if the
Company fails to maintain its relationships with its subcontractors or fails to
develop alternative sources for its printer components.components, it could have a material
adverse effect on the Company's results of operations and financial position.

NOTE 2:- SIGNIFICANT--SIGNIFICANT ACCOUNTING POLICIES

The Company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States.States
("U.S. GAAP").

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. Financial statements in U.S. dollars:

The accompanying consolidated financial statements have been prepared in U.S. dollars.U.S
dollars ("dollars"). The U.S. dollar is the currency of the primary economic
environment in which the operations of the Company, NUR America, Salsa Digital
Printers, HOC and Nur America and affiliatePro Engineering are conducted. The majority of sales is
made in U.S. dollars and the majority of purchases of materials and components is
invoiced and paid in U.S. dollars. In addition, a substantial numberportion of other expenses arecost is
incurred outside
Israel in U.S. dollars or paid in U.S. dollars or in New
Israeli Shekels ("NIS") linked todollars. Accordingly, the exchange rateCompany's management
believes that the dollar is the primary currency of the

F-13

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. dollar. Accordingly,DOLLARS IN THOUSANDS

NOTE 2:--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
economic environment in which the Company has determinedand the U.S. dollar asabove-mentioned entities
operate. Thus, the currency of its primary economic
environment and thus its functional and reporting currency.

The Company'scurrency of the Company and these
subsidiaries is the dollar.

Accordingly, transactions and balances denominated in U.S. dollars are presented
at their original amounts. Non-dollar
transactions and balances have beenMonetary accounts maintained in currencies other than
the dollar are remeasured into U.S. dollars in accordance with Statement 52 of the
Financial Accounting Standards Board ("FASB"), "Foreign Currency Translation".
All transaction gains and losses fromof the remeasurement of monetary balance sheet
items denominated in non-dollar currencies are reflected in the statementstatements of
operationsincome as financial income or expenses, as appropriate.

F-12

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The financial statements of certainother subsidiaries and affilates,an affiliate, whose
functional currency is not the U.S.U.S dollar, have been translated into U.S. dollars, in
accordance with FASB Statement No. 52, "Foreign Currency
Translation".dollars.
All balance sheet accounts have been translated using the exchange rates in
effect at the balance sheet date. Statement of operations amounts have been
translated using the average exchange rate for the year.period. The resulting aggregate
translation adjustments are reported as a component of accumulated other
comprehensive income (loss) in shareholders' equity.

c. Principles of consolidation:

The consolidated financial statements include the accounts of the Company
and its subsidiaries listed below.subsidiaries. Intercompany transactions and balances including profitsprofit
from intercompany sales not yet realized outside the group, have been eliminated
inupon consolidation.

Subsidiaries included in consolidation:

DECEMBER 31, 1998 AND 1999
-------------------------------------------
SHARES CONFERRING
-------------------------------------------
RIGHTS TO
VOTING RIGHTS PROFITS
------------------ --------------------
% %
------------------ --------------------

NUR Media-Solutions 100 100

NUR Europe 100 100

NUR America 100 100

NUR Asia Pacific 100 100

NUR Shanghai 100 100

NUR Germany *) 84 84

*) Dued. Reclassification:

Certain amounts from prior years have been reclassified to the sale of the subsidiary, its statements of
income are consolidated for the period ending June
30, 1999.

d.conform with
current year presentation.

e. Cash equivalents:

The Company considers allCash equivalents are short-term highly liquid investments originally purchasedthat are readily
convertible to cash with original maturities of three months or less to be cash equivalents.

F-13

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

e.less.

f. Marketable securities:

The Company accounts for investments in debt and equity securities (other
than those accounted for under the equity method of accounting) in accordance
with FASB Statement No. 115, "Accounting for Certain Investments in Debt and
Equity Securities".

Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determinations at each balance sheet date.

Management has classified all of its marketable securities as trading
securities. These securities are carried at their fair value based upon the
quoted market price of those investments. Net realized and unrealized gains and
losses on these securities are included in the statement of income.

f.F-14

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 2:--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
g. Inventories:

Inventories are stated at the lower of cost or market value. Inventory
write-offs are provided to cover risks arising from slow-moving items or
technological obsolescence. Cost is determined as follows:

Raw materials - bymaterials--by the "first-in, first-out" method;
work-in-progressWork-in-progress and finished products - onproducts--on the basis of computeddirect manufacturing
costs with the
addition of allocable indirect manufacturing costs.

The Company annually reviews the inventory for
obsolescence,h. Long-term trade receivables:

Long-term receivables from extended payment agreements are recorded at
estimated present values determined based on current rates of interest and
reported at the sales activitynet amounts in the accompanying financial statements. Imputed
interest is recognized, using the effective interest method as a component of
its products,
and provides a reserve where appropriate.

g.interest income in the accompanying statements.

i. Investments in affiliates:

The investment in companies, partnershipsNur Pro Engineering and joint
ventures,Stillachem, over which the Company
can exercise significant influence (generally, entities in which the Company holds
20% to 50% of ownership or voting rights) areis presented using the equity method of
accounting. The Company generally discontinues applying the equity method when
its investment (including advances and loans) is reduced to zero and it has not
guaranteed obligations of the affiliate or otherwise committed to provide
further financial support to the affiliate. Where the Company's share of an
affiliate's losses is greater than the investment in such an affiliate and in
which the Company has guaranteed obligations of the affiliate, the excess amount
is presented as a liability.

Jointly controlled entities (generally entities in which
the Company holds 50% ownership or voting rights) are
accounted for using the equity method.

h. Restricted long term bank deposit:

Restricted long term bank deposit is maintained with banks
mainly to secure obligations of customers. The Company is
restricted from withdrawing any portion of the long term
bank deposit at any time, until the repayment of the
leasing obligation by the customer. The restricted long
term bank deposit will mature approximately in 2001, is
linked to the U.S. dollar and bears interest at a rate of
5%.

F-14

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

i.j. Property and equipment:

These assetsProperty and equipment are stated at cost, net of grantgrants received and
accumulated depreciation.

Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets.

The annual depreciation rates are as follows:

%
--------------------------------------------------------------------

Machinery and equipmentequipment........................... 10 - 33
Motor vehiclesvehicles.................................... 15
Office furniture and equipmentequipment.................... 6 - 10
BuildingBuilding.......................................... 3
Leasehold improvementsimprovements............................ Over the term of the term of the lease period

j.Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" ("SFAS 121") requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets is less than the asset's carrying amount. The Company and its
subsidiaries periodically assess the recoverability of the carrying amount of
property and equipment and

F-15

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 2:--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
provide for any possible impairment loss based upon the difference between the
carrying amount and fair value of such assets. As of December 31, 2000, no
impairment losses have been identified.

k. Other assets:

Other assets are stated at amortized cost. Amortization is calculated using
the straight-line method over the estimated useful lives, at the following annual rates:which are as follows:

%
----------------ESTIMATED
USEFUL LIFE
-----------
(IN YEARS)

Technology.................................................. 5
Assembled work-force........................................ 7
Customer list............................................... 7
Goodwill.................................................... 10
Distribution rights 20rights......................................... 5
Patent rightsrights............................................... 10

k.The carrying value of intangible assets is periodically reviewed by
management, based on the expected future undiscounted operating cash flows over
the remaining amortization period. If this review indicates that the intangible
assets will not be recoverable, the carrying value of the intangible assets is
reduced to estimated fair value. Based on its most recent analysis, management
believes that no impairment of other assets exists as of December 31, 2000.

l. Accrued severance pay, net:

The Company's liability for severance pay is calculated pursuant to Israeli
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. The Company
records as expense the net increase in its funded or unfunded severance
liability. Employees are entitled to one month salary for each year of
employment, or a portion thereof. The Company's liability for all of employees,
is fully provided by monthly deposits with severance pay funds, insurance
policies and by an accrual. Deposits with severance pay
funds and insurance policies are not under the control of
the Company. The value of these policies is recorded as an asset
in the Company's balance sheet.

The deposited funds include profits accumulated up to the balance sheet
date. The deposited funds may be withdrawn only upon the fulfillment of the
obligation pursuant to Israeli severance pay law or labor agreements. The value
of the deposited funds areis based on the cash surrendered value of these policies,
and includeincludes immaterial profits.

Severance expenses for the years ended December 31, 1997,
1998, 1999 and 1999 were $ 312 thousand $ 314 thousand2000
amounted to approximately $314, $440 and $ 440
thousand,$306, respectively.

F-15

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

l.m. Income taxes:

The Company accountsand its subsidiaries account for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS)("SFAS") No. 109, "Accounting for
Income Taxes". This statement prescribes the use of the liability method whereby
deferred tax asset and liability account balances are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are

F-16

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 2:--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
expected to reverse. The Company providesand its subsidiaries provide a valuation
allowance, if necessary, to reduce deferred tax assets to their estimated
realizable value.

m.n. Basic and diluted net earnings per share:

Basic net earnings per share is computed based on the weighted average
number of Ordinary shares outstanding during each year. Diluted net earnings per
share is computed based on the weighted average number of Ordinary shares
outstanding during each year, plus dilutive potential ordinaryOrdinary shares considered
outstanding during the year, in accordance with FASB Statement No. 128,
"Earnings Per Share".

n.o. Accounting for stock-based compensation:

The Company has elected to account for stock-based
compensation in accordance with the provisions offollow Accounting Principles Board Opinion
No. 25 ("APB-25"),
"Accounting for Stock Issued to Employees". ("APB 25") and Interpretation
No. 44 "Accounting for Certain Transactions Involving Stock Compensation" ("FIN
44") in accounting for its employee stock option plans. Under APB-25,APB 25, when the
exercise price of the Company's share options equals or is higherless than the market price of
the underlying shares on the date of grant, no compensation expense is recognized.
The pro-forma informationdisclosures required by SFAS No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"), are provided in Note 16e.

