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<SEC-DOCUMENT>0000910680-07-000427.txt : 20070517
<SEC-HEADER>0000910680-07-000427.hdr.sgml : 20070517
<ACCEPTANCE-DATETIME>20070517112145
ACCESSION NUMBER:		0000910680-07-000427
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20070515
FILED AS OF DATE:		20070517
DATE AS OF CHANGE:		20070517

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ELBIT SYSTEMS LTD
		CENTRAL INDEX KEY:			0001027664
		STANDARD INDUSTRIAL CLASSIFICATION:	AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			L3
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-28998
		FILM NUMBER:		07860007

	BUSINESS ADDRESS:	
		STREET 1:		ADVANCED TECHNOLOGY CENTER
		STREET 2:		PO BOX 539
		CITY:			HAIFA, ISRAEL
		STATE:			L3
		ZIP:			31053
		BUSINESS PHONE:		01197248316626

	MAIL ADDRESS:	
		STREET 1:		ADVANCED TECHNOLOGY CENTER
		STREET 2:		PO BOX 539
		CITY:			HAIFA, ISRAEL
		STATE:			L3
		ZIP:			31053
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>f6k051507.htm
<DESCRIPTION>REPORT OF FOREIGN PRIVATE ISSUER
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>UNITED STATES<BR>SECURITIES AND EXCHANGE COMMISSION</B> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">Washington, D.C. 20549 </FONT> </P>

<!-- MARKER FORMAT-SHEET="Center Rule" FSL="Default" -->
     <P ALIGN=CENTER>_________________ </P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>FORM 6-K</B> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">Report of Foreign Private Issuer<BR>
Pursuant to Rule 13a-16 or 15d-16<BR>
Under the Securities Exchange Act of 1934<BR>
For the Month of May&nbsp;2007 </FONT> </P>

<!-- MARKER FORMAT-SHEET="Center Rule" FSL="Default" -->
     <P ALIGN=CENTER>_________________ </P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commission File Number:
000-28998</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>ELBIT SYSTEMS LTD.</B> </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Translation of Registrant&#146;s Name into English)<BR>
Advanced Technology Center, P.O.B. 539, Haifa 31053, Israel<BR>
(Address of Principal Corporate Offices) </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant files or will file annual reports under cover of Form 20-F or Form 40-F:  </FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" WIDTH="50%">
<TR VALIGN="TOP">
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <IMG SRC="ballotx.jpg" HEIGHT="15" WIDTH="15"> </FONT></TD>
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Form 20-F</FONT></TD>
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <img src="ballot.jpg" HEIGHT="15" WIDTH="15"> </FONT></TD>
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Form 40-F</FONT></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(1): <img src="ballot.jpg" HEIGHT="15" WIDTH="15"> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Note</B>: Regulation S-T Rule
101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to
provide an attached annual report to security holders.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(7): <img src="ballot.jpg" HEIGHT="15" WIDTH="15"> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Note</B>: Regulation S-T Rule
101(b)(7) only permits the submission in paper of a Form 6-K submitted to furnish a
report or other document that the registrant foreign private issuer must furnish and make
public under the laws of the jurisdiction in which the registrant is incorporated,
domiciled or legally organized (the registrant&#146;s &#147;home country&#148;), or under
the rules of the home country exchange on which the registrant&#146;s securities are
traded, as long as the report or other document is not a press release, is not required
to be and has not been distributed to the registrant&#146;s security holders, and, if
discussing a material event, has already been the subject of a Form 6-K submission or
other Commission filing on EDGAR.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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:  </FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" WIDTH="50%">
<TR VALIGN="TOP">
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <img src="ballot.jpg" HEIGHT="15" WIDTH="15"> </FONT></TD>
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Yes</FONT></TD>
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> <img src="ballotx.jpg" HEIGHT="15" WIDTH="15"> </FONT></TD>
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">No</FONT></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If &#147;Yes&#148; is marked,
indicate below the file number assigned to the registrant in connection with Rule
12g3-2(b): 82-______________  </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 5; page: 5" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attached
hereto as Exhibit 1 and incorporated herein by reference is the Registrant&#146;s press
release dated May 15, 2007.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attached
hereto as Exhibit 2 and incorporated herein by reference is the Registrant&#146;s Management Report with respect to the
results of operations of the Registrant for the quarter ended March 31, 2007.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attached
hereto as Exhibit 3 and incorporated herein by reference is the Registrant&#146;s condensed
interim consolidated financial statements for the quarter ended March 31, 2007. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>SIGNATURE </U></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Large Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ELBIT SYSTEMS LTD.</B><BR>
(Registrant)<BR>
<BR>
<BR>
By:&nbsp;<U>&nbsp;/s/&nbsp;Yaniv Baram&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
Name:&nbsp;Yaniv Baram<BR>
Title:&nbsp;&nbsp;&nbsp;Corporate Secretary<BR>
</FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated: May 15, 2007 </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="sheet: 1; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><U>EXHIBIT INDEX </U></FONT></H1>

