SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                                    FORM 6-K

                        Report of Foreign Private Issuer
                        Pursuant to Rule 13a-16 or 15d-16
                     of the Securities Exchange Act of 1934
                          For the Month of August 2005

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

                               ELBIT SYSTEMS LTD.

                 (Translation of Registrant's Name into English)

           Advanced Technology Center, P.O.B. 539, Haifa 31053, Israel

                    (Address of Principal Corporate Offices)

Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:

                  |X|     Form 20-F         |_|     Form 40-F

Indicate by check mark whether the  registrant  by  furnishing  the  information
contained  in this  form is  also  thereby  furnishing  the  information  to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

                  |_|     Yes               |X|     No






         Attached  hereto as Exhibit 1 and  incorporated  herein by reference is
the Registrant's press release dated August 9, 2005.

         Attached  hereto as Exhibit 2 and  incorporated  herein by reference is
the Registrant's  Management Report with respect to the results of operations of
the Registrant for the quarter ended June 30, 2005.

         Attached  hereto as Exhibit 3 and  incorporated  herein by reference is
the Registrant's consolidated audited financial statements for the quarter ended
June 30, 2005.

                                    SIGNATURE

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                           ELBIT SYSTEMS LTD.
                                           (Registrant)


                                           By: /s/ Ilan Pacholder
                                               ---------------------------------
                                           Name:  Ilan Pacholder
                                           Title: Corporate Secretary

Dated:  August 9, 2005





                                  EXHIBIT INDEX
                                  -------------

    Exhibit No.            Description
    -----------            -----------

    1.                     Press release dated August 9, 2005.

    2.                     Management report.

    3.                     Financial statements




                                   EXHIBIT 1
                                   ---------



                                                                       EXHIBIT 1

                ELBIT SYSTEMS REPORTS SECOND QUARTER 2005 RESULTS

                  Revenues Increased by 5.2% to $243.8 Million

             Backlog of Orders Reached a New Record of $ 2.4 Billion

 Excluding One-Time In Process R&D Write-Off Related to Tadiran Share Purchase,
        Net Profit and EPS Reached $14.4 Million and $0.35, Respectively

Haifa,  Israel,  August 9, 2005 - Elbit  Systems Ltd. (the  "Company")  (NASDAQ:
ESLT),  the  international  defense  company,  today  reported its  consolidated
results for the second quarter ended June 30, 2005.

The Company's  backlog of orders as of June 30, 2005 reached $2,401 million,  an
11.5% increase as compared with $2,154 million at the end of 2004. Approximately
65% of the backlog relates to orders outside of Israel. Approximately 60% of the
Company's backlog as of June 30, 2005 is scheduled to be performed over the next
two quarters of 2005 and during 2006.

Consolidated revenues for the second quarter of 2005 increased by 5.2% to $243.8
million from $231.6 million in the second quarter of 2004.

Gross  profit  for the  second  quarter  of 2005 was  $66.1  million  (27.1%  of
revenues), as compared with gross profit of $59.9 million (25.9% of revenues) in
the second quarter of 2004.

Reported  consolidated  net  income  for the  second  quarter  of 2005 was $10.9
million (4.5% of revenues), as compared with $13.3 million (5.7% of revenues) in
the second quarter of 2004.  Reported  diluted earnings per share for the second
quarter of 2005 were  $0.26,  as compared  with $0.33 for the second  quarter of
2004.

Excluding  the  one  time  in-process  R&D  write-off  related  to  the  Tadiran
Communications Ltd. ("Tadiran") share purchase, the Company's net income for the
second  quarter of 2005 was $14.4  million (or 5.9% of revenues) and the diluted
EPS was $0.35.

As previously  reported,  the Company's financial results for the second quarter
of 2005 were affected by its  acquisition of Tadiran shares from Koor Industries
Ltd. ("Koor"). As a result of the completion of the first stage of the agreement
to  acquire  Koor's  holdings  in  Tadiran,  and the  adoption  of the  required
accounting standards,  the Company recorded a $5.6 million expense in



the second quarter of 2005, which was partially offset by its share in Tadiran's
net profit  for the second  quarter of 2005,  resulting  in a $3.2  million  net
expense for the quarter. All the effects of the Tadiran transaction are recorded
as part of the  Company's  earnings  from  affiliated  companies  on its  income
statement

During the first six months of 2005 the Company  produced an operating cash flow
of $85.8 million.

The President and CEO of Elbit Systems, Joseph Ackerman,  commented: "The second
quarter  results  indicate the  continued  growth of our  revenues,  profits and
backlog of orders.  Our strategic growth plan continues on course as we progress
with the Elisra and Tadiran acquisitions, and we believe that both acquisitions,
involving leading companies in their respective fields, will enable all of us to
be even more competitive in the international  defense markets.  In the meantime
we  continue  to carry out our  higher  than usual  investments  in R&D with the
expectation  that our efforts will contribute to our future growth.  We are also
very pleased with the recent  Watchkeeper  contract  signed by Thales,  in which
Elbit  will play a  significant  role,  and  expect  that it will  solidify  our
position  in the  growing  global UAV market,  enhancing  our  presence in major
defense programs."

The Board of  Directors  declared a  dividend  of $0.13 per share for the second
quarter of 2005.  The  dividend's  record  date is  September  6, 2005,  and the
dividend  will be paid on September  19, 2005,  net of taxes and levies,  at the
rate of 22.1%.

Conference Call

The Company will be hosting a webcast and conference  call today,  August 9th at
9:30 am EST. On the call,  management  will review and discuss the results,  and
will be available to answer investor questions.

To  participate,  please access Elbit Systems'  investor  relations  web-site at
http://www.elbitsystems.com.  An online  replay will be  available  from 2 hours
after the call end, and will be available for 30 days.

Alternatively,  please call one of the  teleconferencing  numbers  that  follow.
Please begin placing your calls at least 5 minutes  before the  conference  call
commences.  If you are unable to  connect  using one of the  toll-free  numbers,
please try the international dial-in number.

                       US Dial-in Numbers: 1 866 860 9642
                        UK Dial-in Number: 0 800 917 5108
                       ISRAEL Dial-in Number: 03 918 0600
                  INTERNATIONAL Dial-in Number: +972 3 918 0600

At: 09:30am Eastern Standard Time,  6:30am Pacific Standard Time, 2:30pm UK Time
or 4:30pm Israel Time.



In addition,  a replay of the call will be  available by telephone  starting two
hours after the call ends until  Thursday,  May 19,  10:00 am EST. To access the
replay please dial:

1-888-269-0005 (US) or +972-3-925-5945 (international and Israel)

About Elbit Systems Ltd.

Elbit Systems Ltd. is an international  defense electronics company engaged in a
wide range of  defense-related  programs  throughout the world,  in the areas of
aerospace,   ground  and  naval  systems,  command,   control,   communications,
computers,  intelligence,  surveillance and reconnaissance  (C4ISR) and advanced
electro-optic  technologies.  The Company  focuses on the  upgrading of existing
military platforms and developing new technologies for defense applications. For
further information, please visit the Company web site at www.elbitsystems.com

Company Contact:                                     IR Contact:

Ilan Pacholder                                       Ehud Helft / Kenny Green
V.P. Finance & Capital Markets
and Corporate Secretary
Elbit Systems Ltd                                    GK International
Tel:  +972-4 831-6632                                Tel: 1-866-704-6710
Fax: +972-4 831-6659                                 Fax: + 972-3-607- 4711
E-mail: pacholder@elbit.co.il                        E-mail: Kenny@gk-biz.com
        ---------------------                                ----------------
                                                     E-mail: Ehud@gk-biz.com

STATEMENTS   IN  THIS  PRESS  RELEASE   WHICH  ARE  NOT   HISTORICAL   DATA  ARE
FORWARD-LOOKING  STATEMENTS WHICH INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
OR OTHER  FACTORS  NOT  UNDER THE  COMPANY'S  CONTROL,  WHICH  MAY CAUSE  ACTUAL
RESULTS,  PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY  DIFFERENT
FROM  THE  RESULTS,   PERFORMANCE  OR  OTHER   EXPECTATIONS   IMPLIED  BY  THESE
FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DETAILED IN THE  COMPANY'S  PERIODIC  FILINGS WITH THE  SECURITIES  AND EXCHANGE
COMMISSION.

                          (FINANCIAL TABLES TO FOLLOW)



                               ELBIT SYSTEMS LTD.
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                           (In thousand of US Dollars)

                                              June 30      December 31
                                                2005          2004
                                             ---------     ---------
                                             Unaudited      (*) (**)

Assets

Current Assets:
Cash and short term deposits                    55,051        34,847
Trade receivable and others                    243,654      *267,903
Inventories, net of advances                   296,603       249,041
                                             ---------     ---------
Total current assets                           595,308       551,791

Affiliated companies & other investments       129,142       *59,618
Long-term receivables & others                  82,836        85,100
Fixed assets, net                              252,990       244,288
Other assets, net                               94,017        95,987
                                             ---------     ---------
                                             1,154,293     1,036,784
                                             =========     =========

Liabilities and Shareholder's Equity

Current liabilities                            434,010       378,450
Long-term liabilities                          269,243       221,810
Minority Interest                                4,067         4,340
Shareholder's equity                           446,973      *432,184
                                             ---------     ---------
                                             1,154,293     1,036,784
                                             =========     =========

*    Restated due to the Tadiran share purchase transaction
**   Derived from the Company's 2004 audited financial statements




                               ELBIT SYSTEMS LTD.
                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------
            (In thousand of US Dollars, except for per share amounts)



                                           Six Months Ended           Three Months Ended       Year Ended
                                                June 30                     June 30            December 31
                                           2005         **2004         2005        **2004         2004
                                         -------       -------       -------       -------       -------
                                               Unaudited                   Unaudited            (*) (***)
                                                                                      
Revenues                                 474,470       445,317       243,782       231,645       939,925
Cost of revenues                         346,821       328,839       177,695       171,759       689,626
                                         -------       -------       -------       -------       -------
  Gross Profit                           127,649       116,478        66,087        59,886       250,299

Research and development, net             32,961        27,027        17,795        13,733        66,846
Marketing and selling                     34,386        35,160        17,740        18,662        69,912
General and administrative                25,424        22,731        12,932        11,169        47,832
                                         -------       -------       -------       -------       -------
Total operating expenses                  92,771        84,918        48,467        43,564       184,590
                                         -------       -------       -------       -------       -------

Operating income                          34,878        31,560        17,620        16,322        65,709

Financial expenses, net                   (3,197)       (1,301)       (1,466)         (822)       (5,852)
Other income, net                           (185)          (84)          (75)         (299)          770
                                         -------       -------       -------       -------       -------
  Income before income taxes              31,496        30,175        16,079        15,201        60,627
Taxes on income                            8,043         7,779         4,056         3,704        15,219
                                         -------       -------       -------       -------       -------
                                          23,453        22,396        12,023        11,497        45,408

Company's share of partnerships and
affiliated  companies income, net           (127)        2,970        (1,168)        1,612        *6,645
Minority rights                              273           188            54           193          (180)
                                         -------       -------       -------       -------       -------
  Net income                              23,599        25,554        10,909        13,302       *51,873

Earnings per share

  Basic net earnings per share            $ 0.58        $ 0.64        $ 0.27        $ 0.33        *$1.30
                                         =======       =======       =======       =======       =======
  Diluted net earnings per share          $ 0.57        $ 0.63        $ 0.26        $ 0.33        *$1.26
                                         =======       =======       =======       =======       =======


*    Restated due to the Tadiran share purchase transaction
**   Restated due to the adoption of SFAS 123
***  Derived from the Company's 2004 audited financial statements



                                    EXHIBIT 2
                                    ---------



                               Elbit Systems Ltd.
                               ------------------
                               Management's Report
                               -------------------
             For The Three and Six-Month Period Ended June 30, 2005
             ------------------------------------------------------

         This  report  should  be read  together  with the  unaudited  financial
         statements of Elbit Systems Ltd. ("Elbit Systems" or the "Company") and
         together with its subsidiaries (the "Group") for the quarter ended June
         30, 2005, the Company's audited  consolidated  financial statements and
         related  notes for the year ended  December  31,  2004,  the  Company's
         management  report  for  the  year  ended  December  31,  2004  and the
         Company's Form 20-F for the year ended December 31, 2004,  filed by the
         Company with the U.S.  Securities and Exchange  Commission and with the
         Israeli Securities Authority.