The Company applies SFAS No. 123 and EITF 96-18 "Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services" with respect to options issued to
non-employees. SFAS No. 123 requires use of an option valuation model to measure
the fair value of the options is provided in accordance with
the provisions of Statement No. 123 (see Note 17). In
accounting for options granted to other than employees, the
provisions of Statement of Financial Accounting Standard
Board No. 123 "Accounting for Stock-Based Compensation",
were applied. The fair value of these options was estimated
at the grant date usingdate.

p. Revenue recognition:

In December 1999, the Black-Scholes option pricing
model.

o. RevenueSEC issued Staff Accounting Bulletin No. 101 ("SAB
101") "Revenue Recognition in Financial Statements" as amended in June 2000,
which summarizes the Staff's views in applying generally accepted accounting
principles to revenue recognition 1.in financial statements. The Company adopted
SAB 101 during the fourth quarter of 2000. The adoption did not have a
significant effect on the Company's consolidated result of operations or
financial position.

Revenues from sales of products are recognized upon shipmentdelivery provided that
the collection of resulting receivable is probable, there is a persuasive
evidence of an arrangement, no significant vendor
obligations in respect of
installation remain and collectionthe price is deemed
probable.

2.fixed or determinable. The Company does not
grant right of return.

Revenues from services contracts are recognized ratably over the term of the
agreements.

p.Revenues from trade-in transactions of the Company's printers are recorded
at fair value as a discount from revenues in accordance with APB 29 "Accounting
for Nonmonetary Transactions" and EITF 86-29 "Nonmonetary Transactions:
Magnitude of Boot and the Exceptions to the Use of Fair Value", when the cash
consideration involved with such transactions is material.

F-17

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 2:--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

q. Warranty costs:

The Company provides a warranty for up to six months, at no extra charge. A
provision which to date has been
insignificant is recorded for probable costs in connection with warranties, based on
the Company's experience (in respect of most of these costs the Company has
warranties from its suppliers).

F-16

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

q.r. Research and development costs:

Research and development costs net of grants are charged to expenseexpenses as
incurred.

Grants are netted from research and development costs on an
accrual basis as the related expenses are incurred.

r.s. Royalty-bearing grants:

Royalty-bearing grants from the Government of Israel for funding of approved
research and development projects and for funding marketing activityactivities are
recognized at the time in which the Company is entitled to such grants, on the basis of
the related costs incurred.

s.incurred and are netted from research and development, and
selling and marketing costs, respectively.

t. Non-royalty-bearing grants:

The Company is also entitled to non-royalty-bearing grants for its
participation in the "MAGNT" project financed by the Government of Israel. These
grants are recognized at the time the Company is entitled to such grants, on the
basis of the costs incurred and are recorded as a deduction of research and
development costs.

u. Advertising costs:

The Company expenses advertising costs as incurred. Advertising expenses for
the years ended December 31, 1997,
1998, 1999 and 19992000 are $ 252 thousand, $ 492 thousand$492, $602 and $ 602
thousand,662,
respectively.

t.v. Concentrations of credit risk:

SFAS No. 105, "Disclosure of Information About Financial
Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk", requires
disclosure of any significant off-balance-sheet and credit
risk concentrations. The Company has no significant
off-balance-sheet concentration of credit risk such as
foreign exchange contracts, option contracts or other
foreign hedging arrangements.

Financial instruments that potentially subject the Company and its
subsidiaries to concentrations of credit risk consist principally of cash and
cash equivalents, marketable securities, trade receivables, long-term trade receivables, restricted
long-term bank deposits, long-term loans to affiliates and restricted cash.long-term related
party accounts. Cash and cash equivalents consist primarily of U.S. dollar, NIS,
Euro and Belgian Franc amounts deposited in banks. Cash and cash equivalents and
restricted cashbank deposits are deposited withinvested in major banks primarily in Israel, the
United States, Asia and Belgium. Such deposits in the United States may be in
excess of insured limits and are not insured in other jurisdictions. Management
believes that the financial institutions that hold the Company's cash and cash equivalents and restricted cashinvestments are
financially sound, and, accordingly, minimal credit risk exists with respect to
these financial instruments.investments.

The Company's trade receivables and the long-term trade receivables of the Company and
its subsidiaries are mainly derived from sales to customers located primarily in
the United States,America, Asia and Europe. The
Company has adopted credit policies and standards intended
to accommodate industry growth and inherent risk. Management believes that credit risks are moderated by
the diversity of its end customersend-customers and geographic sales areas. The Company
performs ongoing credit evaluations of its customers' financial condition and requires collateral as
deemed necessary. The Company's marketable securities
include investment in U.S. company. Management believes
that this companycondition. An
allowance for doubtful accounts is financially sound and accordingly
minimal credit risks existsdetermined with respect to these
marketable securities.

F-17those amounts that
the Company has determined to be doubtful of collection. Certain subsidiaries
provide additional general allowance.

As for loans to investees and balances with related parties, the Company
performs ongoing evaluations of the balances and, to date, considers the credit
risk to be low.

F-18

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------

u.(CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 2:--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has no significant off-balance-sheet concentration of credit
risk such as foreign exchange contracts, option contracts or other foreign
hedging arrangements.

w. Fair value of financial instruments:

The estimated fair value of financial instruments has been
determinedfollowing methods and assumptions were used by the Company using available market
information and valuation methodologies. Considerable
judgment is requiredits
subsidiaries in estimating their fair values.
Accordingly, the estimates may not be indicative of the
amounts the Company could realize in a current market
exchange.value disclosures for financial
instruments:

The carrying amounts of cash and cash equivalents, restricted cash, trade receivables,
short-term bank credit, andshort-term loans and marketable securitiestrade payables approximate their
fair values, due to the short term maturitiesmaturity of these
instruments and the terms of the deposits.such instruments.

The carrying amounts of the Company's long-term borrowing
arrangementstrade receivables and
restricted long-term bank deposit, approximate their fair value. The fair value
of the Company's long-term loan iswas estimated using discounted cash flow analyses, based on the Company's
current incrementincremental investment rates for similar type of investment arrangements.

The carrying amount of the Company's long-term loans including long-term
loans to investees and to related parties approximates their fair value. The
fair value was estimated using discounted cash flow analyses, based on the
Company's incremental borrowing rates for similar typestype of borrowing
arrangements.

v.The fair value of foreign currency transactions (used for hedging purposes)
is estimated by obtaining quotes from investment bankers.

x. Impact of recently issued accounting standards:

In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, ("SFAS 133"), "Accounting for Derivative
instruments and Hedging Activities" ("SFAS No. 133"). This
statement establishes accounting and reporting standards
requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts)
be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also
requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income
statement, and requires that a company must formally
document, designate, and assess the effectiveness of
transactions that receive hedge accounting. The FASB has
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of
FASB Statement No.Activities"
("SFAS 133". The Statement defers for one year
the effective date of SFAS No. 133. The rule will apply), as amended, which is required to all fiscal quarters of all fiscalbe adopted in years beginning
after June 15, 2000. TheBased on the Company's derivative positions at
December 31, 2000, the Company does not expect the impact of this new statement
on the Company's consolidated balance sheets or results of operations to be
material.

w. Reclassification:

Certain amounts from prior years have been reclassified to
conform with current period presentation.

NOTE 3:- CASH AND CASH EQUIVALENTS

INTEREST RATE DECEMBER 31,
---------------------------- ------------------------------------
LINKAGE TERMS 1998 1999 1998 1999
-------------------------------------- ----- ----- ----- -----
% U.S. DOLLARS IN THOUSANDS
---------------------------- ------------------------------------

U.S. dollars 5.1 1.75 1,297 6,995
DM 3.3 -- 698 --
Euro -- -- -- 533
Belgian Franks -- 0.56 163 955
Other -- 0.57 169 707
----- -----

F-18

NUR MACROPRINTERS LTD.

NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

2,327 9,190
===== =====
F-19

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------(CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 4:- OTHER3:--OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

DECEMBER 31,
--------------------------------------
1998-------------------
1999 ----------------- -----------------
U.S. DOLLARS IN THOUSANDS

--------------------------------------2000
-------- --------

Government authorities 665authorities...................................... $ -- $ 881
Participations and grants receivable 683receivable........................ 1,351 900
Related parties (1) 93parties(1).......................................... 65 41
Deferred income taxes (2) 42taxes(2).................................... 784 Employees 95658
Employees................................................... 291 343
Advances to suppliers 437suppliers(3).................................... 265 1,335
Prepaid expenses 561expenses............................................ 628 Other 180 289
----- -----

2,756 3,673
===== =====504
Other....................................................... 63 1,674
------ ------
$3,447 $6,336
====== ======

- ------------------------

(1) Balances for two executives that are linked to the U.S. dollar and bears annualbear
interest at the rate of 2%.4% per annum.

(2) See Note 18.17g.

(3) As of December 31, 2000 includes $494 paid in advance to an affiliate, NUR
Pro Engineering, in respect of printers that have not yet been supplied.

NOTE 5:- INVENTORIES4:--INVENTORIES

DECEMBER 31,
--------------------------------------
1998-------------------
1999 ----------------- -----------------
U.S. DOLLARS IN THOUSANDS
--------------------------------------2000
-------- --------

Raw materials 1,539materials............................................. $ 1,763 Work-in-progress 226$ 6,176
Work-in-progress.......................................... 2,158 3,030
Finished products 1,934products......................................... 6,768 ------ ------

3,699 10,689
====== ======

NOTE 6:- INVESTMENTS IN AFFILIATES

DECEMBER 31,
1999
------------------

Equity, net (a) (b) 339
Long-term loans 284
------------------

Total investments in affiliates 623
==================

(a) As follows:
Net equity as at purchase date:
Cost of additionally acquired shares 264
Accumulated net earnings 75
------------------

339
==================14,341
------- -------
$10,689 $23,547
======= =======

F-20

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 5:--LONG-TERM TRADE RECEIVABLES

The aggregate annual maturities of long-term trade receivable from the sale
of products are as follows:

DECEMBER 31,
-------------------
1999 2000
-------- --------

First year (current maturities)............................. $ -- $2,172
Second year................................................. -- 1,876
Third year.................................................. -- 468
Fourth year................................................. -- 43
----- ------
-- 4,559
Less--current maturities.................................... -- 2,172
----- ------
$ -- $2,387
===== ======

Long-term trade receivables bear interest at the average rate of 6% per
annum.