<TABLE WIDTH="70%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Exhibit No.</U></FONT></TH>
     <TH ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Description</U></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>1.</FONT></TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR><A HREF="#ex-1">Press release dated May 15, 2007</A></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2.</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><A HREF="#ex-2">Management's Report</A></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3.</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><A HREF="#ex-3">Financial Statements</A></FONT></TD></TR>
</TABLE>

<DIV STYLE="page-break-after:always"></DIV>





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 26; page: 26" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>

<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="ex-1">Exhibit 1</A> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <IMG SRC="elbitlogo031407.jpg"> </FONT></P>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS REPORTS<BR>FIRST
QUARTER 2007 RESULTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><I>Continued Record
Revenues and Backlog of Orders;<BR><BR>Revenues Increased by 20.7% Year over Year to $403.6
Million;<BR><BR>Net Profit Increased by 32.0% Year over Year to $19.1 Million</I>  </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Haifa, Israel, May 15, 2007 &#150;
Elbit Systems Ltd. (the &#147;Company&#148;) (NASDAQ: ESLT)</B> the international defense
company, today reported its consolidated results for the first quarter ended March 31,
2007. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The Company&#146;s backlog of
orders</B> <B>as of March 31, 2007</B> totaled $3,796 million, as compared with $3,786
million as of December 31, 2006. The backlog amount reflects a reduction of approximately
$70 million due to a cessation settlement of the Bulgarian helicopter program.
Approximately 71% of the backlog relates to orders outside of Israel. Approximately 70% of
the Company&#146;s backlog as of March 31, 2007 is scheduled to be performed during the
upcoming three quarters of 2007 and during 2008. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Consolidated revenues for the
first quarter of 2007</B> increased by 20.7% to $403.6 million, from $334.4 million in the
first quarter of 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Gross profit for the first quarter
of 2007</B> increased by 18.3% to $103.5 million (25.7% of revenues), as compared with
gross profit of $87.5 million (26.2% of revenues) in the first quarter of 2006. The gross
profit margin in the first quarter of 2007 was affected mainly by the impact of the
weakening U.S. Dollar against the New Israeli Shekel (&#147;NIS&#148;), which increased
the effective labor costs in Israel. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Consolidated net income for the
first quarter of 2007 </B>increased by 32.0% to $19.1 million (4.7% of revenues), as
compared with $14.5 million (4.3% of revenues) in the first quarter of 2006. Diluted
earnings per share for the<B> </B>first quarter of 2007 were $0.45, as compared with $0.35
for the<B> </B>first quarter of 2006. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Operating Cash flow </B>during the
first quarter of 2007 reached a record $86.8 million. </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

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<HR SIZE=5 COLOR=GRAY NOSHADE>

<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <IMG SRC="elbitlogo031407.jpg"> </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The President and CEO of Elbit
Systems, Joseph Ackerman, commented: &#147;The continued revenue and profit growth trend
we reported is especially impressive due to the organic growth we have recorded in the
first quarter of 2007. This growth of approximately 20% is the result of our long-term
strategy of expanding our operations to additional target markets and a continued
investment in the R&amp;D of advanced technologies and cutting edge products. This
strategy enables us to win prestigious and important contracts and to further enhance our
network of customers and business partners. It is a long-term strategy that will continue
guiding us in the future.&#148; <BR><BR>Mr. Ackerman added &#147;After the end of this report
period we completed the acquisition of Tadiran Communications&#146; shares and are in the
process of realizing the new synergies within the Group&#146;s companies. We have also
prepared an action plan for Elisra, however, it requires cooperation from the employees
and their representatives.&#148; </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors declared a
dividend of $0.16 per share for the first quarter<B> </B>of 2007. The dividend&#146;s
record date is May 29, 2007, and the dividend will be paid on June 11, 2007, net of taxes
and levies, at the rate of 18.15%. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left Bold Size 2" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Conference Call </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company will also be hosting a
conference call today, Tuesday, May 15, 2007 at 10:00 am EDT. On the call, management will
review and discuss its first quarter 2007 results and will be available to answer
questions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To participate, please call one of
the following teleconferencing numbers. Please begin placing your calls at least 10
minutes before the conference call commences. If you are unable to connect using the
toll-free numbers, please try the international dial-in number. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>US Dial-in Numbers:
1-888-407-2553<BR>UK Dial-in Number: 0-800-917-9141<BR><BR>
ISRAEL Dial-in Number: 03-918-0609<BR>INTERNATIONAL Dial-in Number: +972-3-918-0609<BR>
at:<BR>10:00 am Eastern Time<BR>7:00 am Pacific Time<BR>
3:00 pm UK Time<BR>5:00 pm Israel Time</FONT></H1>