         Forward  looking  statements  with respect to the  Company's  business,
         financial  condition  and results of  operations  in this  document are
         subject to risks and  uncertainties  that could cause actual results to
         differ  materially  from those  contemplated  in such  forward  looking
         statements,  including,  but not limited to, product  demand,  pricing,
         market acceptance,  changing economic conditions,  risks in product and
         technology development, the effect of the Company's accounting policies
         as well as certain  other risk factors  which are detailed from time to
         time in the  Company's  filings with the U.S.  Securities  and Exchange
         Commission.

A.       Executive Overview
         ------------------

         Business Description
         --------------------

         Elbit Systems and its subsidiaries (the "Group") operate in the area of
         upgrading existing airborne, ground and naval defense platforms and are
         engaged in projects involving the design, development,  manufacture and
         integration of advanced integrated defense systems, electronic systems,
         electro-optic  systems and products and software intensive programs and
         products for the defense and homeland  security  sectors.  In addition,
         the Company provides  support services for such platforms,  systems and
         products.

         The Group is engaged in leading  projects in Israel and  worldwide,  in
         areas such as air,  ground and naval Command,  Control,  Communication,
         Computers,  Intelligence,  Surveillance and Reconnaissance  ("C(4)ISR")
         systems,  digital  maps,  night vision  systems,  pilot helmet  mounted
         systems,  display and data  processing  systems,  unmanned air vehicles
         ("UAVs"),  computerized  simulators,   communication  systems,  thermal
         imaging   products,   laser   products,   optical   systems  for  space
         applications,  airborne  reconnaissance  systems,  optic  communication
         systems  and   products,   systems  for  Homeland   Defense   products,
         surveillance products and systems and electric drive systems.

         The Group provides a wide range of logistic support services, including
         operation  of pilot  training  services  for the Israeli Air Force on a
         private financing  initiative  basis.  Several of the Group's companies
         also provide advanced engineering and manufacturing services to various
         customers,  utilizing their significant manufacturing capabilities. The
         Group often  cooperates  with industries in Israel and in various other
         countries.

         The Group  tailors  and adapts its  technologies,  integration  skills,
         market   knowledge  and   battle-proven   systems  to  each  customer's
         individual   requirements  in  both  existing  and  new  platforms.  By
         upgrading existing platforms with advanced electronic and electro-optic
         technologies,   the  Group  provides   customers  with   cost-effective
         solutions,  and its customers  are able to improve their  technological
         and operational capabilities within limited defense budgets.

                                       1

         The  Group  operates  in a  competitive  environment  for  most  of its
         projects,  systems and  products.  Competition  is based on product and
         program performance, price, reputation, reliability,  maintenance costs
         and responsiveness to customer requirements.  This includes the ability
         to respond to rapid changes in technology. In addition, its competitive
         position  sometimes is affected by specific  requirements in particular
         markets.

         Financial Highlights
         --------------------

         The Company's  revenues increased by 5.2% and reached $243.8 million in
         the second quarter of 2005, as compared to $231.6 million in the second
         quarter of 2004.

         Net earnings in the second  quarter of 2005 were $10.9  million and the
         diluted earnings per share were $0.26, as compared to $13.3 million and
         $0.33 in the second quarter of 2004.  Excluding the In Process Research
         and  Development  ("IPR&D")  write-off  of  approximately  $3.5 million
         related to the acquisition of Tadiran Communications Ltd.'s shares, net
         earning in the quarter ended June 30, 2005 were $ 14.4 million, and the
         diluted EPS was $0.35.

         The  Company's  backlog as of June 30, 2005  reached $2.4  billion,  as
         compared to $2.15 billion as of December 31, 2004.

         The  Company's  cash flow  generated  from  operations in the six-month
         period  ended June 30,  2005 was $85.8  million,  as  compared to $55.4
         million in the six-month period ended June 30, 2004.

         The Board of  Directors  declared a dividend of $0.13 per share for the
         second quarter.

B.       Recent Events
         -------------

         On August 4,  2005,  the UK  Ministry  of  Defence  (MoD) and Thales UK
         signed  a  contract  worth  (pound)700  million  for  the  Development,
         Manufacture and Initial  Support phases of the  WATCHKEEPER  programme.
         Elbit Systems and Thales UK are  establishing  a Joint Venture aimed at
         executing  a  significant   part  of  the  WATCHKEEPER   programme  and
         addressing the rapidly growing UAV market worldwide.

         The Elbit Systems  Group  expects to receive a significant  part of the
         contract,  valued at around  (pound)300  million,  the  majority  to be
         executed by the  Leicester-based  Joint  Venture.  The Joint  Venture's
         contract is expected to be signed this year.

         WATCHKEEPER  will  provide  the  UK  armed  forces  with  an  essential
         Intelligence,   Surveillance,  Target  Acquisition  and  Reconnaissance
         (ISTAR) capability based on the Hermes 450 UAV system and will be a key
         component of the UK's Network Enabled  Capability (NEC). This programme
         will deliver  equipment,  training and facilities,  with the capability
         coming into service from 2010.

C.       Backlog of Orders
         -----------------

         The  Company's  backlog of orders as of June 30,  2005  reached  $2,401
         million,  of which 65% was for orders  outside  Israel.  The  Company's
         backlog as of December  31, 2004 was $2,154  million,  of which 66% was
         for orders outside Israel.

                                       2


         Approximately  60% of the  Company's  backlog  as of June  30,  2005 is
         scheduled  to be performed  in the  following  two quarters of 2005 and
         during 2006. The majority of the 40% of the Company's  backlog  balance
         is scheduled to be performed in 2007 and 2008.

D.       Critical Accounting Policies and Estimates
         ------------------------------------------

         The Company's  significant  accounting policies are described in Note 2
         to the audited  consolidated  financial  statements  for the year ended
         December 31, 2004.  See also the  Company's  management  report for the
         year ended December 31, 2004.

E.       Stock-Based Compensation
         ------------------------

         Effective   January  1,  2004,  the  Company  adopted  the  fair  value
         recognition  provision of SFAS No. 123.  Following the adoption of SFAS
         No. 123, the financial results are no longer materially affected by the
         impact of changes in the Company's share price on employee  stock-based
         compensation.

         As a result of the adoption of SFAS No. 123 from  January 1, 2004,  the
         statement  of income and  diluted net  earnings  per share of the first
         three  quarters of 2004 were  restated for purposes of  comparison,  as
         follows:


                                                                                                  
                                                                                   Q1/04        Q2/04        1-6/04
         Net income  as previously reported in 2004                                -----        -----        ------
         Restated net income (according to SFAS No. 123)                        $ 12,727     $ 11,311      $ 24,038
                                                                                ========     ========      ========
         Diluted net earnings per share as reported in 2004                     $ 12,252     $ 13,302      $ 25,554
                                                                                ========     ========      ========
         Restated diluted net earnings per share (according to SFAS No. 123)    $   0.31     $   0.28      $   0.59
                                                                                ========     ========      ========
                                                                                $   0.30     $   0.33      $   0.63
                                                                                ========     ========      ========

F.       Tadiran Communications Ltd. Share Purchase Effect
         -------------------------------------------------

         On April  18,  2005,  the  Company  completed  the  first  stage of the
         transaction  to  purchase   shares  of  Tadiran   Communications   Ltd.
         ("Tadiran") from Koor Industries Ltd. ("Koor").  The first stage of the
         transaction  was completed  after all the conditions  precedent and all
         the required approvals for this stage were obtained.

         According to the transaction  agreements,  Elbit Systems purchased from
         Koor,  in this  stage,  approximately  13.7%  of the  share  equity  of
         Tadiran.  In  addition  to the  shares  previously  purchased  by Elbit
         Systems  in  the  stock  market,  it  now  holds  approximately  21% of
         Tadirans'  shares.  The Company  purchased  Tadiran shares from Koor in
         consideration  for  approximately  $62.5  million.  As a result  of the
         Company obtaining  shareholder rights to exercise significant influence
         over Tadiran, as defined in the applicable  accounting  standards,  the
         Company's  investment in Tadiran,  which had been previously  accounted
         for   as   "available-for-sale   securities",   were   accounted   for,
         retroactively,  under the equity  method of  accounting  ("step-by-step
         acquisition").   Implementing  the  step-by-step   acquisition   method
         resulted in a restatement of the Company's prior financial  results for
         the last  quarter of 2004 and the first  quarter of 2005,  in which the
         Company's investment in Tadiran was accounted for as available-for-sale
         securities.

         Accordingly,  the Company's  net income for the fourth  quarter of 2004
         and the  first  quarter  of 2005 were  reduced  by  approximately  $1.1
         million and $0.5 million,  respectively. As a result, the Company's net
         income was  restated as $13 million for the fourth  quarter of 2004 and
         $12.6 million for the first  quarter of 2005,  rather than the reported
         net income of $14.1 million and $13.1 million, respectively.