NOTE 6:--INVESTMENTS IN AFFILIATES AND EXCESS OF LOSSES OVER INVESTMENTS

a. Investment in Nur Pro Engineering:

DECEMBER 31,
-------------------
1999 2000
-------- --------

Equity, net(1).............................................. $ 84 $ 58
Long-term loans(2).......................................... 284 284
---- ----
Total investments in NUR Pro Engineering.................... $368 $342
==== ====
- --------------------------------------------------------------------------------

(b)------------------------

(1) Net equity as follows:
Net equity as of purchase date.......................... $ --* $ --*
Accumulated net earnings................................ 84 58
---- ----
$ 84 $ 58
==== ====

* Represents an amount lower than $1.

(2) In October 1999, the Company entered into
a joint venture, with Nur Pro Engineering
Ltd. for the assembly of the Company's
printers.

Under the establishment agreements, the
Company has the option to purchase the other
50% of Nur Pro Engineering or to sell its
50%, if certain conditions as described in
the agreements are met (including a Buy me,
Buy you mechanism).

The Company granted the following loans to NurNUR Pro Engineering:

A loan isin the amount of $ 175 thousand$175 linked to the U.S. dollar and bearing annual
interest at the rate of 3%. A maturity date has not yet been determined.

A loan in the amount of $ 100 thousand$100 linked to the NIS withbearing no interest to be
repaid afterin 20 years.

(2) In December 1999, the Company established
Stillachem , a joint venture in which the
Company owns 50.1%. Stillachem is engaged in
development and manufacture of special ink
for digital printing systems.

NOTE 7:- PROPERTY AND EQUIPMENT

MACHINERY OFFICE BUILDING AND
AND MOTOR FURNITURE AND LEASEHOLD
EQUIPMENT VEHICLES EQUIPMENT IMPROVEMENTS GRANTS TOTAL
------------- ------------ -------------- ----------------- ------------ -------------
U.S. DOLLARS IN THOUSANDS
----------------------------------------------------------------------------------------------

Cost as of January 1,
1999 1,319 345 1,664 1,209 (266) 4,271
Additions 801 2 625 70 - 1,498
Disposals (799) (235) (529) (17) - (1,580)
------------- ------------ -------------- ----------------- ------------ -------------
Balance as of
December 31, 1999 1,321 112 1,760 1,262 (266) 4,189
------------- ------------ -------------- ----------------- ------------ -------------

Accumulated
depreciation as of
January 1, 1999 133 105 793 232 (50) 1,213
Additions 248 46 408 136 (56) 782
Disposals (119) (88) (319) (3) - (529)
------------- ------------ -------------- ----------------- ------------ -------------
Balance as of
December 31, 1999 262 63 882 365 (106) 1,466
------------- ------------ -------------- ----------------- ------------ -------------

Depreciated cost as of
December 31, 1999 1,059 49 878 897 (160) 2,723
============= ============ ============== ================= ============ =============
Depreciated cost as of
December 31, 1998 1,186 240 871 977 (216) 3,058
============= ============ ============== ================= ============ =============

Depreciation expense amounted to $ 496 thousand, $ 647 thousand
and $ 782 thousand for the years ended December 31, 1997, 1998 and
1999, respectively.

As for charges, see Note 15.

F-21

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------(CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 8:- OTHER ASSETS, NET6:--INVESTMENTS IN AFFILIATES AND EXCESS OF LOSSES OVER INVESTMENTS
(CONTINUED)
b. Investment in Stillachem:

DECEMBER 31,
-----------------------------------
1998-------------------
1999 ----------------- --------------
U.S. DOLLARS IN THOUSANDS
-----------------------------------2000
-------- --------

Equity, net(1).............................................. $481 $(212)
---- -----
Total investments (excess of losses over investments) in
Stillachem................................................ $481 $(212)
==== =====
(1) Net equity as follows:
Net equity as of purchase date.......................... $490 $ 490
Accumulated net losses.................................. (9) (437)
Elimination of an intercompany transaction.............. -- (265)
---- -----
$481 $(212)
==== =====

NOTE 7:--RESTRICTED LONG-TERM BANK DEPOSITS

Restricted long-term bank deposits are maintained with banks mainly to
secure obligations to customers. The Company is restricted from withdrawing any
portion of the long-term bank deposits at any time, until the repayment of the
leasing obligation by the customer. The restricted long-term bank deposits as of
December 31, 2000 will mature in 2002, are linked to the U.S. dollar and bear
weighted average interest at a rate of 5%.

NOTE 8:--PROPERTY AND EQUIPMENT

a. Composition of property and equipment is as follows:

DECEMBER 31,
-------------------
1999 2000
-------- --------

Cost:
Distribution rights 700 700
Patent rights 61 72
----------------- --------------

761 772
----------------- --------------Machinery and equipment................................... $1,321 $2,163
Motor vehicles............................................ 112 33
Office furniture and equipment............................ 1,760 4,937
Buildings and leasehold improvements...................... 1,262 3,125
------ ------
4,455 10,258
------ ------
Accumulated amortization:
Distribution rights 490 630
Patent rights 35 45
----------------- --------------

525 675
----------------- --------------

Amortizeddepreciation:
Machinery and equipment................................... 262 546
Motor vehicles............................................ 63 16
Office furniture and equipment............................ 882 1,749
Building and leasehold improvements....................... 365 750
------ ------
1,572 3,061
------ ------
Depreciated cost 236 97
================= ==============before grants.............................. 2,883 7,197
Less--grants, net........................................... 160 151
------ ------
Depreciated cost............................................ $2,723 $7,046
====== ======

Amortization of distribution and patent rights were $ 148
thousand, $ 145 thousand and $ 150 thousand for the years ended
December 31, 1997, 1998 and 1999, respectively.F-22

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 9:- LEASES

a. Nur America Inc. leases office space and demo-center
facility under a ten-year operating lease agreement ending
October 2008.8:--PROPERTY AND EQUIPMENT (CONTINUED)
b. Nur Europe S.A. leases office space and warehouse
facilities under a 15 year capital lease agreement ending
in December 2011.

c. Nur Media Solutions lease office space under a lease
agreement expiring in December 2002.

d. Nur Shangai leases space for use as a warehouse as well as
a demo-center and offices in a separate location under
lease agreements expiring in 2000 and 2001, respectively.

e. Nur Asia pacific leases offices and warehouse space under a
one year agreement.

f. The Company entered into a lease agreement with a former
shareholder (Moshe Nur) according to which the Company
leases two adjacent buildings.

During 1996 and 1997, the Company paid $ 545 thousand in
respect of the construction of the building, on behalf of
Moshe Nur. In 1997, Moshe Nur experienced financial
difficulties, resulting in the filing of a petition for
bankruptcy. According to a settlement agreement signed in
September 1998 (see Note 14e), it was agreed that the
Company's payments are considered as a pre-payment of the
lease until July 2000.

The Company recorded $ 162 thousand and $ 120 thousand as
rent expenses, in connection with such prepaid expensesDepreciation expense for the years ended December 31, 1998, 1999 and
1999,2000 amounted to $647, $782 and $1,614, respectively.

F-22

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

g. Future minimum lease paymentsAs for charges, see Note 14c.

NOTE 9:--OTHER ASSETS

a. Composition of other assets is as of December 31, 1999, under
the aforementioned non- cancelable leases, are as follows
(U.S. dollars in thousands):

2000 77
2001 84
2002 89
2003 92
Thereafter 683
----------------
1,025
================

h. Rental expenses were $ 350 thousand, $ 220 thousand and $ 297
thousand for the each of the years ended December 31, 1997,
1998 and 1999, respectively.

NOTE 10:- SHORT-TERM BANK CREDIT AND LOANSfollows:

WEIGHTED
AVERAGE
INTEREST
LINKAGE RATE DECEMBER 31.
--------------------------- -----------------------------
TERMS 199831,
-------------------
1999 1998 1999
-------------- ------------ -------------- ------------- --------------
% U.S. DOLLARS IN THOUSANDS
--------------------------- -----------------------------2000
-------- --------

Revolving bank credit Belgian
Franks 5 - 173 -
Revolving bank credit NIS 17 16.5 112 18
Short-term loans U.S. dollar 7.2+1.5 9.23 1,214 1,480
Short-term loans NIS 17.7 - 683 -
Short-term loans Belgian
Franks Libor+2.5 4.4 790 1,245
-------------- --------------
2,972 2,743
============== ==============Original amounts:
Technology(1)............................................. $ -- $ 9,672
Assembled work-force(1)................................... -- 1,478
Customer list(1).......................................... -- 3,094
Goodwill(1)............................................... -- 3,195
Distribution rights....................................... 700 700
Patent rights............................................. 72 72
---- -------
772 18,211
---- -------
Accumulated amortization:
Technology................................................ -- 966
Assembled work-force...................................... -- 106
Customer list............................................. -- 221
Goodwill.................................................. -- 159
Distribution rights....................................... 630 700
Patent rights............................................. 45 65
---- -------
675 2,217
---- -------
Amortized cost.............................................. $ 97 $15,994
==== =======

The weighted average interest rate was 9% and 7%- ------------------------

(1) Resulting from the acquisition of Salsa Group.

b. Amortization of other assets for the years ended December 31, 1998, 1999
and 2000 were $145, $150 and $1,542, respectively.

NOTE 10:--SHORT-TERM BANK CREDIT AND SHORT-TERM LOANS

INTEREST RATE DECEMBER 31.
LINKAGE ------------------- -------------------
TERMS 1999 2000 1999 2000
--------------------- -------- -------- -------- --------
%

Short-term bank credit.................... NIS 16.5 -- $ 18 $ --
Short-term bank loans..................... U.S. dollar 9.23 7.75 1,480 500
Short-term bank loans..................... Belgian franc 4.4 6.8 1,245 167
------ ----
$2,743 $667
====== ====

F-23

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 10:--SHORT-TERM BANK CREDIT AND SHORT-TERM LOANS (CONTINUED)
The weighted average interest rate as of December 31, 1999 respectivelyand 2000 was 7%
and 7.5%, respectively.