<DIV STYLE="page-break-after:always"></DIV>

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<HR SIZE=5 COLOR=GRAY NOSHADE>

<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <IMG SRC="elbitlogo031407.jpg"> </FONT></P>






<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This call will be broadcast live on
Elbit Systems&#146; web-site at <U>http://www.elbitsystems.com</U>. An online replay will
be available from 24 hours after the call ends. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Alternatively, for two days following
the end of the call, investors will be able to dial a replay number to listen to the call.
The dial-in number is either: 1 877 456 0009 (US) 0 800 917 4613 (UK) or +972 3 925 5942
(Israel and International). </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left Bold Size 2" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>About Elbit Systems Ltd.: </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Elbit Systems Ltd. is an
international defense electronics company engaged in a wide range of defense-related
programs throughout the world. The Elbit Systems Group, which includes the company and its
subsidiaries, operates in the areas of aerospace, land and naval systems, command,
control, communications, computers, intelligence, surveillance and reconnaissance
(&#147;C4ISR&#148;), advanced electro-optic and space technologies, EW suites, airborne
warning systems, ELINT systems, data links and military communications systems and
equipment. The Group also focuses on the upgrading of existing military platforms and
developing new technologies for defense and homeland security applications. </FONT></P>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Company Contact:</B><BR>
Joseph Gaspar, Corporate VP &amp; CFO<BR>
Dalia Rosen, Director of Corporate Communications<BR>
Elbit Systems Ltd.<BR>
Tel: +972-4-8316663<BR>
Fax: +972-4-8316944<BR>
E-mail: gspr@elbit.co.il<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;daliarosen@elbit.co.il<BR>
</FONT></TD>
     <TD WIDTH="50%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>IR Contact:</B><BR>
Ehud Helft / Kenny Green<BR>
&nbsp;<BR>
G.K. Investor Relations<BR>
Tel: 1-866-704-6710<BR>
Fax: + 972-3-6074711<BR>
E-mail: info@gkir.com<BR>
</FONT></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><B>STATEMENTS IN THIS PRESS
RELEASE WHICH ARE NOT HISTORICAL DATA ARE FORWARD-LOOKING STATEMENTS WHICH INVOLVE KNOWN
ANDUNKNOWN RISKS, UNCERTAINTIES OR OTHER FACTORS NOT UNDER THE COMPANY&#146;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&#146;S PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.</B></I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I><B>(FINANCIAL TABLES TO
FOLLOW)</B></I> </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

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<HR SIZE=5 COLOR=GRAY NOSHADE>

<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <IMG SRC="elbitlogo031407.jpg"> </FONT></P>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>ELBIT SYSTEMS LTD.<BR>
<U>CONSOLIDATED BALANCE SHEETS</U></B><BR>
(In thousand of US Dollars) </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>March 31<BR>
2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>December 31<BR>
2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>Unaudited</FONT></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>Audited</FONT></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=62% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR><U><B>Assets</B></U></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Current Assets:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cash and short term deposits</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>155,822</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>85,400</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Trade receivable and others</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>427,289</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>465,428</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Inventories, net of advances</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>395,015</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>371,962</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total current assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>978,126</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>922,790</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Affiliated Companies &amp; other Investments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>231,941</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>235,723</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Long-term receivables &amp; others</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>191,443</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>189,236</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Fixed Assets, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>294,090</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>294,628</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other assets, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>126,656</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>128,995</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,822,256</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,771,372</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><B><U>Liabilities and Shareholder's Equity</U></B></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Current liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>827,435</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>810,885</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Long-term liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>485,118</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>460,032</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Minority Interest</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,380</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6,871</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Shareholder's equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>501,323</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>493,584</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,822,256</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,771,372</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