                                       3

         The excess of the amount paid for the Tadiran shares acquired until the
         end  of  the   second   quarter  of  2005  over  their  book  value  is
         approximately  $62  million.  Based  on  a  purchase  price  allocation
         analysis  ("PPA")  performed by independent  advisors,  this excess was
         attributed as follows:



                                                       
                                                      $M     Expected useful lives
                                                      --     ---------------------

         In Process R&D ("IPR&D")                    5.0     immediate write-off
         Inventory                                   1.5     Up to a quarter
         Other tangible assets net of liabilities    0.5     5 years
         Brand name                                  4.0     15 years
         Customer base and backlog                  20.0     2-10 years
         Technology                                 12.0     10 years
         Goodwill                                   19.0     Indefinite - subject to annual impairment test
                                                   -----
                                                   62.0
                                                   =====

         The effect of the above  transaction  on the Company's  results for the
         last quarter of 2004 and for the first and the second quarters of 2005,
         which were reflected as part of the Company's equity in net earnings of
         affiliated companies, was as follows:



                                                                 Q4/04        Q1/05       Q2/05       Total
                                                                 -----        -----       -----       -----
                                                                                          
         IPR&D write-off                                         (1.0)        (0.5)       (3.5)       (5.0)
         Inventory                                               (0.2)        (0.2)       (1.1)       (1.5)
         amortization
         Other tangible and intangible assets amortization       (0.2)        (0.4)       (1.0)       (1.6)
                                                              --------- ------------ ----------- -----------
                                                                 (1.4)        (1.1)       (5.6)       (8.1)
         Company's portion in Tadiran's profit
         (according to US GAAP)                                    0.3          0.6         2.4         3.3
                                                              --------- ------------ ----------- -----------
         Net effect                                              (1.1)        (0.5)       (3.2)       (4.8)
                                                              ========= ============ =========== ===========

         Further  effects on the  Company's  financial  results are  expected to
         occur in the event of the  consummation of the additional  purchases of
         Tadiran  shares  from Koor in  accordance  with the  amendments  to the
         agreements  with  Koor,  announced  on  July  6,  2005,  as well as the
         purchase of Koor's shares in Elisra Electronic Systems Ltd.  ("Elisra")
         (see section G below),  subject to receipt of the  required  approvals.
         The effect on the Company's  financial  results of future  purchases of
         shares of  Tadiran  as well as the  anticipated  purchase  of shares in
         Elisra  will  be  reported  following   completion  of  the  respective
         purchases.

G.       Acquisition of Elisra Shares and Amendment to the Tadiran Acquisition
         ---------------------------------------------------------------------

         On July 6, 2005, the Company  reported that it signed an agreement with
         Koor to acquire all of Koor's 70% holdings in Elisra,  in consideration
         of $70 million in cash. In addition,  the parties  agreed on additional
         conditional  consideration  as a result  of future  insurance  proceeds
         relating to the fire at Elisra's plant in 2001. Moreover, Koor received
         the right to purchase  from Elisra,  at an agreed upon price,  Dekolink
         Wireless  Ltd., a start-up  company  engaged in the  cellular  networks
         area,  that  is  wholly-owned  by  Elisra.  The  acquisition  agreement
         relating to Elisra is subject to the  receipt of the  approval of Elbit
         Systems'  shareholders as well as governmental  authorities,  including
         the Israel Antitrust Authority.

                                       4

         Concurrently  with the  signing  of the  agreement  to  acquire  Koor's
         holdings  in  Elisra,  Elbit  Systems  and Koor  agreed to amend  their
         agreements  regarding  the  purchase  of Koor's  holdings  of  Tadiran.
         Pursuant  to  the   amendment,   Elbit  Systems  will   accelerate  the
         acquisition from Koor of approximately 5% of Tadiran's shares, out of a
         total of 18.2% of Tadiran's shares that Elbit Systems agreed to acquire
         as part of the second stage of the agreement entered into between Elbit
         Systems and Koor on December 27, 2004.  Upon  completion  of this step,
         Elbit  Systems  and Koor will have equal  representation  on  Tadiran's
         board of directors.  Joseph Ackerman, Elbit Systems President,  will be
         appointed as Chairman of Tadiran's  Board for a 24-month period and the
         provisions of the shareholders  agreement  relating to joint control in
         Tadiran will enter into effect.

         The price to be paid by Elbit  Systems for the  Tadiran  shares will be
         the price agreed to in the original agreement with Koor.

         The agreement for the  acquisition of Koor's holdings in Elisra and the
         amendments regarding the acquisition of Koor's shares in Tadiran,  were
         signed following  receipt of approval of Elbit Systems' Audit Committee
         and  Board of  Directors  that  obtained  a  fairness  opinion  from an
         independent  appraiser  regarding the  consideration to be paid for the
         Elisra shares.

         The  purchase  of the  approximately  5% of  Tadiran's  shares by Elbit
         Systems  will  take  place   following   approval  of  Elbit   Systems'
         shareholders   at  a  general   shareholders   meeting  of  the  Elisra
         transaction and the amendments to Tadiran transaction agreements.  Upon
         completion  of  that  stage,   Elbit  Systems  will  hold  a  total  of
         approximately 26% of Tadiran's shares,  including approximately 7% that
         were purchased on the stock market.

         Upon completion of the Elisra transaction,  Elbit Systems will complete
         the purchase of Koor's remaining shares in Tadiran - approximately  13%
         - reaching a total of  approximately  39% of Tadiran's  shares based on
         Elbit Systems' current shareholdings.

                                       5

H.       Summary of Financial Results
         ----------------------------

         The following table sets forth the reported consolidated  statements of
         operations  of the Company for the three and  six-month  periods  ended
         June 30,  2005 and June 30,  2004.  The  results  of the  three and six
         months of 2004 and of the first  quarter of 2005 reflect  restatements,
         regarding  the  Tadiran's   share   acquisition   and  the  stock-based
         compensation (see above).


                                                                                                   
                                                  For the six months ended                     For the three months ended
                                                        June 30                                        June 30
                                       ----------------------------------------------  -------------------------------------------
                                                2005                    2004                   2005                   2004
                                           -------------------   -------------------   -------------------   -------------------
                                               $           %        $           %         $           %         $            %
                                               -           -        -           -         -           -         -            -
                                                              (In thousands of U.S. dollars except per share data)

Total revenues                             474,470       100.0   445,317       100.0   243,782       100.0   231,645       100.0
Cost of revenues                           346,821        73.1   328,839        73.8   177,695        72.9   171,759        74.1
                                           -------        ----   -------        ----   -------        ----   -------        ----
Gross profit                               127,649        26.9   116,478        26.2    66,087        27.1    59,886        25.9
                                           -------        ----   -------        ----   -------        ----   -------        ----
Research and development
(R&D) expenses                              42,053         8.9    32,697         7.3    22,153         9.1    16,236         7.0

Less - participation                        (9,092)       (1.9)   (5,670)       (1.3)   (4,358)       (1.8)   (2,503)       (1.1)
                                           -------        ----   -------        ----   -------        ----   -------        ----
R&D expenses, net                           32,961         7.0    27,027         6.1    17,795         7.3    13,733         5.9

Marketing and selling expenses              34,386         7.2    35,160         7.9    17,740         7.3    18,662         8.1

General and administrative expenses         25,424         5.4    22,731         5.1    12,932         5.3    11,169         4.8
                                           -------        ----   -------        ----   -------        ----   -------        ----
                                            92,771        19.6    84,918        19.1    48,467        19.9    43,564        18.8
                                           -------        ----   -------        ----   -------        ----   -------        ----
Operating  income                           34,878         7.3    31,560         7.1    17,620         7.2    16,322         7.0

Finance expenses, net                       (3,197)       (0.7)   (1,301)       (0.3)   (1,466)       (0.6)     (822)       (0.4)

Other expenses, net                           (185)                 --         (84)       --         (75)       (299)       (0.1)
                                           -------        ----   -------        ----   -------        ----   -------        ----
Income before taxes on income               31,496         6.6    30,175         6.8    16,079         6.6    15,201         6.6

Taxes on income                              8,043         1.7     7,779         1.8     4,056         1.7     3,704         1.6
                                           -------        ----   -------        ----   -------        ----   -------        ----
                                            23,453         4.9    22,396         5.0    12,023         4.9    11,497         5.0
Minority interest in losses (gains)
of subsidiaries                                273         0.1       188      --            54      --           193         0.1
Equity in net earnings of affiliated
companies and partnership                     (127)     --         2,970         0.7    (1,168)       (0.4)    1,612         0.7
                                           -------        ----   -------        ----   -------        ----   -------        ----

Net earnings                                23,599         5.0    25,554         5.7    10,909         4.5    13.302         5.7
                                           =======        ====   =======        ====   =======        ====   =======        ====
Diluted earnings per share                    0.57                  0.63                  0.26                 0.33
                                           =======               =======               =======               =======


                                       6

         Revenues
         --------

         The Company's  sales are primarily to  governmental  entities and prime
         contractors under government defense programs.  Accordingly,  the level
         of  the  Company's  revenues  is  subject  to  governmental   budgetary
         constraints.

         The changes in revenues by geographic distribution, other than standard
         quarterly fluctuations,  were in the revenues from customers in Europe,
         which  decreased  mainly as a result of the temporary  reduction in the
         land  systems  area  of   operations,   while  revenues  in  all  other
         geographical regions increased.

         Three Months Ended on June 30, 2005, Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         The consolidated  revenues increased by 5.2% from $231.6 million in the
         second quarter of 2004 to $243.8 million in the second quarter of 2005.

         The following  table sets forth the Company's  revenue  distribution by
         areas of operation:


                                                                                         
                                                                     Three-Month Period ended
                                                           ----------------------------------------------
                                                             June 30, 2005              June 30, 2004
                                                           --------------------       -------------------
                                                           $ millions       %         $ millions       %

         Airborne systems                                      93.4        38.3           94.4       40.7
         Land systems                                          33.2        13.6           48.7       21.0
         C(4)ISR systems                                       44.1        18.1           27.8       12.0
         Electro-optics                                        56.3        23.1           44.6       19.3
         Other  (mainly non-defense engineering and
              production services)                             16.8         6.9           16.1        7.0
                                                              -----       -----          -----      -----

         Total                                                243.8       100.0          231.6      100.0
                                                              =====       =====          =====      =====

         The following  table sets forth the Company's  distribution of revenues
         by geographic regions:

                                                                     Three-Month Period ended
                                                           ----------------------------------------------
                                                             June 30, 2005              June 30, 2004
                                                           --------------------       -------------------
                                                           $ millions       %         $ millions       %
         Israel                                                77.9        31.9           56.6       24.4
         United States                                         87.9        36.1           87.3       37.7
         Europe                                                18.4         7.5           33.6       14.5
         Other countries                                       59.6        24.5           54.1       23.4
                                                              -----       -----          -----      -----
         Total                                                243.8       100.0          231.6      100.0
                                                              =====       =====          =====      =====

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         The  Company's  consolidated  revenues  increased by 6.6%,  from $445.3
         million in the first six months of 2004 to $474.5  million in the first
         six months of 2005.