The total authorized unused line of credit denominated in NIS, Belgian Franks and US
dollars, at December 31, 19992000 is $ 3,405 thousand.$14,800.

NOTE 11:---OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES AND OTHER LIABILITIES

Employees and payroll accruals 670 1,567accruals............................. $1,567 $ 3,075
Government authorities 301authorities..................................... 835 2,202
Royalties payable 664payable.......................................... 396 1,358
Current maturities of long-term liabilitiesliability (see Note 13).... 293 293
Warranty and installation 90other......................................... 462 2,390
Accrued expenses 908expenses........................................... 2,020 ----------------- -----------------
2,926 5,573
================= =================3,972
------ -------
$5,573 $13,290
====== =======

F-24

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 12:- LONG-TERM--LONG-TERM LOANS

a. Composed as follows:

LINKAGE WEIGHTED AVERAGE
TERMS INTEREST RATE DECEMBER 31,31.
LINKAGE ------------------- -------------------
TERMS 1999 2000 1999 2000
------------- --------------------------- -------------------------------
1998 1999 1998 1999
----------- ----------- ------------- ---------------------- -------- -------- --------
% U.S. DOLLARS IN THOUSANDS
--------------------------- -------------------------------

From banksbanks........................ U.S. Libor +
dollar 3.12 7.5 20 1,6117.4 $1,611 $33,444
From leasing companies............ Belgian companies Franksfranc 6.6 6.6 1,1546.0 871 ------------- --------------
1,1741,267
------ -------
2,482 Less - current
maturities 22434,711
Less--current maturities.......... 832 ------------- --------------
950 1,650
============= ==============864
------ -------
$1,650 $33,847
====== =======

b. AggregateThe aggregate annual maturities of long-term loans:loans are as follows:

DECEMBER 31,
--------------------------------------
1998 1999 ----------------- -----------------
U.S. DOLLARS IN THOUSANDS
--------------------------------------2000
-------- --------

First year (current maturities) 224............................ $ 832 ----------------- -----------------$ 864
------ -------
Second year 188year................................................ 813 7,680
Third year 170year................................................. 408 25,279
Fourth year 118year................................................ 46 71
Fifth year and thereafter 474thereafter.................................. 383 ----------------- -----------------
950817
------ -------
1,650 ----------------- -----------------
1,174 2,482
================= =================33,847
------ -------
$2,482 $34,711
====== =======

F-24

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 13:- LONG-TERM--LONG-TERM LIABILITY

In connection with various claims filed by Dochovna group (the developer of
Outboard Printer and several companies heit controls), Idanit and the Company, a
settlement was reached in December 1998, according to which the Company will pay
a total of $ 880 thousand$880 during a three year period. The Company fully provided for the
said amount in 1998. The Companythird installment to be paid Dochovna group totalin 2001 in the amount of
$ 293 thousand$293 is included in other accounts payable and accrued expenses (see Note 11).

NOTE 14:--COMMITMENTS AND CONTINGENT LIABILITIES

a. Lease commitments:

The Company and most of its subsidiaries rent their facilities under various
operating lease agreements, which expire on various dates, the latest of which
is in 2009. The minimum rental payments under non-cancelable operating leases
are as follows:

YEAR ENDED
DECEMBER 31
------------

2001........................................................ $1,661
2002........................................................ 1,307
2003........................................................ 1,220
2004........................................................ 1,069
2005 and thereafter......................................... 2,556
------
$7,813
======

Total rent expenses for each of the years ended December 31, 1998, 1999 and 1999. As of balance sheet date the total liability amounts to
$ 586 thousand.

F-24

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Future payments shall bear annual interest of 6% unless the
Company pays the full amount by March 31, 2000.

The parties to the settlements2000
were Dochovna Idanit, Scitex
corporation Ltd. (which acquired Idanit), Meital$220, $297 and Jacob Markovits (Meital
CEO).

NOTE 14:- CONTINGENT LIABILITIES

a.$900, respectively.

b. Royalty commitments:

1. The Company entered into several project plans with the Chief
Scientist of the GovernmentIsrael's Ministry of Israel regarding the
development of the printersIndustry and the Mega Light, a
discontinued product.Trade. The Company has an
obligation to pay royalties at the rate of 2% - 3% of the sales derived from
the applicable products developed within the framework of such research and
development projects, up to an amount equal to 100% - 150% of the grant
received, in NIS linked to the exchange rate of the U.S. dollar. The Company has no obligation to repay
this amount if sales are not sufficient to satisfy the royalty obligations.

In addition, a subsidiary, NUR Media Solutions, has an obligation to pay
royalties at rates of 3% - 6% on the sales of products developed with funds
provided by the Government of Belgium, up to an amount equal to the research
and development grants received in connection to such products, linked to
the Belgian franc.

Royalties paid or accrued amounted to $0, $0 and $490 in 1998, 1999 and
2000, respectively.

As of December 31, 1999,2000, the Company hasand Nur Media Solutions have a
contingent obligation to pay royalties in the amount of $ 1,152
thousand.

b.$950.

2. The Company is required to pay royalties to the Fund for the
Encouragement of Marketing Activity at the rate of 3% - 4% of the increases
in export sales of products for which

F-25

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 14:--COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
the Company received participations for its marketing activities, up to an
amount equal to 100% - 150% of the grant received.received, linked to the U.S.
dollar. Royalties regarding grants received insince 1999 bears LIBOR interest.

The grant is repayable only in respect of sales of the related products,
as a percentage of the growth in export sales. If there is no increase in
export sales, or if the Company ceases producing the relevant products, the
grant would not be repaid.

As of December 31, 1999,2000 the Company paid an aggregate amount of $179.

As of December 31, 2000, the Company has a contingent obligation to pay
royalties in the amount of $
597 thousand.$929.

c. Charges and guarantees:

As collateral for its liabilities to the banks, the Company placed fixed
charges on certain assets and share capital, as well as a floating lien on all
of its assets.

d. Litigation:

1. In December 1999, a claim was filed against the Company in the
amount of $330 regarding a breach of an agreement to pay finders fee in
connection with a private placement in 1999 (see Note 16b). The Company
provided $50 in respect of this claim, based on its Israeli legal advisors.
Management believes that this provision is adequate.

2. In September 2000, a claim in the amount of approximately $4,950 was
filed against the Company and Meital and the CEOs of the companies (jointly
and severally), according to which Meital breached a contract, and the
Company caused Meital to such breach of contract. The Company provided $200
in respect of this claim, based on consultations with its Israeli legal
advisors. Management believes that this provision is adequate.

e. Other contingent liabilities:

1. In May 1996, the Company signed an agreement as follows:

1. Exerciseexercised the option to purchase all of
Shamrock's (former shareholder in NurNUR Media Solutions) shares in NurNUR Media
Solutions, for a consideration of one dollar.

2. Notwithstanding the above, for every year during which NurNUR Media
Solutions' net income (after taxes) will exceed $ 1 million,$1,000, the Company will pay
Shamrock a sum equal to 10% of NurNUR Media Solutions' net income, up to a
total of $ 0.5 million$500 (accumulating from the first payment). NurNUR Media Solutions'
net income shall be determined by its annual audited financial statements.
Shamrock's right to payments under this section will expire upon the earlier
of the payment of the $ 0.5 million
thereunder,above $500, or at the end of the fiscal year 2002. In
1997, 1998, 1999 and 1999, Nur2000, NUR Media Solutions' net income (after taxes) was less
than $ 1 million.

d. The Company has guaranteed capital lease payments in the
amount of $ 105 thousand for a printer that was leased by
a subsidiary.

e. During September 1998, the district court of Tel Aviv
approved several settlement agreements among the Company,
the special manager for Moshe Nur's assets in his

F-25

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

bankruptcy proceedings, Moshe Nur and certain of his family
members, two Israeli banks, and the temporary receiver of
Nur Outdoor Advertising Ltd. (a company formerly affiliated
with Mr. Nur).

According to the settlement, all material claims against
the Company relating to the lease of its offices (including
confirmation of the Company's pre-payment of lease fees
until July 2000), alleged breach of contracts and debts
allegedly owed to any of the abovementioned parties were
dismissed. The Company agreed not to file any claim against
the abovementioned settling parties, provided that no
claims will be filed against the Company in connection with
the bankruptcy proceedings.

As part of the various settlement agreements, the Company
paid in 1998 an aggregate of $100 thousand. However, in the
course of the bankruptcy proceedings of Moshe Nur and the
companies controlled by him, the Company may, in the
future, be exposed to claims arising from the actions of
Moshe Nur, the liability of whom could be material.

f. In 1997, claims and threats of claims were brought against
the Company in respect of various matters. The Company made
a provision in the amount of $ 25 thousand in respect of
these claims and threats of claims based on the opinion of
the Company's Israeli legal advisors. The Company's
management believes that these provisions are adequate.

g. In December 1999, a claim was filed against the Company in
the amount of $ 330 thousand regarding a breach of an
agreement to pay finders fee in connection with a private
placement in 1999 (See Note 17).

According to the Company's management and its legal
advisors, the Company will not be obliged to pay any amount
regarding this claim.

h.$1,000.

2. In October 1999, the Company signed an agreement with a consultant
according to which the consultant will render services in connection with
the manufacture of the Company's new printers. Under this agreement, the
Company is obligated to pay $ 2 thousand$2 for each new printer.printer manufactured. The
Company has the option to end this agreement after the manufacturing of 112
printers.

F-26

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

NOTE 14:--COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

As of December 31, 1999,2000, the Company has a contingentmaximum obligation to pay
service fees in the amount of $ 224
thousand.

i. As for contingent liability regarding acquisition of
technology, see Note 1b.$72.

NOTE 15:- CHARGES, GUARANTEES AND RESTRICTED CASH

a. As collateral for its liabilities to the banks, the Company
granted an unlimited senior in priority lien on its
machinery and equipment, motor vehicles, as well as a
floating lien (a lien on the assets of the Company as they
exist from time to time) on all of its assets.