<DIV STYLE="page-break-after:always"></DIV>

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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> <IMG SRC="elbitlogo031407.jpg"> </FONT></P>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>ELBIT SYSTEMS LTD.<BR><U>CONSOLIDATED
STATEMENTS OF INCOME</U></B><BR>(In thousand of US Dollars, except for per share amounts)</FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman" SIZE=2>Three Months Ended<BR>
March 31</FONT></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>Year Ended<BR>
December 31</FONT></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman" SIZE=2>Unaudited</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>Audited</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=54% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Revenues</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>403,600</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>334,370</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,523,243</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Cost of revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>300,062</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>246,830</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,149,768</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Gross Profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>103,538</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>87,540</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>373,475</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Research and development, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>24,093</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>21,438</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>92,232</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Marketing and selling</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>32,371</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>26,248</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>111,880</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>General and administrative</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20,318</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>19,007</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>77,505</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total operating expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>76,782</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>66,693</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>281,617</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Operating income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>26,756</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20,847</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>91,858</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Financial expenses, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(2,928</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(4,241</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(21,456</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other income (expenses), net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>113</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>908</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,814</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Income before income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>23,941</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>17,514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>72,216</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Provisions for income taxes</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,733</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4,604</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20,694</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>17,208</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>12,910</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>51,522</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Equity in net earnings (losses) of affiliated</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>companies and partnership</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,400</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,267</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>14,743</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Minority rights</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,509</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(709</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5,977</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>19,099</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>14,468</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>72,242</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Earnings per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Basic net earnings per share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>0.45</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>0.35</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1.75</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Diluted net earnings per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0.45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0.35</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1.72</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