                                       7

         The following  table sets forth the Company's  revenue  distribution by
         areas of operation:


                                                                                         
                                                                      Six-Month Period ended
                                                           ----------------------------------------------
                                                             June 30, 2005              June 30, 2004
                                                           --------------------       -------------------
                                                           $ millions       %         $ millions       %
         Airborne systems                                     194.4        41.0          178.7       40.1
         Land systems                                          59.2        12.5          100.5       22.6
         C(4)ISR systems                                       88.1        18.5           57.3       12.9
         Electro-optics                                        99.5        21.0           85.0       19.1
         Other  (mainly non-defense engineering and
              production services)                             33.3         7.0           23.8        5.3
                                                              -----       -----          -----      -----
         Total                                                474.5       100.0          445.3      100.0
                                                              =====       =====          =====      =====

         The following  table sets forth the Company's  distribution of revenues
         by geographic regions:

                                                                      Six-Month Period ended
                                                           ----------------------------------------------
                                                             June 30, 2005              June 30, 2004
                                                           --------------------       -------------------
                                                           $ millions        %        $ millions       %
         Israel                                                 145.1        30.6          110.5       24.8
         United States                                          177.5        37.4          166.7       37.4
         Europe                                                  34.5         7.3           65.7       14.8
         Other countries                                        117.4        24.7          102.4       23.0
                                                                -----        ----          -----       ----
         Total                                                  474.5       100.0          445.3      100.0
                                                                =====       =====          =====      =====

         Gross Profit
         ------------

         The Company's  gross profit  represents  the  aggregate  results of the
         Company's activities and projects,  and is based on the mix of programs
         in which the Company is engaged during the reported period.

         Three Months Ended on June 30, 2005,  Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         The Company's gross profit in the quarter ended June 30, 2005 was $66.1
         million as  compared  to $59.9  million in the  quarter  ended June 30,
         2004.  The gross profit margin in the second  quarter of 2005 was 27.1%
         as compared to 25.9% in the same period last year.  The  difference  in
         the  gross  profit  was as a result of the mix of  programs  generating
         revenues  in the  applicable  periods,  which  included  in the  second
         quarter of 2005 certain programs with a relatively higher gross profit.

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         The  Company's  gross  profit in the six months ended June 30, 2005 was
         $127.6  million as compared to $116.5  million in the six months  ended
         June 30, 2004. The gross profit margin in the six months ended June 30,
         2005 was 26.9% as compared to 26.2% in the corresponding  period of the
         previous year. The difference in the gross profit was the result of the
         mix of programs generating revenues in the applicable periods.

                                       8

         Research and Development ("R&D")
         --------------------------------

         The Company continually invests in R&D in order to maintain and further
         advance its technologies, in accordance with a long-term plan, based on
         its estimate of future market needs.

         The Company's R&D activities in the reported  period were in accordance
         with its strategy plans. Some of these activities are coordinated with,
         and partially funded by, third parties,  including the Israeli Ministry
         of  Defense  ("IMOD")  and the Office of the Chief  Scientist  ("OCS").
         These programs were mainly in the areas of advanced  airborne  systems,
         cutting edge  electro-optics  technology and products for surveillance,
         aerial reconnaissance, lasers and space based sensors.

         Further  to the trend that  began in the  fourth  quarter of 2004,  the
         Company  increased  its R&D  efforts,  mainly in the areas of Airborne,
         Land  and  Electro-Optics  Systems,  for the  development  of  advanced
         technologies and products to meet expected market requirements.

         Three Months Ended on June 30, 2005,  Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         Gross R&D  expenses in the quarter  ended June 30, 2005  totaled  $22.2
         million  (9.1% of  revenues),  as  compared to $16.2  million  (7.0% of
         revenues) in the quarter ended June 30, 2004.

         Net  R&D  expenses  (after  deduction  of  third  party  participation,
         including  the IMOD and the OCS) in the  quarter  ended  June 30,  2005
         totaled $17.8 million (7.3% of revenues),  as compared to $13.7 million
         (5.9% of revenues) in the quarter ended June 30, 2004.

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         Gross R&D expenses in the six months ended June 30, 2005 totaled  $42.1
         million  (8.9% of  revenues),  as  compared to $32.7  million  (7.3% of
         revenues) in the six months ended June 30, 2004.

         Net  R&D  expenses  (after  deduction  of  third  party  participation,
         including the IMOD and the OCS) in the six months period ended June 30,
         2005 totaled $33.0  million  (6.9% of  revenues),  as compared to $27.0
         million  (6.1% of  revenues)  in the six months  period  ended June 30,
         2004.

         Marketing and Selling Expenses
         ------------------------------

         The Company  maintains its  activities  in  developing  new markets and
         pursues various business opportunities according to the Company's plan.

         Three Months Ended on June 30, 2005,  Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         Marketing and selling  expenses in the quarter ended June 30, 2005 were
         $17.7 million (7.3% of revenues), as compared to $18.7 million (8.1% of
         revenues) in the quarter ended June 30, 2004.

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         Marketing  and selling  expenses in the six months  ended June 30, 2005
         were $34.4  million  (7.2% of  revenues),  as compared to $35.2 million
         (7.9% of revenues) in the six months ended June 30, 2004.

                                       9

         General and Administrative ("G&A") Expenses
         -------------------------------------------

         Three Months Ended on June 30, 2005,  Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         G&A expenses were $12.9 million (5.3% of revenues) in the quarter ended
         June 30, 2005,  as compared to $11.2  million (4.8% of revenues) in the
         quarter ended June 30, 2004.

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         G&A expenses  were $25.4  million  (5.4% of revenues) in the six months
         ended June 30, 2005, as compared to $22.7 million (5.1% of revenues) in
         the six months ended June 30, 2004.

         Finance Expense (Net)
         ---------------------

         The increase in the net finance  expense  resulted mainly from a higher
         level of long-term  loans,  currency  exchange rate  differences and an
         increase in market interest rates.

         Three Months Ended on June 30, 2005,  Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         Net  finance  expense  in the  quarter  ended  June  30,  2005 was $1.5
         million,  as compared to $0.8 million of finance expense in the quarter
         ended June 30, 2004.

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         Net  finance  expense  in the six months  ended June 30,  2005 was $3.2
         million,  as  compared  to $1.3  million of finance  expense in the six
         months ended June 30, 2004.

         Taxes on Income
         ---------------

         The Company's tax rate  represents a weighted  average of the tax rates
         to which the various companies in the Group are subject.  The change in
         the  effective  tax rate is  attributable  mainly to the mix of the tax
         rates in the various tax  jurisdictions in which the Group's  companies
         generating the taxable  income  operate and the recent  decrease in the
         tax rate in Israel.

         On July 25, 2005, the Knesset (Israeli  Parliament)  passed the Law for
         the  Amendment  of the Income Tax  Ordinance  (No.  147),  2005,  which
         prescribes, among other provisions, a gradual decrease in the corporate
         tax rate in Israel to the following tax rates: in 2006 - 31%, in 2007 -
         29%,  in 2008 - 27%,  in 2009 - 26% and in 2010 and  thereafter  - 25%.
         According to US GAAP accounting rules, the effect of the amendment will
         be included in the third quarter of 2005.  The Company  estimates  that
         the  amendment  is not  expected  to  have  a  material  effect  on the
         Company's financial position and results of operations in 2005.

         Three Months Ended on June 30, 2005,  Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         Provision for taxes in the quarter ended June 30, 2005 was $4.1 million
         (effective tax rate of 25.2%),  as compared to a provision for taxes of
         $3.7 million  (effective  tax rate of 24.4%) in the quarter  ended June
         30, 2004.

                                       10

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         Provision  for taxes in the six  months  ended  June 30,  2005 was $8.0
         million  (effective tax rate of 25.5%),  as compared to a provision for
         taxes of $7.8 million  (effective  tax rate of 25.8%) in the six months
         ended June 30, 2004.

         Company's Share in Earnings of Affiliated Entities
         --------------------------------------------------

         The companies and partnerships,  in which the Company holds 50% or less
         in shares or voting rights and are therefore  not  consolidated  in its
         financial  statements,  operate in complementary areas to the Company's
         core  business  activities,   including   electro-optics  and  airborne
         systems.  This includes the Company's share in the earnings of Tadiran,
         and reflects the impact of the corresponding  purchase price allocation
         adjustments described above.

         Three Months Ended on June 30, 2005,  Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         In the  second  quarter  of 2005 the  Company  had net  expense of $1.2
         million  from  its  share  in  earnings  of  affiliated  companies  and
         partnership,  as compared  to net income of $1.6  million in the second
         quarter of 2004.

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         In the six months  ended June 30,  2005 the  Company had net expense of
         $0.1 million  from its share in earnings of  affiliated  companies  and
         partnership,  as  compared  to net  income of $3.0  million  in the six
         months ended June 30, 2004.

         Net Earnings and Earnings Per Share ("EPS")
         -------------------------------------------

         Three Months Ended on June 30, 2005,  Compared to Three Months Ended on
         June 30, 2004
         -----------------------------------------------------------------------

         Net  earnings  in the quarter  ended June 30,  2005 were $10.9  million
         (4.5% of  revenues),  as  compared to  reported  net  earnings of $13.3
         million (5.7% of revenues) in the quarter ended June 30, 2004.  Diluted
         EPS in the quarter ended June 30, 2005 was $0.26,  as compared to $0.33
         in the quarter ended June 30, 2004.

         Excluding the IPR&D  write-off  related to Tadiran,  which  amounted to
         approximately $3.5 million,  net earnings in the quarter ended June 30,
         2005 were $14.4  million  (5.9% of  revenues),  and the diluted EPS was
         $0.35.

         The number of shares used for computation of diluted EPS in the quarter
         ended June 30, 2005 was 41,617 thousand  shares,  as compared to 40,892
         thousand shares in the quarter ended June 30, 2004.

         Six Months Ended on June 30, 2005, Compared to Six Months Ended on June
         30, 2004
         -----------------------------------------------------------------------

         Net earnings in the six months  ended June 30, 2005 were $23.6  million
         (5.0% of revenues),  as compared to net earnings of $25.6 million (5.7%
         of revenues) in the six months ended June 30, 2004.  Diluted EPS in the
         six months  ended June 30,  2005 was $0.57,  as  compared  to $0.63 per
         share in the six months ended June 30, 2004.

                                       11

         Excluding the IPR&D  write-off  related to Tadiran,  which  amounted to
         approximately  $4.0 million,  net earnings in the six months ended June
         30, 2005 were $27.6 million (5.8% of revenues), and the diluted EPS was
         $0.66.

         The number of shares  used for  computation  of diluted  EPS in the six
         months ended June 30, 2005 was 41,617 thousand  shares,  as compared to
         40,805 thousand shares in the six months ended June 30, 2004.

I.       Liquidity and Capital Resources
         -------------------------------

         The Company's net cash flow generated from operating  activities in the
         six months ended June 30, 2005 was $85.8 million, resulting mainly from
         net income and advances received from customers.  The cash inflows were
         partially offset,  mainly by an increase in inventories and by payments
         of trade payables.

         Net cash flow used for  investment  activities  in the six months ended
         June 30, 2005 was $101.1 million, which was used mainly for acquisition
         of  Tadiran's   shares  and  for  procurement  of  various  assets  and
         equipment.

         Net cash flow from  financing  activities  in the six months ended June
         30, 2005 was $35.0 million,  which was mainly from receipt of long-term
         loans.

         On June 30,  2005,  the Company had total  borrowings  in the amount of
         $140.2 million, including $128.7 million in long-term loans, and $440.9
         million in guarantees issued on its behalf by banks,  mainly in respect
         of advance payment and performance  guarantees  provided in the regular
         course of business.  On June 30,  2005,  the Company had a cash balance
         amounting to $53.9 million.