F-26

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

b. The collateralized liabilities are as follows:

DECEMBER 31,
--------------------------------------
1998 1999
----------------- -----------------
U.S. DOLLARS IN THOUSANDS
--------------------------------------

Short-term bank credit 2,972 2,743
Long-term liabilities, including current maturities 1,174 2,482
---------------- ----------------
4,146 5,225
================ ================

NOTE 16:- TRANSACTIONS--TRANSACTIONS AND BALANCES WITH RELATED PARTIES

a. For a lease agreementBalance with a former shareholder, seean affiliate, Stillachem, in respect of services provided,
linked to the Euro and bears no interest. (see Note 9c.6b).

b. Between September and December 1997,Accounts payable in favor of an affiliate, NUR Pro Engineering, due to
the Company effected a
private offering of its Ordinary Shares in the United
States (see also Note 17a), for which the investment
banking firm of Josephthal and Co. Inc. ("Josephthal")
acted as an exclusive placement agent. The chairman of
Josephthal beneficially owns approximately 35.8%assembly of the Company's Ordinary Shares.printers. The chairman of Josephthalamount is linked to the NIS and does
not bear any interest. (See Note 6a).

c. A company wholly-owned by the Company's chairman. As compensation for hisCEO rendered services asto certain
subsidiaries. The Company and its subsidiaries expenses during the Company's exclusive placement agent, Josephthal
received feesyear 2000 in
respect of $ 439 thousand and warrantssuch services amounted to purchase
400,000 Ordinary Shares at an exercise price of $ 1.00 per
share or less than 400,000 Ordinary Shares of the Company
if the cashless alternative pursuant to the agreement has
been elected. Finally, an individual employed by Josephthal
was the Company's acting Chief Financial Officer from April
through October 1997 received compensation of approximately $ 45 thousand.

c. Transactions with related parties:

YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1998 1999
---------------- ---------------- ----------------
U.S. DOLLARS IN THOUSANDS
----------------------------------------------------------

Sales:
Nur Outdoor 159 - -
Nur Focus 31 - -
---------------- ----------------- -----------------
190 - -
================ ================= =================
Cost of sales:
Paid to:
Nur Outdoor 99 - -
Nur Focus 18 - -
---------------- ----------------- -----------------
117 - -
================ ================= =================
Selling expenses:
Nur Focus - - -
================ ================= =================
$40.

d. Loans to related parties, see Notes 3 and 6a.

e. Advances to an affiliated supplier, Nur Pro Engineering, see Note 6b and 4.

F-27

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------3.

NOTE 17:- SHARE16:--SHARE CAPITAL

a. Between September and December 1997, the Company effected a
private offering of its securities in the United States. In
the private offering, the Company issued 4,000,000Shareholders' rights:

Ordinary shares of NIS 1 par value eachconfer upon their holders voting rights, the right to
receive dividends and the right to share in consideration of $ 1 per
Ordinary share.

Following the initial public offeringexcess assets upon liquidation of
the Company's
shares in October 1995, the Company issued 155,000 warrants
to Josephthal. These warrants are exercisable no later than
October 2000 into 155,000 Ordinary shares of the Company at
an exercise price of $ 7.20 per share, or less than 155,000
Ordinary shares of the Company if the cashless alternative
pursuant to the agreement has been elected.

As part of the private offering, the Company issued
warrants to the placement agent, Josephthal, expiring in
September 2002 to purchase 400,000 Ordinary shares of the
Company at an exercise price of $ 1.00 per share or less
than 400,000 Ordinary shares of the Company if the cashless
alternative pursuant to the agreement has been elected.Company.

b. In September 1999, the Company effected a private offering of its
securities. In the private offering, the Company issued 600,000 Ordinary shares
of NIS 1 par value each in consideration of $ 5.5$5.5 per Ordinary share.

c. In addition,July 2000, the Company issued warrants expiring in four
years to purchase 150,000666,667 Ordinary shares of NIS 1 par
value each to the former owners of Salsa Group as a partial consideration for
the acquisition in an amount equal to $10,000 (see Note 1b).

d. In September 2000, the Company at
an exercise priceeffected a private offering of $ 8 per share. If certain conditions
exist,its
securities. In the private offering, the Company may induce the exerciseissued 748,223 Ordinary shares
of these
warrants.

b. Earnings per share:

The following table sets forth the computationNIS 1 par value each in consideration of historical basic and diluted earnings per share:

YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1998 1999
------------- ------------ --------------
U.S. DOLLARS IN THOUSANDS
------------------------------------------------

Numerator:
Net income as reported 485 1,457 7,175
============ ============== =============
Numerator for basic earnings per share - income
available to ordinary shareholders 485 1,457 7,175
============ ============== =============
Numerator for diluted earnings per share -
income available to ordinary shareholders 485 1,457 7,175
============ ============== =============
Denominator:
Weighted average Ordinary shares
outstanding 7,293,640 10,880,000 11,181,137
------------ -------------- -------------
Denominator:
Denominator for basic earnings per share
-weighted - average shares 7,293,640 10,880,000 11,181,137
------------ -------------- -------------
Effect of dilutive securities Employee stock
options 72,527 571,389 1,541,463
------------ -------------- -------------
Denominator for diluted earnings per
share-adjusted weighted-average shares 7,366,167 11,451,389 12,722,600
============ ============== =============

F-28

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

c.$10,000 (excluding issuance
expenses).

e. Stock Option Plan:Plans:

1. In October 1995, the Company's Board of Directors adopted a Flexible
Stock Incentive Plan (the "Stock Incentive("1995 Plan"). The Stock Incentive Plan provides for
grants of stock options to the Company's employees and outside consultants.
An aggregate amount of not more than 500,000 stock options are available for
grant under the Stock Incentive Plan. Of such amount, (i) not more than
414,768 options are available for grant as stock options on the basis of
future services ("Service Options"), (ii) not more than 18,232 options may
be granted as stock options on the basis of performance ("Performance
Options" - as--as of December 31, 19992000 there are no outstanding performance
options) and (iii) not more than 67,000 options may be granted as stock
options to consultants on the basis of service or performance in respect of
the public offering ("Consultant Options").

F-27

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

The service options usually vest over a four-yearsfour-year period with an
exercise price of not less than 80% of the fair market value of the Ordinary
shares at the date of grant (as defined in the stock incentive plan).

Consultant options usually vest immediately based on past servicedservices
rendered as the board determines. The options expiresexpire usually after ten years
from the date of grant.

In October 1997, the Company adopted an additional stock option plan.
According to that option plan, 1,200,000 options will be granted to
Company's and its subsidiaries employees, directors and consultants. In
October 1998 and August 1999, the Company's and its subsidiaries
shareholders approved the increase in the number of options available for
grant by 500,000, and 500,000 options, respectively. The options usually
vest over a three-yearsthree-year period with an exercise price of not less than 80% of
the fair market value of the common stock at the date of grant (as defined
in the stock option plan). Each option usually expireexpires after ten years from
the date of grant.

F-29

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

In December 1998, the Company's shareholders approved the directors
share option plan ("1998 plan") according to which 250,000 options are
available for grant with an exercise price of the average of the closing bid
and sale price at the issuance date. Each option is vested immediately and
will expire after 10 years. During 1999 and 2000, the Company granted 58,333 options to
directors (including the Chairman of the Board of Directors) 58,333 and
40,000 options, respectively.

In August 2000, the Company's Board of Directors adopted the 2000 Stock
Option Plan ("2000 plan"). According to that option plan, 1,000,000 options
may be granted to officers, directors, employees and consultants of the
Company and its subsidiaries. The Options usually vest over a three-year
period. The exercise price of the options under the 2000 plan is determined
to be not less than 80% of the fair market value of the Company's Ordinary
shares at the time of grant, and they usually expire after ten years from
the date of grant. The 2000 plan expires on August 31, 2008, unless
previously terminated or extended by the Board of Directors.

Under the Company's 1995, 1997, 1998 and 2000 plans, the Company
reserved for issuance 500,000, 2,200,000, 250,000 and 1,000,000 Ordinary
shares, respectively. As of December 31, 2000, 77,261, 1,532, 111,667 and
322,800 options, respectively, are still available for future grants under
these plans. Any options, which are canceled or forfeited before expiration,
become available for future grants.

F-28

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

2. The balance of the options at December 31, 19992000 is as follows:

OPTIONS OUTSTANDING
-------------------------------------------------------------------------
WEIGHTED
AVAILABLE NUMBER EXERCISE AVERAGE
FOR GRANT OF OPTIONS PRICE EXERCISE PRICE
---------- ---------- --------------
-------------- -------------- --------------
U.S. DOLLARS IN THOUSANDS
------------------------------

Balance as of January 1, 1997 380,229 119,771 0.3-1.75 1.341998..................... 429,629 1,270,371 1.30
Additional stock options plan 1,200,000 - - -
Options granted (25 employees
and a vendor) (325,600) 325,600 0.3-1.75 1.33
Options granted (2 employees and
3 directors) (825,000) 825,000 1-3 1.46
-------------- -------------- -------------- --------------

Balance as of December 31, 1997 429,629 1,270,371 0.3-3 1.3
Additional stock options planplan................... 750,000 - - --- --
Options granted (46 employees, 4 directors and 1
consultant)................................... (655,000) 655,000 1 - 3 22.00
Options forfeited and canceled.................. 150,332 (150,332) 1.4 - 2 1.4
-------------- -------------- -------------- --------------1.40
---------- --------- ----
Balance as of December 31, 19981998................... 674,961 1,775,039 0.3 - 3 1.62
Additional stock options planplan................... 500,000 - - --- --
Options granted (93 employees, 4 directors and 1
consultantconsultant)................................... (693,933) 693,933 5.5 - 7.88 5.12
Options exercised -exercised............................... -- (294,573) - 1.57
-------------- -------------- -------------- ------------------------ --------- ----
Balance as of December 31, 19991999................... 481,028 2,174,399 0.3 - 7.88 1.98
============== ============== ============== ==============Additional stock options plan................... 1,000,000 -- --
Options granted (358 employees, 4 directors and
1 consultant)................................. (1,069,900) 1,069,900 9.00
Options exercised............................... -- (738,968) 1.71
Options forfeited and canceled.................. 102,132 (102,132) 5.80
---------- --------- ----
Balance as of December 31, 2000................... 513,260 2,403,199 5.69
========== ========= ====

The number of options exercisable as of December 31, 1997,
1998, 1999 and 19992000
was 849,921, 1,308,622, 1,209,967 and 1,209,967,951,212, respectively.