<DIV STYLE="page-break-after:always"></DIV>




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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="ex-2">Exhibit 2</A></FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>Elbit Systems
Ltd.<BR>Management&#146;s Report<BR>For
The Quarter Ended March 31, 2007</FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>This
report should be read together with the unaudited financial statements for the quarter
ended March 31, </B> <B>2007 of Elbit Systems Ltd. (&#147;Elbit Systems&#148; and together
with its subsidiaries, the &#147;Company&#148; or the </B> <B>&#147;Group&#148;), the
Company&#146;s audited consolidated financial statements and related notes for the year
ended </B> <B>December 31, 2006, the Company&#146;s management report for the year ended
December 31, 2006 and the Company&#146;s </B> <B>Form 20-F for the year ended December 31,
2005, filed by the Company with the U.S. Securities and Exchange </B> <B>Commission and
with the Israeli Securities Authority.</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>Forward
looking statements with respect to the Company&#146;s business, financial condition and
results of </B> <B>operations in this document are subject to risks and uncertainties that
could cause actual results to differ </B> <B>materially from those contemplated in such
forward looking statements, including, but not limited to, product </B> <B>demand,
pricing, market acceptance, changing economic conditions, risks in product and technology
</B> <B>development, the effect of the Company&#146;s accounting policies as well as
certain other risk factors which are </B> <B>detailed from time to time in the
Company&#146;s SEC filings.</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>A.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Executive
Overview</U></B>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Business
Description</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Group operates in the areas of aerospace, land and naval systems, command, control,
communications, computers, intelligence, surveillance and reconnaissance (&#147;C<SUP>(4)</SUP>ISR&#148;),
advanced electro-optic and space technologies, EW suites, airborne warning systems, ELINT
systems, data links and military communications systems and equipment. The Group also
focuses on the upgrading of existing military platforms and developing new technologies
for defense and homeland security applications.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Group provides support services for the platforms it upgrades as well as the systems and
products it supplies. In addition, the Group provides a wide range of logistic support
services. Several of the Group&#146;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. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Group tailors and adapts its technologies, integration skills, market knowledge and
battle-proven systems to each customer&#146;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. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1 </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Financial
Highlights</B></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s revenues increased by 20.7% and reached $403.6 million in the first quarter
of 2007, as compared to $334.4 million in the first quarter of 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
earnings in the first quarter of 2007 were $19.1 million (4.7% of revenues) and the
diluted earnings per share were $0.45, as compared to $14.5 million (4.3% of revenues) and
$0.35 in the first quarter of 2006. Net earnings and EPS increased by 32% and 29%,
respectively. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s cash flow generated from operations in the quarter ended March 31, 2007 was
$86.8 million, as compared to $75.4 million in the quarter ended March 31, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Board of Directors declared a dividend of $0.16 per share for the first quarter of 2007.  </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>B.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Recent
Events</U></B>  </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
April 26, 2007, the Company completed its Cash Tender Offer (&#147;the Offer&#148;) for
the balance of the ordinary shares of Tadiran Communications Ltd. (&#147;Tadiran&#148;),
which prior to the completion of the Offer was a publicly traded company in Israel, held
43% by the Company. As a result, and in accordance with the provisions of Israeli law
relating to tender offers, the Company acquired under the terms of the Offer, the
remaining shares of Tadiran from those Tadiran shareholders who did not provide an
acceptance notice relating to the Offer. In addition, Tadiran agreed to cancel any stock
options remaining outstanding after completion of the Offer in consideration for the same
price per share as under the Offer. As a result, Tadiran became a private, wholly-owned
subsidiary of the Company. The total amount paid by the Company for Tadiran&#146;s shares,
relating to the Offer and the remaining shares, was approximately $382 million. The
results of Tadiran will be consolidated in the Company&#146;s financial statements
commencing the date of completion of the Offer. The Company is in the process of preparing
a Purchase Price Allocation (&#147;PPA&#148;) related to the acquisition and estimates
that it will have a material effect, which includes an In-Process Research and Development
(&#147;IPR&amp;D&#148;) write-off and other related adjustments on its 2007 second quarter
results. </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>C.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Backlog
of Orders</U> </B> </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s backlog of orders as of March 31, 2007 reached $3,796 million, of which
71% were for orders outside of Israel, and includes a reduction of approximately $70
million resulting from the cessation settlement of the Bulgarian helicopter program in
the first quarter of 2007. The Company&#146;s backlog as of December 31, 2006 was $3,786
million, of which 68% were for orders outside of Israel.  </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Approximately
70% of the Company&#146;s backlog as of March 31, 2007 is scheduled to be performed in
the following three quarters of 2007 and during 2008. The majority of the 30% balance is
scheduled to be performed in 2009 and 2010.  </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>D.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U><B>Critical
Accounting Policies and Estimates</B></U> </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s significant accounting policies are described in Note 2 to the audited
consolidated financial statements for the year ended December 31, 2006. See also the
Company&#146;s management report for the year ended December 31, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company adopted the provisions of FIN 48 on January&nbsp;1, 2007. FIN 48 clarifies the
accounting for uncertainty in income taxes by prescribing a minimum recognition threshold
for a tax position taken or expected to be taken in a tax return that is required to be
met before being recognized in the financial statements. FIN 48 also provides guidance on
de-recognition, measurement, classification, interest and penalties, accounting in interim
periods, disclosure and transition. As of January 1, 2007, the Company&#146;s unrecognized
tax benefit (&#147;tax contingencies&#148;) totaled $18.8 million. As a result of the
implementation of FIN 48, the Company&#146;s tax contingencies increased by $ 4.8 million,
which were recorded as a reduction to retained earnings. The Company do not expect a
significant increase or decrease in unrecognized tax benefits over the next 12 months. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company and its subsidiaries are subject to examination by various tax authorities in
jurisdictions such as Israel, the United States and Europe. With respect to the Company
and its major subsidiaries, we have completed the examinations by the tax authorities for
tax years through 2000. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>E.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Elisra
Electronic Systems Ltd. (&#147;Elisra&#148;)</U></B>  </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Further
to the efficiency plan previously announced, Elisra&#146;s management has adopted
corrective action measures. The Company believes that the efficiency plan and corrective
action measures, which require the cooperation of Elisra&#146;s employees, provide a
reasonable basis to improve Elisra&#146;s efficiency. During the second quarter of 2007,
the Company will evaluate whether the level of Elisra&#146;s implementation of the
corrective action plan requires the Company to reflect any significant impairment in its
recorded assets related to Elisra. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>F.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>2007
Employee Stock Option Plan</U></B>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
January 2007, the Company&#146;s shareholders approved the Company&#146;s 2007 Option Plan
(the &#147;Plan&#148;). The purpose of the Plan is to provide the benefits arising from
ownership of share capital by the Company&#146;s and certain of its subsidiaries
employees&#146;, who are expected to contribute to the Elbit Systems Group&#146;s future
growth and success on the first quarter of 2007. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During
the first quarter of 2007, the Company granted to employees 2,366,300 options under the
Plan. The average exercise price of the options granted in the first quarter of 2007 was
$33.19. All grants were made in accordance with the grant date conditions contained in the
approved Plan. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
compensation expenses, related to the Plan, amounting to $1 million were recorded in the
three months ended March 31, 2007. The expenses were recorded based on SFAS No. 123(R) and
SAB 107. As of March 31, 2007, there was $19 million of total unrecognized compensation
cost related to share-based compensation arrangements granted under the Plan. That cost is
expected to be recognized over a weighted-average period of four years. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>G.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Summary
of Financial Results</U></B>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
following table sets forth the consolidated statements of operations of the Company and
its subsidiaries for the three-month periods ended March 31, 2007 and March 31, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=7><FONT FACE="Times New Roman" SIZE="2">For the three months ended<BR>
March 31</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE="2">2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman" SIZE="2">$</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman" SIZE=2>%</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman" SIZE="2">$</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman" SIZE=2>%</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=7><FONT FACE="Times New Roman" SIZE="2">(In thousands of U.S. dollars, except per share data)</FONT></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=55% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Total revenues</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>403,600</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100.0</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>334,370</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100.0</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>Cost of revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>300,062</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>74.3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>246,830</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>73.8</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>103,538</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>25.7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>87,540</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>26.2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>Research and development (R&amp;D) expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>29,699</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7.4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>28,578</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>8.5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Less - participation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(5,606</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1.4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(7,140</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(2.1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>R&amp;D expenses, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>24,093</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6.0</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>21,438</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6.4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Marketing and selling expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>32,371</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8.0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>26,248</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>7.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>General and administrative expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>20,318</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5.0</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>19,007</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5.7</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>76,782</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>19.0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>66,693</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>20.0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>Operating  income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>26,756</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6.7</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>20,847</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6.2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Finance expenses, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(2,928</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(0.7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>(4,241</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1.3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>Other income, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>113</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>908</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>0.3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Income before taxes on income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>23,941</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6.0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>17,514</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5.2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>Taxes on income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>6,733</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1.7</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>4,604</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1.4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>17,208</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4.3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>12,910</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3.8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>Minority interest in gains of subsidiaries</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>(1,509</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(0.4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>(709</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(0.2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Equity in net earnings of affiliated companies</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;and partnership</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>3,400</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0.8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>2,267</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0.7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=1></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net earnings</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>19,099</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4.7</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>14,468</B> </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4.3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=3></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=3></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Diluted earnings per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>0.45</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>0.35</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=3></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT></TD><TD></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B><HR NOSHADE COLOR=#000000 SIZE=3></B> </FONT></TD><TD></TD>
     <TD ALIGN=RIGHT></TD><TD></TD></TR>
</TABLE>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>