         The Company and some of its  subsidiaries  operate with loan and credit
         agreements  that contain  certain  covenants.  Such  covenants  include
         requirements for shareholders' equity,  current ratio, operating profit
         margin,  tangible net worth, EBITDA,  interest coverage ratio and total
         leverage.  As of June 30, 2005, the Company and its subsidiaries are in
         full compliance with all such covenants.

         As of June 30,  2005,  the Company had working  capital of $161 million
         and its current ratio was 1.37. The Company's  ratio of equity to total
         assets was 38.7%.

J.       Derivatives and Hedges
         ----------------------

         Market risks relating to the Company's operations result primarily from
         changes in interest  rates and exchange  rates.  The Company  typically
         uses financial  instruments to limit its exposure to those changes. The
         Company also typically enters into forward contracts in connection with
         transactions that are denominated in currencies other than U.S. dollars
         and New  Israeli  Shekels  ("NIS").  The Company may enter from time to
         time into forward contracts related to NIS, based on market conditions.

         On June 30, 2005,  the Company's  liquid assets were  comprised of bank
         deposits,  and it had no investments in liquid equity  securities  that
         were   subject  to  market   fluctuations,   except  for  the   Tadiran
         Communications  shares  acquired  as  mentioned  above.  The  Company's
         deposits  and  loans  are  based on  variable  interest  rates.  Should
         interest rates either increase or decrease,  such change may affect the
         Company's  results  of  operations  due to  changes  in the cost of the
         liabilities  and the  return on the assets  that are based on  variable
         rates.

                                       12

         The Company's functional currency is the U.S. dollar. On June 30, 2005,
         the Company had exposure due to liabilities denominated in NIS of $62.8
         million  in excess of its NIS  denominated  assets.  These  liabilities
         represent mostly wages and trade payables.  The amount of the Company's
         exposure to the changes in the  NIS-U.S.  dollar  exchange  rate varies
         from time to time.

         Most of the Company's  assets and liabilities  which are denominated in
         currencies  other than the NIS and the U.S.  dollar were  covered as of
         June 30, 2005 by forward  contracts and options.  On June 30, 2005, the
         Company had forward contracts for the sale and purchase of such foreign
         currencies  totaling $32.2 million ($19.2 million in Euro, $5.9 million
         in GBP and $7.1 million in other currencies).  The results of financial
         derivative activities in this quarter were not material.

K.       Resignation of a Director
         -------------------------

         On August 2, 2005, the Company  reported that Mr. Aharon  Beth-Halachmi
         submitted  his  resignation  from  the  Company's  Board  of  Directors
         effective  as of July  31,  2005.  The  resignation  was  submitted  in
         connection with the Company's  compliance with  Sarbanes-Oxley  Act and
         Nasdaq  Listing  Requirements  relating to  independence  criteria  for
         boards of directors.  Mr. Beth-Halachmi will serve as a special advisor
         to the Chairman of the Company's Board of Directors.

L.       Dividends
         ---------

         The Board of Directors declared on August 8, 2005 dividend of $0.13 per
         share.

                                    * * * * *




                                       13


                                    EXHIBIT 3
                                    ---------



                     ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
                             CONDENSED CONSOLIDATED

                              FINANCIAL STATEMENTS

                               AS OF JUNE 30, 2005
                               -------------------

                                   (Unaudited)
                         (In thousands of U.S. dollars)

                                 C O N T E N T S

                                                                      P a g e
                                                                      -------

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

   Consolidated Balance Sheets                                         2 - 3

   Consolidated Statements of Income                                     4

   Consolidated Statements of Changes in Shareholders' Equity           5 -7

   Consolidated Statements of Cash Flows                               8 - 9

   Notes to the Consolidated Financial Statements                     10 - 16





                                   # # # # # #





                                       1

                                         ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars (in thousands)

                                                         June 30,   December 31,
                                                           2005          2004
                                                       -----------  ------------
                                                       (Unaudited)       (**)

CURRENT ASSETS:
Cash and cash equivalents                               $   53,855   $   34,109
Short-term bank deposits                                     1,196          738
Trade receivables, (net of allowance for doubtful
    accounts in the amount of $2,890 and $3,064 as of                  June 30,
    2005 and December 31, 2004, respectively)              189,599      214,816
Other receivables and prepaid expenses                      54,055      *53,087
Inventories, net of advances                               296,603      249,041
                                                        ----------   ----------
Total current assets                                       595,308      551,791
                                                        ----------   ----------

INVESTMENTS AND LONG-TERM RECEIVABLES:
Investments in affiliated companies and a partnership      117,397      *47,873
Investments in other companies                              11,745       11,745
Long-term bank deposits and trade receivables                1,595        2,102
Severance pay fund                                          81,241       82,998
                                                        ----------   ----------
                                                           211,978      144,718
                                                        ----------   ----------

PROPERTY, PLANT AND EQUIPMENT,  NET                        252,990      244,288
                                                        ----------   ----------


INTANGIBLE ASSETS:
Goodwill                                                    33,716       33,706
Other intangible assets, net                                60,301       62,281
                                                        ----------   ----------
                                                            94,017       95,987
                                                        ----------   ----------

                                                        $1,154,293   $1,036,784
                                                        ==========   ==========

*   Restated (See Note 1B)

**  Derived from the Company's 2004 audited financial statements

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

                                       -2-

                                        ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars (in thousands, except share and per share data)

                                                         June 30,   December 31,
                                                           2005         2004
                                                       -----------  ------------
                                                       (Unaudited)     (**)
                                                       -----------  ------------
CURRENT LIABILITIES:
Short-term bank credit and loans                    $     8,581    $      8,592
Current maturities of long-term loans                     2,914           1,656
Trade payables                                          111,006         118,391
Other payables and accrued expenses                     159,261         169,702
Customers advances and amounts in excess of
    costs incurred on contracts in progress             152,248          80,109
                                                    -----------    ------------
Total current liabilities                               434,010         378,450
                                                    -----------    ------------

LONG-TERM LIABILITIES:
Long-term loans                                         128,681          86,234
Advances from customers                                  19,099          10,320
Deferred income taxes                                    24,082          24,516
Accrued termination liability                            97,381         100,740
                                                    -----------    ------------
                                                        269,243         221,810
                                                    -----------    ------------

MINORITY INTERESTS                                        4,067           4,340
                                                    -----------    ------------

SHAREHOLDERS' EQUITY:
Share capital

Ordinary shares of New Israeli Shekels (NIS)
  1 par value; Authorized 80,000,000 shares
   as of June 30, 2005 and December 31,                                   2004;
   Issued - 41,154,632 and 40,969,947 shares as
   of June 30, 2005 and December 31, 2004
   respectively; Outstanding                               --        40,745,711
   and  40,561,026 shares as of June 30, 2005 and
   December 31, 2004, respectively                       11,590          11,548
Additional paid-in capital                              276,461         274,432
Accumulated other comprehensive loss                     (5,064)       *(4,742)
Retained earnings                                       168,307        *155,267
Treasury shares - 408,921 shares as of June 30,
   2005 and December 31, 2004                            (4,321)         (4,321)
                                                    -----------    ------------
                                                        446,973        *432,184
                                                    -----------    ------------

                                                    $ 1,154,293    $  1,036,784
                                                    ===========    ============

*  Restated (See Note 1B)

** Derived from the Company's 2004 audited financial statements

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

                                      -3-


                                                                                             ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
------------------------------------------------------------------------------------------------------------------------------------
U.S. dollars (in thousands, except share and per share data)


                                                                                                        

                                                    Six months ended              Three months ended                   Year ended
                                                        June 30,                       June 30,                        December 31,
                                              ------------------------------    -------------------------------     ---------------
                                                  2005             **2004           2005               **2004            2004
                                              ------------------------------    -------------------------------     ---------------
                                                        (Unaudited)                       (Unaudited)                    (***)
                                                        -----------                       -----------                    -----

Revenues                                       $ 474,470         $ 445,317         $ 243,782         $ 231,645         $ 939,925
Cost of revenues                                 346,821           328,839           177,695           171,759           689,626
                                               ---------         ---------         ---------         ---------           -------
  Gross profit                                   127,649           116,478            66,087            59,886           250,299
                                               ---------         ---------         ---------         ---------           -------

Research and development costs, net               32,961            27,027            17,795            13,733            66,846
Marketing and selling expenses                    34,386            35,160            17,740            18,662            69,912
General and administrative expenses               25,424            22,731            12,932            11,169            47,832
                                               ---------         ---------         ---------         ---------           -------

                                                  92,771            84,918            48,467            43,564           184,590
                                               ---------         ---------         ---------         ---------           -------

  Operating income                                34,878            31,560            17,620            16,322            65,709

Financial expenses, net                           (3,197)           (1,301)           (1,466)             (822)           (5,852)

Other income (expenses), net                        (185)              (84)              (75)             (299)              770
                                               ---------         ---------         ---------         ---------           -------
   Income before taxes on income                  31,496            30,175            16,079            15,201            60,627
Taxes on income                                    8,043             7,779             4,056             3,704            15,219
                                               ---------         ---------         ---------         ---------           -------
                                                  23,453            22,396            12,023            11,497            45,408
Equity in net earnings of affiliated
   companies and partnership                        (127)            2,970            (1,168)            1,612            *6,645
Minority interests in losses (earnings)
   of subsidiaries                                   273               188                54               193              (180)
                                               ---------         ---------         ---------         ---------           -------
   Net income                                  $  23,599         $  25,554         $  10,909         $  13,302          *$51,873
                                               =========         =========         =========         =========           =======
Earnings per share
   Basic net earnings per share                $    0.58         $    0.64         $    0.27         $    0.33            *$1.30
                                               =========         =========         =========         =========           =======
   Diluted net earnings per share              $    0.57         $    0.63         $    0.26         $    0.33          * $ 1.26
                                               =========         =========         =========         =========           =======
Number of shares used in computation of
   basic net earnings per share                   40,675            39,704            40,705            39,828            39,952
                                               =========         =========         =========         =========           =======
Number of shares used in computation of
   Diluted net earnings per share                 41,617            40,805            41,617            40,892            41,041
                                               =========         =========         =========         =========           =======


*    Restated (See Notes 1B)
**   Restated (See Note 3)

***  Derived from the Company's 2004 audited financial statements

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

                                      -4-


                                                                                             ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
U.S. dollars (in thousands, except share data)

                                                                                                            
                                                                                                                     Accumulated
                                                         Number of                                  Additional         other
                                                        outstanding             Share                paid-in        comprehensive
                                                          shares               capital               capital        income (loss)
                                                       ------------           ----------          -------------    -----------------