The weighted average exercise price of options exercisable as of
December 31, 1997, 1998, 1999 and 19992000 is $ 1.3, $ 1.28$1.28, $1.65 and $ 1.65,$3.25, respectively.

F-30F-29

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------(CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

3. The options outstanding as of December 31, 19992000 have been separated
into ranges of exercise price, as follows:

WEIGHTED
OPTIONS WEIGHTED OPTIONS AVERAGE
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE EXERCISE
AS OF REMAINING AVERAGE AS OF PRICE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, OF OPTIONS
EXERCISE PRICE 19992000 LIFE PRICE 19992000 EXERCISABLE
- -------------- ----------------- ---------------- -------------- ---------------- ---------------------------- ----------- -------- ------------- -----------
(YEARS)

$1.00 -- 1.50.......... 498,400 7 $ 1.25 - 1.75 275,466 2 1.46 207,468 1.431.33 458,667 $ 1 - 1.5 741,500 4 1.22 710,500 1.221.32
$1.75 -- 2.50.......... 241,667 8 $ 2 - 3 460,000 7 2.34 223,666 2.132.20 146,334 $ 2.75 30,0002.16
$2.75 -- 3.50.......... 105,500 8 $ 2.90 88,000 $ 2.91
$4.60.................. 10,000 8.5 $ 4.60 -- $ --
$5.50 -- 7.875......... 1,270,632 9 2.75 30,000 2.75
$ 2.875 - 4.6 115,000 10 3.45 - -6.73 202,776 $ 5.5 - 7.875 552,433 10 5.71 38,333 7.19
----------------- -------------- ---------------- ---------------
2,174,399 1.98 1,209,967 1.65
================= ============== ================ ===============5.89
$8.50 -- 12.125........ 103,000 9 $11.17 15,435 $11.58
$12.875 -- 14.25....... 174,000 9.5 $13.91 40,000 $13.50
--------- ------ ------- ------
2,403,199 $ 5.69 951,212 $ 3.25
========= ====== ======= ======

d. In January 1997, the Company4. Compensation expense in respect of stock options granted to an Israeli vendor
an option to purchase 30,000 shares atwith an
exercise price of
$ 1.75 per share. In September 1998,below the Company granted to
its counsel an option to purchase 15,000 shares at an
exercise price of $ 2.25 per share with an immediate
vesting.fair value are amortized over the vesting period.
The fair market value of the options was estimated
according to FASB-123 at the grant date using Black-Scholes
option valuation pricing model. The aggregate amount of
compensation related to the above options was $ 12 thousand
and $ 11 thousand, and was accounted for as compensation
expenseexpenses that have been charged in the years ended December 31, 1997consolidated
statements of income in 1998, 1999 and 1998,2000 were $110, $167 and $52,
respectively.

In February 1999, following a registration statement of
Form F-1, the Company issued to its qualified independent
underwriter options to purchase 25,000 Ordinary shares of
the Company at an exercise price of $ 4.5 per share. These
warrants are exercisable for a period of four years
commencing February 24, 2000, and are not to be sold,
transferred, assigned or hypothecated until February 2000,
(except for permitted transferees).

e.5. Pro-forma information under SFAS 123:

Pro-forma information regarding net income and net earnings per share is
required by FASBSFAS No. 123, and has been determined as if the Company hashad
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of
grant, date using the Black-Scholes option valuation pricing modelOption Valuation Model, with the following
weighted-average assumptions for 1997, 1998, 1999 and 1999:2000: risk-free interest
rates of 6.3%5%, 5%7% and 7%6%, respectively, dividend yields of 0% for each year,
volatility factors of the expected market price of the Company's Ordinary
shares of 1.25, 0.46, 0.59 and 0.59,0.66, respectively, and a weighted average expected
life of the option of 10 years for each year.

F-31

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options whichthat have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly
subjective assumptions, including the expected sharestock price
volatility. Because the Company's employee stock options have
characteristics significantly different from those of
traded options, and because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosure, the estimated fair
value of the options is amortized to expense over the
options vesting period. The Company'sF-30

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

Pro-forma information under SFAS No. 123 is as follows:

YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997------------------------------
1998 1999 --------------- ---------------- ---------------
U.S. DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNT
------------------------------------------------------2000
-------- -------- --------

Net income, as reported 485 1,457 7,175
=============== =============== ================
Pro formareported..................................... $1,457 $7,175 $8,493
====== ====== ======
Pro-forma net income 129 1,251 6,443
=============== =============== ================
Pro formaincome........................................ $1,251 $6,443 $6,225
====== ====== ======
Pro-forma basic earnings per share 0.02share.......................... $ 0.11 $ 0.55 =============== =============== ================
Pro forma$ 0.47
====== ====== ======
Pro-forma diluted earnings per share 0.02share........................ $ 0.11 $ 0.51 =============== =============== ================$ 0.42
====== ====== ======

The total compensation expense included in the statements
of income for 1997, 19986. Weighted-average fair values and 1999 is $ 91 thousand, $ 121
thousand and $ 167 thousand, respectively.

Weighted average exercise price and weighted average fair
value of options granted during the year wason dates
of grant are as follows:

- $ 5.52 and $ 4.1, respectively, for options
LESS THAN
EQUALS MARKET PRICE EXCEEDS MARKET PRICE MARKET PRICE
------------------------------ ------------------------------ ------------------------------
1998 1999 2000 1998 1999 2000 1998 1999 2000
-------- -------- -------- -------- -------- -------- -------- -------- --------

Weighted average
exercise prices...... $2.75 $5.52 $8.99 $1.91 $4.09 $13.00 $1.82 $5.30 $8.50
===== ===== ===== ===== ===== ====== ===== ===== =====
Weighted average fair
value on grant
date................. $1.29 $4.10 $7.04 $1.07 $2.90 $10.16 $1.61 $4.15 $6.64
===== ===== ===== ===== ===== ====== ===== ===== =====

7. In September 1998, the Company granted to its consultant an option
to purchase 15,000 shares at an exercise price equal toof $2.25 per share with an
immediate vesting.

The Company had accounted for these options under the fair value method
of SFAS No. 123 and EITF 96-18. The fair value for these options was
estimated using a Black-Scholes option-pricing model with the following
weighted-average assumptions for 1998: risk-free interest rates of 5.0%,
dividend yields of 0%, volatility factors of the expected market price of
the stock onCompany's Ordinary shares of 0.46, and a weighted-average expected life
of the grant date.options of approximately 5 years. The aggregate amount of
compensation related to the above options was $11, and was accounted for as
compensation expense in the year ended December 31, 1998.

f. Stock warrants:

1. The Company's outstanding warrants as of December 31, 2000, are as
follows:

NUMBER
OF
WARRANTS EXERCISE PRICE WARRANTS EXPIRATION
ISSUANCE DATE ISSUED PER SHARE EXERCISABLE DATE
------------- -------- -------------- ----------- -----------------

December 1997(1).................... 400,000 $ 1.00 55,000 September -
December 2002
January 1999(2)..................... 15,000 $ 2.75 15,000 January 2004
February 1999(3).................... 25,000 $ 4.50 25,000 February 2004
September 2000(4)................... 37,411 $13.36 37,411 September 2005
------- -------
Total number of warrants............ 477,411 132,411
======= =======

- $ 4.09 and $ 2.9, respectively, for options------------------------

(1) As part of a private offering, the Company issued warrants to the
placement agent, Josephthal, to purchase 400,000 Ordinary shares of
the Company or less than 400,000

F-31

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

Ordinary shares of the Company if the cashless alternative, pursuant
to the agreement, has been elected. In 2000, 345,000 of these
warrants were exercised in consideration of $345. Due to
immateriality, no compensation expenses have been recorded in the
financial statements.

(2) The Company issued warrants to its consultant, in connection with
legal services provided to the Company.

(3) Following a registration statement of Form F-1, the Company issued
warrants to its qualified independent underwriter.

(4) As part of the private placement, the Company granted warrants to the
placement agent (see d above).

2. Following the initial public offering of the Company's shares in
October 1995, the Company issued 155,000 warrants to Josephtal. These
warrants were exercisable into 155,000 Ordinary shares of the Company at an
exercise price that exceeds the market priceof $7.20 per share, or less than 155,000 Ordinary shares of
the stock onCompany if the grant date.

- $ 5.3cashless alternative, pursuant to the agreement, has been
elected. During 2000, 102,487 of these warrants were exercised in a total
consideration of $403, and $ 4.15, respectively, for options grantedthe remainder of these warrants were expired.

3. In September 1999, the Company issued to the private offering
investors warrants expiring in four years to purchase 150,000 Ordinary
shares of the Company at an exercise price of $8 per share. These warrants
were fully exercised during 2000.

g. Dividends:

In the event that is less thancash dividends are declared in the market price of
the stock on the grant date.

f. Dividends:

Dividends if any,future, such dividends
will be paid in NIS. Dividends paidThe Company does not intend to shareholders outside Israel will be converted into U.S.
dollars onpay cash dividends in the
basis of the exchange rate prevailing at the
date of payment.foreseeable future.

F-32

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------(CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 18:- TAXES17:--TAXES ON INCOME

a. Tax benefits under the Law for the Encouragement of Capital Investments,
1959 (the "law"):

Certain of the Company's production facilities have been granted the status
of "approved enterprise" under the law, under two separate investment plans.

The implementation of the investments under the first and second plan was
finalized in 1993 and 1998, respectively.

According to the provisions of this law, the Company elected to enjoy
"alternative benefits" which provide tax exemptionbenefits in exchange for waiver of
grants. Accordingly, the Company's income from the approved enterprise will be
tax-exempt for a period of two and four years for the first and second plan,
respectively, commencing with the year it first earns taxable income. Based on
the percentage of foreign ownership of the Company, income derived during the
remaining periods of five and three years of benefits inis taxable at the rate of
15% orto 20%, for the first and second
plan, respectively..