 Balance as of January 1, 2004                           39,337,204            $ 11,273            $ 259,033            $ (3,992)
 Exercise of options                                      1,223,822                 275               10,985                  --
 Cumulative effect of first time adoption
   of the fair value based method for stock
   based compensation expenses                                 (152)               (152)
 Tax benefit in respect of options exercised                     --                  --                1,179                  --
 Stock based compensation                                        --                  --                3,387                  --
 Dividends paid                                                  --                  --                   --                  --
 Other comprehensive income (loss):
 Unrealized gains on derivative
    instruments                                                  --                  --                   --                (299)
 Foreign currency translation differences                        --                  --                   --                 450
 Minimum pension liability                                       --                  --                   --                (901)
 Net income                                                      --                  --                   --                  --
                                                       ------------            --------            ---------            --------
 Total comprehensive income

 Balance as of December 31, 2004                         40,561,026            $ 11,548            $ 274,432            $ (4,742)
Exercise of options                                         184,685                  42                1,545                  --
Tax benefit in respect of options exercised                      --                  --                  484                  --
Dividends paid                                                   --                  --                   --                  --
 Other comprehensive income (loss):
Unrealized gains on derivative
    instruments                                                  --                  --                   --                 293
Foreign currency translation differences                         --                  --                   --                (615)
Net income                                                       --                  --                   --                  --
                                                       ------------            --------            ---------            --------
Total comprehensive income

  Balance as of June 30, 2005 (Unaudited)                40,745,711            $ 11,590            $ 276,461            $ (5,064)
                                                       ===========             =========           ==========           ========


                                                                                                   Total              Total
                                                        Retained                Treasury        shareholders'      comprehensive
                                                        earnings                 shares            equity         income (loss)
                                                      ------------            ------------    ---------------     ---------------

 Balance as of January 1, 2004                         $    190,086            $ (4,321)           $ 452,079
 Exercise of options                                             --                  --               11,260
 Cumulative effect of first time adoption
   of the fair value based method for stock
   based compensation expenses
 Tax benefit in respect of options exercised                     --                  --                1,179
 Stock based compensation                                        --                  --                3,387
 Dividends paid                                             (86,692)                 --              (86,692)
 Other comprehensive income (loss):
 Unrealized gains on derivative
    instruments                                                  --                  --                 (299)           $   (299)
 Foreign currency translation differences                        --                  --                  450                 450
 Minimum pension liability                                       --                  --                 (901)               (901)
 Net income                                                  51,873                  --               51,873              51,873
                                                       ------------            --------            ---------            --------
 Total comprehensive income                                                                                               51,123
                                                                                                                        ========
 Balance as of December 31, 2004                       $    155,267            $ (4,321)           $ 432,184
Exercise of options                                              --                  --                1,587
Tax benefit in respect of options exercised                      --                  --                  484
Dividends paid                                              (10,559)                 --              (10,559)
 Other comprehensive income (loss):
Unrealized gains on derivative
    instruments                                                  --                  --                  293            $    293
Foreign currency translation differences                         --                  --                 (615)               (615)
Net income                                                   23,599                  --               23,599              23,599
                                                       ------------            --------            ---------            --------
Total comprehensive income                                                                                              $ 23,277
                                                                                                                        ========
  Balance as of June 30, 2005 (Unaudited)              $    168,307            $ (4,321)           $ 446,973
                                                       ===========             =========           ==========


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

                                      -5-


                                                                                             ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
U.S. dollars (in thousands, except share data)


                                                                                                           
                                                                                                                      Accumulated
                                                         Number of                                 Additional            other
                                                        outstanding              Share               paid-in          comprehensive
                                                          shares                capital              capital          income (loss)
                                                       ------------           -------------       -------------    ----------------

Balance as of January 1, 2004                           39,337,204            $ 11,273            $ 259,033            $ (3,992)
                                                       -----------            --------            ---------            --------
Exercise of options                                        591,247                 132                5,584                  --
Tax benefit in respect of options exercised                     --                  --                  691                  --
Stock based compensation                                        --                  --                1,845                  --
Dividends paid                                                  --                  --                   --                  --
Other comprehensive income (loss):
Unrealized gains on derivative instruments                      --                  --                   --                 428
Foreign currency translation differences                        --                  --                   --                 (20)
Net income                                                      --                  --                   --                  --
                                                       -----------            --------            ---------            --------
Total comprehensive income

Balance as of June 30, 2004
 (Unaudited)                                            39,928,451            $ 11,405            $ 267,153            $ (3,584)
                                                       ===========            ========            =========            ========

Balance as of April 1, 2005
  (Unaudited)                                           40,682,842            $ 11,576            $ 275,766            $ (4,705)
  Exercise of options                                       62,869                  14                  498                  --
  Tax benefit in respect of options
   exercised                                                    --                  --                  197                  --
 Dividends paid                                                 --                  --                   --                  --
 Other comprehensive income (loss):
 Unrealized gains on derivative
    instruments                                                 81
 Foreign currency translation differences                     (440)
 Net income                                                     --                  --                   --                  --
                                                       -----------            --------            ---------            --------
Total comprehensive income

 Balance as of June 30, 2005
  (Unaudited)                                           40,745,711            $ 11,590            $ 276,461            $ (5,064)
                                                       ===========            ========            =========            ========



                                                                                                       Total              Total
                                                         Retained               Treasury            shareholders'     comprehensive
                                                         earnings                shares                equity         income (loss)
                                                       ------------           ------------        ---------------  -----------------

Balance as of January 1, 2004                          $   190,086            $ (4,321)           $ 452,079
Exercise of options                                             --                  --                5,716
Tax benefit in respect of options exercised                     --                  --                  691
Stock based compensation                                        --                  --                1,845
Dividends paid                                              (8,696)                 --               (8,696)
Other comprehensive income (loss):
Unrealized gains on derivative instruments                      --                  --                  428            $    428
Foreign currency translation differences                        --                  --                  (20)                (20)
Net income                                                  25,554                  --               25,554              25,554
                                                       -----------            --------            ---------            --------
Total comprehensive income                                                                                             $ 24,448
                                                                                                                       ========
Balance as of June 30, 2004
 (Unaudited)                                           $   206,944            $ (4,321)           $ 477,597
                                                       ===========            ========            =========

Balance as of April 1, 2005
  (Unaudited)                                          $   162,661            $ (4,321)           $ 440,977
  Exercise of options                                           --                  --                  512
  Tax benefit in respect of options
   exercised                                                    --                  --                  197
 Dividends paid                                             (5,263)                 --               (5,263)
Other comprehensive income (loss):
 Unrealized gains on derivative
    instruments                                                 81            $     81
 Foreign currency translation differences                     (440)               (440)
 Net income                                                 10,909                  --               10,909              10,909
                                                       -----------            --------            ---------            --------
Total comprehensive income                                                                                             $ 10,550
                                                                                                                       ========
 Balance as of June 30, 2005
  (Unaudited)                                          $   168,307            $ (4,321)           $ 446,973
                                                       ===========            ========            =========


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

                                      -6-


                                                                                             ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
U.S. dollars (in thousands, except share data)


                                                                                                           

                                                                                                                     Accumulated
                                                        Number of                              Additional               other
                                                       outstanding            Share              paid-in            comprehensive
                                                          shares             capital             capital             income (loss)
                                                       ------------       -------------       -------------        ----------------

Balance as of April 1, 2004
  (Unaudited)                                           39,718,313            $ 11,358            $ 263,919            $ (3,942)
Exercise of options                                        210,138                  47                2,032                  --
Tax benefit in respect of options exercised                     --                  --                  280                  --
Amortization of deferred stock                                  --                  --                   --
  compensation                                                 922
Dividend paid                                                   --                  --                   --                  --
Other comprehensive income (loss):
 Unrealized gains on derivative                                522
instruments

Foreign currency translation differences                        --                  --                   --                (164)
Net income                                                      --                  --                   --                  --
                                                       -----------            --------            ---------           ---------
Total comprehensive income


Balance as of June 30, 2004
  (Unaudited)                                           39,928,451            $ 11,405            $ 267,153            $ (3,584)
                                                       ===========            ========            =========           =========


                                                                                                       Total              Total
                                                         Retained               Treasury            shareholders'     comprehensive
                                                         earnings                shares                equity         income (loss)
                                                       ------------           ------------        ---------------  -----------------

Balance as of April 1, 2004
  (Unaudited)                                          $   198,010            $ (4,321)           $ 465,025
Exercise of options                                             --                  --                2,079
Tax benefit in respect of options exercised                     --                  --                  280
Amortization of deferred stock                                  --                  --
  compensation                                                 922
Dividend paid                                               (4,369)                 --               (4,369)
Other comprehensive income (loss):
 Unrealized gains on derivative                                 --                  --                  522           $     522
instruments

Foreign currency translation differences                        --                  --                 (164)               (164)
Net income                                                  13,302                  --               13,302              13,302
                                                       -----------            --------            ---------           ---------
Total comprehensive income                                                                                            $  13,660
                                                                                                                      =========
Balance as of June 30, 2004
  (Unaudited)                                          $   206,944            $ (4,321)           $ 477,597
                                                       ===========            ========            =========


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

                                      -7-


                                                                                             ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------------------------
U.S. dollars (in thousands)

                                                                                                                 
                                                                                              Six months ended          Year ended
                                                                                                  June 30,             December 31,
                                                                                         --------------------------- ---------------
                                                                                             2005          2004           2004
                                                                                         ------------- ------------- ---------------
                                                                                                (Unaudited)               (***)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                                  $ 23,599      $ 25,554      **$ 51,873
Adjustments to reconcile net income to net cash provided by
    operating activities:
Depreciation and amortization                                                                 24,102        20,304          42,261
Stock based compensation                                                                           -         1,845           3,387
Deferred income taxes                                                                         (1,804)        1,653             153
Accrued severance pay, net                                                                    (1,725)         (833)         (2,304)
Loss (gain) on sale of property and equipment                                                   (304)           16             143
Tax benefit in respect of options exercised                                                      484           691           1,179
Minority interests in earnings (losses) of subsidiaries                                         (273)         (187)            180
Equity in net losses (earnings) of affiliated companies and
partnership,                                                                                   4,265           681         **1,505
    net of dividend received (*)
Changes in operating assets and liabilities:
 Decrease (increase) in short and long-term receivables and
    prepaid expenses                                                                          25,732        24,603         (16,871)
 Decrease (increase) in inventories                                                          (63,529)       (5,062)          2,932
 Increase (decrease) in trade payables, other payables and
 accrued                                                                                     (21,262)       (5,216)         20,522
    expenses

 Increase (decrease) in advances received from customers                                      96,507        (7,308)        (18,535)
 Settlement of royalties with the Office of the Chief Scientist                                    -        (1,247)         (3,714)
 Other adjustments                                                                                45           (91)         (1,228)
                                                                                         ------------- ------------- ---------------
 Net cash provided by operating activities                                                    85,837        55,403          81,483
                                                                                         ------------- ------------- ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment                                                    (30,017)      (26,262)        (53,008)
Acquisition of subsidiaries and businesses (Schedule A)                                         (318)            -          (2,315)
Investments in affiliated companies and subsidiaries                                         (74,782)         (250)        (18,391)
Proceeds from sale of property, plant and equipment                                            1,001         1,351           2,560
Proceeds from sale of investment                                                               3,100             -               -
Investment in long-term bank deposits                                                           (551)         (167)         (1,203)
Proceeds from sale of long-term bank deposits                                                    945           317           1,507
Short-term bank deposits, net                                                                   (458)          125             (48)
                                                                                         ------------- ------------- ---------------
Net cash used in investing activities                                                       (101,080)      (24,886)        (70,898)
                                                                                         ------------- ------------- ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds from exercise of options                                                             1,587         5,716          11,260
 Repayment of long-term bank loans                                                           (51,652)      (12,222)        (35,826)
 Receipt of long-term bank loans                                                              95,500             -          58,410
 Dividends paid                                                                              (10,559)       (8,696)        (86,692)
  Change in short-term bank credit and loans, net                                                113        (1,135)            216
                                                                                         ------------- ------------- ---------------
 Net cash provided by (used in) financing activities                                          34,989       (16,337)        (52,632)
                                                                                         ------------- ------------- ---------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                          19,746        14,180         (42,047)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
    PERIOD                                                                                    34,109        76,156          76,156
                                                                                         ------------- ------------- ---------------
CASH AND CASH EQUIVALENTS AT THE END OF THE  PERIOD                                         $ 53,855      $ 90,336        $ 34,109
                                                                                         ============= ============= ===============
(*) Dividend received                                                                      $   4,138     $   3,651       $   8,150
                                                                                         ============= ============= ===============

(**) Restated (See Notes 1B and 3)

(***) Derived from the Company's 2004 audited financial statements

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

                                      -8-



                                                                                             ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------------------------
U.S. dollars (in thousands)

                                                                                                          
                                                                                        Six months ended        Year ended
                                                                                            June 30,           December 31,
                                                                                    ------------------------- ---------------
                                                                                       2005         2004           2004
                                                                                    ------------ ------------ ---------------
                                                                                          (Unaudited)              (*)

SUPPLEMENTARY CASH FLOWS
    ACTIVITIES:

     Cash paid during the period for:

       Income taxes                                                                 $ 13,233        $ 6,614        $ 13,305
                                                                                    ============ ============ ===============

       Interest                                                                     $   3,193       $    844      $   3,122
                                                                                    ============ ============ ===============

SCHEDULE A:
    Subsidiaries and businesses acquired

    Estimated net fair value of assets acquired and  liabilities  assumed at the
      date of acquisition:

    Working capital, net (excluding cash and cash equivalents)
                                                                                       $ (3,281)           -      $  (707)
       Property, plant and equipment                                                          -            -          (10)
      Goodwill, customer contracts and other intangible assets                           (1,514)           -       (1,598)
       Long-term liabilities - mainly advances from customers                             4,477            -            -
                                                                                    ------------ ------------ ---------------
                                                                                      $    (318)           -     $ (2,315)
                                                                                    ============ ============ ===============


* Derived from the Company's 2004 audited financial statements

                                      -9-

                                       ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands)

Note 1 -            GENERAL

              A.    The accompanying  unaudited interim  consolidated  financial
                    statements  have been  prepared in a condensed  format as of
                    June 30,  2005,  and for the three and six months then ended
                    in accordance with generally accepted accounting  principles
                    in the United States )U.S. GAAP( relating to the preparation
                    of financial  statements for interim  periods.  Accordingly,
                    certain  information  and  footnote   disclosures   normally
                    included in financial statements prepared in accordance with
                    generally  accepted  accounting  principles  in  the  United
                    States  but which are not  required  for  interim  reporting
                    purposes, have been condensed or omitted. See Note 7 for the
                    reconciliation  from  U.S.  GAAP  to  accounting  principles
                    generally accepted in Israel (Israeli GAAP).

                    These  statements  should  be read in  conjunction  with the
                    Company's annual financial statements and accompanying notes
                    as of December 31,  2004,  included in the Form 20-F for the
                    year ended December 31, 2004.

                    The interim  financial  statements  reflect all adjustments,
                    which are, in the  opinion of  management,  necessary  for a
                    fair  presentation.  All such  adjustments  were of a normal
                    recurring  nature.   Reclassifications  have  been  made  to
                    comparative  data in the balance  sheet as of  December  31,
                    2004 in order to conform to the current period presentation.

                    Comparative   data  in  the  condensed   interim   financial
                    statements for the three and six months ended June 30, 2004,
                    for the year  ended  December  31,  2004  and for the  three
                    months ended March 31, 2005 have been restated (see Notes 1B
                    and 3).

                    Operating  results  for the three and six months  ended June
                    30, 2005, are not necessarily indicative of the results that
                    may be expected for the year ending December 31, 2005.

              B.    On December 27, 2004, the Company  reached an agreement with
                    Koor  Industries  Ltd.  ("Koor") to  purchase  all of Koor's
                    holdings   in   Tadiran    Communications   Ltd.   ("Tadiran
                    Communications"),   which  represents  approximately  a  32%
                    interest  in Tadiran  Communications,  at a price of $37 per
                    share. This purchase was to be made concurrently with Koor's
                    purchase of approximately  9.8% of the Company's shares from
                    Federmann    Enterprises    Ltd    ("Federmann").    Tadiran
                    Communications  is an  Israeli  company,  whose  shares  are
                    traded on the Tel Aviv Stock  Exchange.  The purchase of the
                    interest in Tadiran  Communications was to have been made in
                    two stages,  subject to the terms  agreed  upon  between the
                    parties.

                    On April 18, 2005, the Company  completed the first stage of
                    the transaction to purchase shares of Tadiran Communications
                    from Koor. The first stage of the  transaction was completed
                    after  all the  precedent  conditions  were  met and all the
                    required approvals for this stage were obtained.

                    According  to  the  transaction  agreements,  Elbit  Systems
                    purchased from Koor, in this stage,  approximately  13.7% of
                    the outstanding shares of Tadiran in consideration for $62.5
                    million.  In addition to the shares previously  purchased by
                    Elbit   Systems   in  the   stock   market,   it  now  holds
                    approximately   21%   of   Tadirans'   shares.   The   total
                    consideration  paid  by the  Company  for  the  purchase  of
                    Tadiran shares from Koor and in the stock market amounted to
                    approximately $90 million.

                                      -10-

                                         ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands, except per share data)

Note 1 -            GENERAL (CONT.)

                    The  excess  of the  amount  paid  for  the  Tadiran  shares
                    acquired  until the end of the  second  quarter of 2005 over
                    their book value is  approximately  $62 million.  Based on a
                    purchase  price  allocation  analysis  ("PPA")  performed by
                    independent advisors, this excess was attributed as follows:



                                                           

                                                          $M     Expected useful lives
                                                          --     ---------------------
             In Process R&D ("IPR&D")                    5.0     immediate write-off
             Inventory                                   1.5     Up to a quarter
             Other tangible assets and liabilities       0.5     5 years
             Brand                                       4.0     15 years
             name
             Customer base and backlog                  20.0     2-12 years
             Technology                                 12.0     10 years
             Goodwill                                   19.0     Indefinite - subject to annual impairment test
                                                     --------
                                                        62.0
                                                     ========

                    As a result of the  acquisition  in the  second  quarter  of
                    2005, the Company is able to execise  significant  influence
                    in Tadiran. In accordance with APB 18, "The Equity Method of
                    Accounting for  Investments in Common Stock",  the Company's
                    interest in Tadiran,  which was previously  accounted for as
                    available-for-sale  securities,  is accounted  retroactively
                    under  the  equity  method  of   accounting   ("step-by-step
                    acquisition").  Implementing  the  step-by-step  acquisition
                    method resulted in a restatement of the Company's  financial
                    statements  for all prior  periods,  in which the  Company's
                    investment  in Tadiran  Communications  was accounted for as
                    available-for-sale securities.

                    The following are the effects of the restatement:

                    (1)    Consolidated balance sheet


                                                                                             
                                                                                 December 31, 2004
                                                                   -------------------------------------------
                                                                         As          Effect by          As
                                                                      reported       restatement     restated
                                                                      --------       -----------     --------
             Other receivables and prepaid expenses                   $ 52,335            $  752      $53,087
             Investment in affiliated companies and partnership         33,124            14,748       47,873
             Available for sale securities                              18,017          (18,017)            -
             Accumulated other comprehensive loss                      (3,346)           (1,396)      (4,742)
             Retained earnings                                         156,387           (1,120)      155,267
             Total shareholders'                                       434,700           (2,516)      432,184
             equity

                    (2)    Consolidated statement of income

                                                                           Year ended December 31, 2004
                                                                   -------------------------------------------
                                                                        As           Effect by          As
                                                                      reported       restatement     Restated
                                                                      --------       -----------     --------
             Equity in net earnings of affiliated companies
             and partnership                                           $ 7,765         $ (1,120)      $ 6,645
             Net income                                                 52,993           (1,120)       51,873
             Basic net earnings per share                                 1.33            (0.03)         1.30
             Diluted net earnings per share                               1.29            (0.03)         1.26


                                      -11-

                                         ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands)

Note 1 -            GENERAL (CONT.)

              C.    On July 6,  2005,  the  Company  reported  that it signed an
                    agreement with Koor to acquire all of Koor's 70% holdings in
                    Elisra Electronic Systems Ltd. ("Elisra"),  in consideration
                    for $70 million to be paid in the form of cash.  The parties
                    also agreed on an additional  contingent  consideration as a
                    result of future insurance  proceeds relating to the fire at
                    Elisra's plant in 2001. As part of the transaction, Koor may
                    purchase  Dekolink  Wireless  Ltd.  from Elisra at an agreed
                    upon price.  Dekolink  Wireless  Ltd. is a start-up  company
                    engaged in the cellular  networks area that is  wholly-owned
                    by Elisra.  The acquisition  agreement relating to Elisra is
                    subject to receipt of the Company's shareholders approval as
                    well as approvals from governmental  authorities,  including
                    the Israel Antitrust Authority.

                    Concurrently  with signing the  agreement to acquire  Koor's
                    holdings  in Elisra,  the  Company  and Koor agreed to amend
                    their agreements regarding the Company's purchase of Tadiran
                    shares held by Koor. Pursuant to the amendment,  the Company
                    will accelerate the acquisition  from Koor of  approximately
                    5% of Tadiran's  outstanding shares, out of a total of 18.2%
                    of Tadiran  outstanding  shares that the  Company  agreed to
                    acquire  as part of the second  stage of the  aforementioned
                    agreement.  Upon  completion  of the  acquisition  of the 5%
                    interest  in  Tadiran,  the Company and Koor will have equal
                    representation  on  Tadiran's  board  of  directors,  Joseph
                    Ackerman,  Elbit  Systems  President,  will be  appointed as
                    Chairman of Tadiran's  Board of Directors and the provisions
                    of the shareholders'  agreement relating to joint control in
                    Tadiran will enter into effect.

                    The price to be paid by the Company  for the Tadiran  shares
                    will be the price agreed upon in the original agreement with
                    Koor signed on December 27, 2004.