The period of tax benefits detailed above is subject to limits of 12twelve
years from the commencement of production, or 14fourteen years from receiving the
approval, whichever is earlier. Given the abovementioned conditions, the period
of benefits for the first and second planplans commenced in 1994 and 1999,
respectively. The first plan terminated in 2000 and the second plan will
terminate in 20002006.

The Company applied for a third plan under "approved enterprise" status, an
application which was approved by the Investment Center in 2000. The third plan
entitles the Company for two years of tax-exempt income and 2005, respectively.a reduced tax rate
of 15% to 20% for an additional eight years period. The period of tax benefits
for the third plan has not yet been determined.

The entitlement to the above benefits is conditional upon the Company's
fulfilling the conditions stipulated by the above 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 canceled and the Company may be required to refund the
amount of the benefits, in whole or in part, including interest.

The tax-exempt profits earned by the Company's "approved enterprise" can be
distributed to shareholders, without subjectingimposing a tax liability on the Company, to taxes
only upon the complete liquidation of the Company. The retained tax-exempt
profits as of December 31, 19992000 are $ 5,802 thousand.approximately $21,500. If these retained
tax-exempt profits are distributed in a manner other than upon the complete
liquidation of the Company, they would be taxed at the corporate tax rate
applicable to such profits as if the Company had not elected the alternative tax
benefits (currently - 15% or(currently--15% to 20% for an "approved enterprise" based on the
percentage of foreign ownership of the company)Company) and an income tax liability of
approximately $ 1,160 thousand$4,300 would be incurred.

The Company has decided to permanently invest the tax exempt income
resulting from the "approved enterprise" status and not to distribute such
income as dividends. Accordingly, no deferred income taxes have been provided in
respect of said tax exempt income.

Income from sources other than the "approved enterprise"
during the periods of benefits, will be taxable at regular
tax rate of 36%.

The law also entitles the Company to claim accelerated rates of depreciation
on equipment used by the "approved enterprise" during five tax years.

The Company applied for a third plan under "approved
enterprise" status, and is a now negotiating with the
Investment Center.

F-33

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------(CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT PER SHARE DATA)

Income from sources other than the "approved enterprise" during the periods
of benefits, will be taxable at the statutory rate of 36%.

b. Measurement of results for tax purposes:purposes under the Income Tax Law
(Inflationary Adjustments), 1985:

Results for tax purposes are measured in terms of earnings in NIS after
certain adjustments for increases in the Israeli Consumer Price Index ("CPI").
As explained in Note 2b., the financial statements are measured in U.S. dollars.
The difference between the annual change in the Israeli CPI and in the
NIS/dollar exchange rate causes a difference between taxable income and the
income before taxes shown in the financial statements. In accordance with
paragraph g(f)9(f) of SFAS No. 109, the Company has not provided deferred income
taxes onin respect of the difference between the reporting currency and the tax
bases of assets and liabilities.

c. Tax benefits under the Law for the Encouragement of Industry (Taxation),
1969:

The Company is an "industrial company" under the above, as defined by this law and, as such,
is entitled to claim accelerated rates of depreciation, in accordance with
regulations published under the inflationary adjustments law. The Company is
also entitled to deduct the offering expenses and patent amortization costs from
its taxable income in three and eight equal annual installments, respectively.

d. Theoretical tax expense:

A reconciliation of the theoretical tax expense, assuming all income is
taxed at the regular statutory rate applied to corporations in Israel up to December 31, 1999, and the actual tax
expense, is as follows:

YEAR ENDED DECEMBER 31,
------------------------------------------
1997------------------------------
1998 1999 -------------- ---------- -----------
U.S. DOLLARS IN THOUSANDS
------------------------------------------2000
-------- -------- --------

Theoretical tax expense computed at the rate of
36% 208.............................................. $ 635 $ 2,853 $ 3,669
Increase (decrease) in taxes:
Approved enterprise (1) - -enterprise(1)............................. -- (1,274) Effect(3,226)
Reduced statutory tax rate of certain adjustments on the results for tax

purposesa subsidiary......... -- -- (3,232)
Non-deductible expenses and the Israeli CPI 61other.................. 91 118 313
Carryforward loss, generated during the year for
which a valuation allowance was provided - -provided......... -- 522 3,917
Utilization of operating carryforward tax losses
from prior years (202)years................................. (462) (1,421) -------------- ---------- -----------(197)
----- ------- -------
Actual tax expense 67expense................................. $ 264 $ 798 ============== ========== ===========$ 1,244
===== ======= =======
(1) Basic net earnings per share amounts of the
tax benefits resulting from the exemption - -"approved
enterprise" benefits.......................... $ -- $ 0.11 ============== ========== ============
(1)$ 0.25
===== ======= =======
Diluted net earnings per share amounts of the
tax benefits resulting from the exemption - - 0.1
============== ========== ============"approved
enterprise" benefits......................... $ -- $ 0.10 $ 0.22
===== ======= =======

F-34

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
-------------- ---------- -----------(CONTINUED)

U.S. DOLLARS IN THOUSANDS
------------------------------------------

e. Taxes on income (benefit) included in the statements of income:

Current:
Domestic - -Domestic......................................... $ -- $ 1,132 Foreign 94$ 850
Foreign.......................................... 298 533 -------------- ---------- ------------
94494
----- ------- -------
$ 298 $ 1,665 ============== ========== ============$ 1,344
===== ======= =======
Deferred:
Domestic - -Domestic......................................... $ -- $ (531) Foreign (27)$ (100)
Foreign.......................................... (34) (336) -------------- ---------- ------------
(27)--
----- ------- -------
$ (34) $ (867) ============== ========== ============$ (100)
===== ======= =======

f. Deferred income taxes:

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company and its subsidiaries' deferred tax liabilities and assets are comprised of the following:as
follows:

YEAR ENDED DECEMBER 31,
-------------------------------------
1998-------------------
1999 ----------------- -----------------
U.S. DOLLARS IN THOUSANDS
-------------------------------------2000
-------- --------

Provisions for severance pay 34 12
Others 92 147
Net operating losslosses and deductions carryforward 3,195 2,296
----------------- ----------------
Gross deferredcarryforward............ $2,296 $5,188
Others...................................................... 159 148
------ ------
Deferred tax assets 3,321assets......................................... 2,455 ----------------- ----------------
Fixed assets (82)5,336
------ ------
Property and equipment...................................... (3) Inventories (20) -
----------------- ----------------
Gross deferred--
Inventories................................................. -- --
------ ------
Deferred tax liabilities (102)liabilities.................................... (3) ----------------- ----------------
Valuation allowance (1) (3,177) (1,543)
----------------- ------------------
------ ------
Net deferred tax assets 42before valuation allowance.......... 2,452 5,336
------ ------
Valuation allowance(1)...................................... (1,543) (4,453)
------ ------
Net deferred tax assets..................................... $ 909 ================= ================$ 883
====== ======
Domestic.................................................... $ 529 $ 883
Foreign..................................................... 380 --
------ ------
$ 909 $ 883
====== ======
Presented as follows:
Current assets 42assets.............................................. $ 784 $ 658
Long-term assets -assets............................................ 125 ----------------- ----------------
42225
------ ------
$ 909 ================= ================$ 883
====== ======

F-35

NUR MACROPRINTERS LTD.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------------

(1) The Company's subsidiaries have provided valuation allowances against thein respect of
deferred tax assets in respectresulting from tax losses carryforward and other
temporary differences. Due to history of losses of these subsidiaries
management believes it is more likely than not that deferred tax lossregarding
the losses carryforward and other temporary differences due to history ofwill not be
realized.

F-35

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

g. Carryforward tax losses and current
uncertainty concerning its ability to realize these
deferred tax assets in the future.

g. Income tax assessments, losses and deductions carried
forward to future years:

Atdeductions:

As of December 31, 1999,2000, the Company had available deductions (excludingaggregating to
$3,378. In addition, the Company has capital losses totaling
$ 2,413 thousand) aggregating to $ 1,421 thousand,for tax purposes total
approximately $350, which will expire in the years 2000 to 2005.year 2002 and can be offset against
capital gains for tax purposes.

Nur America, Nur Media Solutions, Nur EuropeAsia Pacific and Nur Shanghai had available carryforward losses as of
December 31, 19992000 aggregating to $ 4,957 thousandapproximately $3,500, which hashave no expiration
date. Additional carryforward losses of Nur America and Salsa Digital Printers,
in the amount of $2,200, which are located in the U.S., will expire in 2020.

As of December 31, 2000 Nur Europe and Nur Media Solutions had available
carryforward losses aggregating to approximately $7,725, which have no
expiration date.

h. Income (loss) before income taxes consistedconsists of the following:

YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997------------------------------
1998 1999 ---------------- ---------------- ----------------
U.S. DOLLARS IN THOUSANDS
----------------------------------------------------------2000
-------- -------- --------

Domestic 1,156 2,535 10,318
Foreign (578)Domestic.......................................... $2,535 $10,318 $10,275
Foreign........................................... (771) (2,392) ---------------- ---------------- ----------------
578 1,764(84)
------ ------- -------
$1,764 $ 7,926 ================ ================ ================$10,191
====== ======= =======

NOTE 19:- REPORTABLE18:--REPORTABLE SEGMENTS DATA

a. Summary information about geographic areas:

The Company manages its business on a basis of one reportable segment. See
note 11a for a brief description of the Company's business.

This data is presented in accordance with SFAS 131 "Disclosures about
Segments of an Enterprise and Related Information", which the Company has retroactively adopted
for all periods presented.Information.

The following presents total revenues for the years ended December 31, 1997, 1998,
1999 and 19992000 based on the end customers' location and long-lived assets as of
December 31, 1998, 1999 and 1999:2000:

1997 1998 1999 ------------------------- ---------------------------- ------------------------------2000
------------------- ------------------- -------------------
LONG- LONG- LONG-
TOTAL LIVED TOTAL LIVED TOTAL LIVED
REVENUES ASSETS REVENUES ASSETS REVENUES ASSETS
------------------------- ------------- -------------- --------------- -------------
U.S. DOLLARS IN THOUSANDS
--------------------------------------------------------------------------------------------- -------- -------- -------- -------- --------

Asia *) 819 975 3,326Israel........................ 381 1,109 600 1,093 1,856 1,779
Asia.......................... 2,945 -- 9,995 781
America 7,061 166389 26,223 609
America....................... 14,640 977 24,325 629
Europe 11,849 1,392453 47,780 7,298
Europe........................ 16,241 1,747 21,448 1,172
Others *) 2,230 -1,010 41,289 13,787
Others........................ 2,238 - 4,951 -
------------ ------------ ------------- -------------- --------------- -------------

21,959 2,533 36,445 3,833 60,719 2,582
============ ============ ============= ============== =============== =============
*) Reclassified.-- 4,351 -- 4,776 --
------- ------ ------- ------ -------- -------
$36,445 $3,833 $60,719 $2,945 $121,924 $23,473
======= ====== ======= ====== ======== =======

F-36

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------(CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 18:--REPORTABLE SEGMENTS DATA (CONTINUED)
Total revenues from external customers divided on the basis of the Company's
product lines are divided by the following products:as follows:

Printers 12,023 19,052 33,474
Ink 4,571Printers........................................ $19,052 $33,474 $ 79,521
Ink............................................. 8,619 14,044 24,101
Printed materials 3,085materials............................... 4,540 2,460 Substrates - *)--
Substrates...................................... 894 7,274 Others 2,280 *)12,013
Others.......................................... 3,340 3,467 ---------------- ----------------- -----------------
21,959 36,445 60,719
================ ================= =================
*) Reclassified.6,289
------- ------- --------
$36,445 $60,719 $121,924
======= ======= ========

b. Major customer data:

Percentage of total sales 11.18%sales....................... 10.6% -
================ ================= =================-- --
======= ======= ========

F-37

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

U.S. DOLLARS IN THOUSANDS

NOTE 20:- SELECTED19:--SELECTED STATEMENTS OF OPERATIONS DATA

a. SellingResearch and marketingdevelopment expenses, net:

Research and development expenses(1)............... $5,027 $5,530 $15,077
Less--participation of the Israeli and Belgian
governments in research and development
projects......................................... 818 721 451
------ ------ -------
$4,209 $4,809 $14,626
====== ====== =======

- ------------------------

(1) Including write-off of technology amounted to $1,950 for the year ended
December 31, 1998, and write-off of in process research and development
amounted to $4,300 for the year ended December 31, 2000.

b. Selling and marketing expenses, net:

Selling and marketing expenses 4,820 6,361 9,885
Less - participationexpenses..................... $6,361 $9,885 $17,385
Less--participation of the Fund for the
Encouragement of Marketing Activity 200Activity.............. 250 400 ---------------- ----------------- -----------------
4,620 6,111 9,485
================ ================= =================--
------ ------ -------
$6,111 $9,485 $17,385
====== ====== =======

F-37

b.c. Financial expenses, net:

Expenses:
Interest:
OnInterest on short-term bank credit 390 342 461
Onand charges.... $ (342) $ (461) $(1,024)
Interest on long-term loans 193 67 92loans....................... (67) (92) (581)
Loss arising from foreignon marketable securities..................... (91) -- --
Foreign currency translations - 151 659
---------------- ----------------- -----------------
583 560 1,212
---------------- ----------------- -----------------translation differences.......... (151) (659) (1,353)
------- ------- -------
(651) (1,212) (2,958)
------- ------- -------
Income:
Interest 234on bank deposits and other............... 59 86 163
Gain arising from foreignon marketable securities..................... -- 67 --
Foreign currency translations 29 -translation differences.......... -- 443 ---------------- ----------------- -----------------
2631,372
------- ------- -------
59 529
---------------- ----------------- -----------------
320 501 683
================ ================= =================596 1,535
------- ------- -------
$ (592) $ (616) $(1,423)
======= ======= =======

F-38

NUR MACROPRINTERS LTD. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------------------------

NOTE 21:- INVESTEES(CONTINUED)

U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

d. The following table sets forth the reconciliation of basic and diluted,
net earnings per share:

PERCENTAGE OF (1)
------------------------------------
NAME OF THE COMPANY OWNERSHIP CONTROL
------------------------------------------------------------------- ---------------- ----------------
%
------------------------------------
a. Subsidiaries outside Israel:
ACTIVE:
NUR Media Solutions S.A. 100 100
NUR Europe S.A. 100 100

NUR America Inc. 100 100

NUR Asia Pacific Ltd. 100 100

NUR Macroprinters (Shanghai) Co., Ltd. 100 100

Stillachem S.A. 50.1 50.1

NUR Pro Engineering Ltd. 50 50

INACTIVE:

NUR Hungaria KFT (1) 100 100

Good-Lux S.A (1) 100 100

b. Subsidiaries in Israel:

INACTIVE:

NUR Middle East
NUMERATOR:
Net earnings available to shareholders of
ordinary shares........................ $ 1,457 $ 7,175 $ 8,493
========== ========== ==========
Numerator for diluted net earnings per
share--earnings available to
shareholders of ordinary shares........ $ 1,457 $ 7,175 $ 8,493
========== ========== ==========
DENOMINATOR:
Weighted average number of ordinary
shares (denominator for basic net
earnings per share).................... 10,880,000 11,181,137 13,150,110
Effect of dilutive securities:
Employee and Africa Ltd. 100 100

M.B.T. (Nur) Industries Ltd 100 100

Nur Print Technologies (1993) Ltd. 100 100non-employee stock options
and warrants......................... 571,389 1,541,463 1,643,217
---------- ---------- ----------
Denominator for diluted net earnings per
share.................................. 11,451,389 12,722,600 14,793,327
========== ========== ==========

(1) RepresentsNOTE 20:--SUBSEQUENT EVENTS (UNAUDITED)

In April 2001, the percentagesCompany announced and commenced implementation of ownershipa
restructuring plan, in order to align its cost structure to more conservative
growth rates. The restructuring actions are primarily related to the
reorganization of Nur Media
Solutions (formerly: "Nur International")operating activities, such as the centralization of certain
manufacturing operations, the relocation of activities, a reduction in these
subsidiaries.workforce
and a reduction in other administrative costs. The sharesrestructuring costs accrued
for in the first quarter of some2001 amounted to $2,500. In addition, during the
first quarter of these
subsidiaries are held in custody by2001, the Company.

- - - - - - - - - - - - -Company incurred one-time inventory write-offs of
approximately $4,000.

F-39

EXHIBIT INDEX

NUMBER DESCRIPTION

3.1 Memorandum of Association of the Registrant, in Hebrew with a translation to English1

3.2 Amended Articles of Association of the Registrant 2

3.3 Certificate of Name Change 3

4.1 Specimen Certificate for Ordinary Shares 1

4.2 Representative's Warrant Agreement dated October 12, 1995 1

4.3 Form of Representative's Warrant Certificate 1

4.4 Forms of Placement Agent's Warrant Agreement and Certificate 4

4.5 Forms of Qualified Independent Underwriter's Warrant Agreement and Certificate 4

4.6 Form of Warrant Agreement between the Registrant and Barak Zamir, Advocates

10.1 1995 Stock Option / Stock Purchase Plan 1

10.2 Amendment to the 1995 Stock Option / Stock Purchase Plan 4

10.3 1997 Stock Option Plan 5

10.4 1998 Non-Employee Director Share Option Plan 6

10.5 Lease Agreement between the Registrant and Mr. Moshe Nur dated
October 4, 1993, as amended on May 29, 1995, in Hebrew with a
translation to English 1

10.6 Lease Agreement for office space in Brussels, Belgium between Nivellease, S.A. and the Registrant
dated November 25, 1996 4

10.7 Lease Agreement for office space in Newton Centre, Massachusetts
between WHTR Real Estate Limited Partnership and the Registrant dated
July 10, 1998 4

10.9 Distribution Agreement between Imaje S.A. and the Registrant dated June 26, 1995 1

10.10 Settlement Agreements relating to Moshe Nur and his affiliated companies 4

10.16 Bank Hapoalin revolving loan agreement 4, 7

10.17 Agreement between I.T.S. Machinery Development Ltd. and the Registrant dated February 10, 1997 4

10.18 Form of confidentiality agreement 4

10.19 Agreement dated September 13, 1998 between "Meital" Electronic Technology Ltd. and Markowitz Yaakov
and the Registrant 4

21 List of Subsidiaries of the Registrant

23.1 Consent of Kost Forer & Gabbay (S-8)

23.2 Consent of Kost Forer & Gabbay (F-3)

23.3 Consent of Willy Knyrim (F-3)

23.4 Consent of Willy Knyrim (S-8)

27.1 Financial Data Schedule as of and for the year ended December 31, 1995 5

27.2 Financial Data Schedule as of and for the year ended December 31, 1996 6

27.3 Financial Data Schedule as of and for the year ended December 31, 1997 7

27.4 Financial Data Schedule as of and for the year ended December 31, 1998 8

27.5 Financial Data Schedule as of and for the year ended December 31, 1999

- ----------
1/ Previously filed with the Company's Registration Statement (File No.
33-93160) on Form F-1 and incorporated by reference herein.
2/ Previously filed with the Company's Form F-3 (File No. 333-92493) and
incorporated by reference herein.
3/ Previously filed with the Company's Form 6-K dated January 7, 1998 and
incorporated by reference herein
4/ Previously filed with the Company's Form F-1 (File No. 333-66103) and
incorporated by reference herein.
5/ Previously filed with the Company's Form 20-F for the year ended December
31, 1997 and incorporated by reference herein.
6/ Previously filed with the Company's Form 6-K dated November 13, 1998 and
incorporated by reference herein.
7/ Filed in summary form. Original filed in paper format pursuant to Form SE.
8/ Previously filed with the Company's Form 20-F for the year ended December
31, 1998 and incorporated by reference herein.