                    The agreement for  acquiring  Koor's  holdings in Elisra and
                    the amendments regarding the acquisition of Koor's shares in
                    Tadiran,   were  signed   following   the  approval  of  the
                    transactions  by the Company's  Audit Committee and Board of
                    Directors,   who   obtained  a  fairness   opinion  from  an
                    independent appraiser regarding the consideration to be paid
                    for the Elisra shares.

                    The purchase of the  approximately 5% interest in Tadiran by
                    Elbit Systems will take place  following the approval of the
                    Company's shareholders for the acquisition of Elisra and the
                    amendments to the Tadiran acquisition agreements.  Following
                    the  acquisition of the 5% interest in Tadiran,  the Company
                    will hold a total of approximately  26% of Tadiran's shares,
                    including  approximately 7% that were purchased on the stock
                    market.  Upon  completion  of the  Elisra  transaction,  the
                    Company  will  complete  the  purchase  of Koor's  remaining
                    shares in Tadiran - approximately  13% - reaching a total of
                    approximately  a  39%  interest  in  Tadiran  based  on  the
                    Company's current shareholdings.

                                      -12-

                                         ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands)

Note 1 -            GENERAL (CONT.)

              D.    In  March  2005,  the  Company,   through  its  wholly-owned
                    subsidiary  Cyclone  Aviation  Products  Ltd.   ("Cyclone"),
                    acquired from Israel Military  Industries  Ltd.  ("IMI") the
                    assets  and  customer  contracts  related  to  the  Aircraft
                    Systems  Division  of  IMI  ("the  Aircraft   Division")  in
                    consideration  for  approximately $7 million,  to be paid in
                    cash  (approximately  $1 million  out of which $318 was paid
                    through  balance  sheet  date) and  assumed  liabilities  of
                    approximately  $6 million.  The excess of the purchase price
                    over the fair value of net tangible  assets  acquired in the
                    amount of  approximately  $1,500 was allocated to customers'
                    contracts to be amortized  over an estimated  period of four
                    years.

                    The  Aircraft  Division  manufactures  weapon  payloads  and
                    external fuel tanks for fighter aircrafts.

                    The financial  results of the business acquired are included
                    in the Company's  consolidated financial statements from the
                    date of acquisition.

                    Pro forma  information  in accordance  with SFAS No. 141 has
                    not been provided,  since the revenues and net income of the
                    Aircraft  Division are not material in relation to the total
                    consolidated revenues and net income of the Company.

Note 2 -            SIGNIFICANT ACCOUNTING POLICIES

              A.    The  significant   accounting   policies   followed  in  the
                    preparation  of  these  statements  are  identical  to those
                    applied  in  preparation  of  the  latest  annual  financial
                    statements.

              B.    The accompanying  financial statements have been prepared in
                    U.S.  dollars since the  functional  currency of the primary
                    economic  environment  in which the  operations of the Group
                    (which includes Elbit Systems Ltd. and its subsidiaries) are
                    conducted is the U.S. dollar.

Note 3 -      STOCK-BASED COMPENSATION

              As  mentioned  in  Note  2X  to  the  Company's  annual  financial
              statements,  effective  January 1, 2004,  the Company  adopted the
              fair value recognition  provisions of SFAS 123. Under the modified
              prospective  method of adoption  selected by the Company under the
              provisions of SFAS No. 148, the fair value recognition  provisions
              are applied from January 1, 2004 to all employee  awards  granted,
              modified  or  settled  subsequent  to  January  1,  2004,  and  to
              previously  granted  awards that were not fully vested on the date
              of adoption.  The aforementioned  decision to adopt the fair value
              recognition  provisions  of SFAS 123 took place in December  2004.
              SFAS 123 fair value recognition  provisions were adopted effective
              January 1, 2004 and the  results of the first  three  quarters  of
              2004 were  restated  accordingly.  The  restatement  reflects  the
              change in stock-based  compensation  expense  calculated under the
              intrinsic value based method as compared to the expense calculated
              under the fair value based method.

                                      -13-

                                         ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands, except per share data)

Note 3 -      STOCK-BASED COMPENSATION (CONT.)

              The  following  is the effect of the  restatement  of  stock-based
              compensation expense on the financial statements for the three and
              six months ended June 30, 2004:



                                                                                                         

                                                                                     Three months ended June 30, 2004
                                                                                -------------------------------------------
                                                                                     As          Effect by            As
                                                                                     --          ---------            --
                                                                                   reported       restatement     restated
                                                                                   --------       -----------     --------

              Gross profit                                                         $ 58,518           $ 1,368     $ 59,886
              Operating income                                                       13,835             2,487       16,322
              Net income                                                             11,312             1,990       13,302
              Basic net earnings per share                                             0.28              0.05         0.33
              Diluted net earnings per share                                           0.28              0.05         0.33

                                                                                       Six months ended June 30, 2004
                                                                                -------------------------------------------
                                                                                     As          Effect by            As
                                                                                     --          ---------            --
                                                                                   reported       restatement     restated
                                                                                   --------       -----------     --------
              Gross profit                                                        $ 115,438           $ 1,040     $116,478
              Operating income                                                       29,669             1,891       31,560
              Net income                                                             24,039             1,515       25,554
              Basic net earnings per share                                             0.61              0.03         0.64
              Diluted net earnings per share                                           0.59              0.04         0.63

Note 4 -      INVENTORIES, NET OF ADVANCES


                                                                                                   

                                                                                        June 30,       December 31,
                                                                                          2005             2004
                                                                                     ----------------------------------
                                                                                       (Unaudited)          (*)
                                                                                     ----------------------------------

              Cost of long-term contracts in progress                                   $ 309,308        $ 254,009
              Raw materials                                                                78,426           71,813
              Advances to suppliers and subcontractors                                     27,549           21,164
                                                                                        ---------        ---------
                                                                                          415,283          346,986
               Less - Cost incurred on contracts in progress
                   deducted from customer advances                                         34,512         14,533
                                                                                        ---------        ---------
                                                                                          380,771         332,453
               Less - Advances received from customers                                     77,104           75,776
               Provision for losses                                                         7,064            7,636
                                                                                        ---------        ---------
                                                                                        $ 296,603        $ 249,041
                                                                                        =========        =========


              * Derived from the Company's 2004 audited financial statements

                                      -14-

                                         ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands)

Note 5 -      RECENTLY ISSUED ACCOUNTING STANDARDS

              A.    In  March  2005,  the  SEC  released  SEC  Staff  Accounting
                    Bulletin No. 107, "Share-Based Payment" ("SAB 107"). SAB 107
                    provides the SEC staff's position  regarding the application
                    of Statement 123R and contains interpretive guidance related
                    to the  interaction  between  Statement 123R and certain SEC
                    rules and  regulations  and also  provides  the SEC  staff's
                    views   regarding  the  valuation  of  share-based   payment
                    arrangements  for public  companies.  SAB 107 highlights the
                    importance of disclosures made related to the accounting for
                    share-based payment  transactions.  The Company is currently
                    reviewing  the  effect  of SAB  107;  however,  it does  not
                    believe  that SAB 107 will  have a  material  impact  on its
                    financial position, results of operations or cash flows.

              B.    In  May  2005,  the  FASB  issued   Statement  of  Financial
                    Accounting Standard No. 154 ("FAS 154"), "Accounting Changes
                    and  Error  Corrections"  - a  replacement  of APB  No.  20,
                    Accounting  Changes"  and FAS No. 3,  "Reporting  Accounting
                    Changes in Interim Financial  Statements".  FAS 154 provides
                    guidance on the  accounting  for and reporting of accounting
                    changes and error  corrections.  APB  Opinion 20  previously
                    required that most voluntary changes in accounting principle
                    be  recognized  by  including in net income of the period of
                    the  change the  cumulative  effect of  changing  to the new
                    accounting   principle.   FAS  154  requires   retrospective
                    application  to prior  periods'  financial  statements  of a
                    voluntary  change  in  accounting  principle  unless  it  is
                    impracticable  to do so. FAS 154 is effective for accounting
                    changes  and  corrections  of errors  made in  fiscal  years
                    beginning  after  December 15, 2005.  The Company  estimates
                    that the  adoption  of FAS 154  will not have a  significant
                    impact on its results of operations, financial condition and
                    cash flows.

              C.    FASB  Statements  No.  123  (revised   2004),   "Share-based
                    Payment"  (FASB  123(R)) (See Note 2AA(3)) to the  Company's
                    annual  financial  statements  for  2004,  was to have  been
                    effective as of the beginning of the first interim or annual
                    reporting period that commences after June 15, 2005 (July 1,
                    2005 for the  Company);  however,  on April  14,  2005,  the
                    United States  Securities  and Exchange  Commission  ("SEC")
                    delayed  effectiveness  of FAS  123(R)  for  companies  with
                    fiscal  years  ending  December 31 (such as the  Company) to
                    January 1, 2006.

Note 6 -      TAXES ON INCOME

              On July 25, 2005, the Knesset  (Israeli  Parliament)  approved the
              Law for the Amendment of the Income Tax Ordinance (No. 147), 2005,
              which prescribes,  among other  provisions,  a gradual decrease in
              the corporate  tax rate in Israel to the  following tax rates:  in
              2006 - 31%,  in 2007 - 29%,  in  2008 - 27%,  in 2009 - 26% and in
              2010 and  thereafter - 25%. The Company  estimates that the change
              in tax  rate is not  expected  to have a  material  effect  on the
              Company's financial position and results of operations in 2005.

                                      -15-

                                         ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
--------------------------------------------------------------------------------
U. S. dollars (In thousands)

Note 7 -      RECONCILIATION TO ISRAELI GAAP

              As  described  in Note  1,  the  Company  prepares  its  financial
              statements in accordance  with U.S.  GAAP. See Note 26 to the 2004
              annual  financial  statements for a description of the differences
              between U.S. GAAP and Israeli GAAP in respect to the Company.  The
              effects of the  differences  between U.S. GAAP and Israeli GAAP on
              the Company's financial statements are detailed below.

              A.    Effect on net income



                                                                                                 

                                                                            Three months ended          Year ended
                                                                                 June 30,              December 31,
                                                                       ------------------------------------------------
                                                                           2005            2004            2004
                                                                       -------------- ---------------------------------
                                                                                (Unaudited)                 (*)

                     Net income as reported according to
                     U.S. GAAP                                              $ 23,599       $ 25,554       $ 51,873
                     Adjustments to Israeli GAAP                              (3,004)        (1,907)           662
                                                                            --------       --------       --------
                     Net income according to Israeli GAAP                   $ 20,595       $ 23,647       $ 52,535
                                                                            ========       ========       ========


              B.    Effect on shareholders' equity

                                                                                                          As per
                                                                      As reported      Adjustments     Israeli GAAP
                                                                      -----------      -----------     ------------
                 As of June 30, 2005 (Unaudited)

                 Shareholders' equity                                  $ 446,973       $ (17,143)       $ 429,830
                                                                       =========       =========        =========

                 As of December 31, 2004 (*)

                 Shareholders' equity                                  $ 432,184       $ (12,004)      $ 420,180
                                                                       =========       =========        =========


              * Derived from the Company's 2004 audited financial statements

                                   # # # # # #


                                      -16-