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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Revenues</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s sales are primarily to governmental entities and prime contractors under
government defense programs. Accordingly, the level of the Company&#146;s revenues is
subject to governmental budgetary constraints. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s consolidated revenues increased by 20.7%, from $334.4 million in the first
quarter of 2006 to $403.6 million in the first quarter of 2007. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
following table sets forth the Company&#146;s revenue distribution by areas of operation:  </FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" WIDTH="70%">
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=7><FONT FACE="Times New Roman" SIZE=2>Three-Month Period ended</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>March 31, 2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>March 31, 2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN="1"><FONT FACE="Times New Roman" SIZE=2>$ millions</FONT></TH><TH></TH>
     <TH COLSPAN="1"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TH><TH></TH>
     <TH COLSPAN="1"><FONT FACE="Times New Roman" SIZE=2>$ millions</FONT></TH><TH></TH>
     <TH COLSPAN="1"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="34%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Airborne systems</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>151.7</FONT></TD>
        <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>37.6</FONT></TD>
        <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>138.6</FONT></TD>
        <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>41.5</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Land systems</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>81.5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20.2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>41.8</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>12.5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">C<SUP>4</SUP>ISR systems </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>86.9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>21.5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>83.0</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>24.8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Electro-optics</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>52.3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>13.0</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>44.1</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>13.2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other  (mainly non-defense engineering<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and production services)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>31.2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>7.7</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>26.9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>8.0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>403.6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100.0</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>334.4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>100.0</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD ALIGN="RIGHT"><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
changes in revenues distribution by areas of operation were the result of ordinary
quarterly fluctuations.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
following table sets forth the Company&#146;s distribution of revenues by geographical
regions:  </FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=7><FONT FACE="Times New Roman" SIZE=2>Three-Month Period ended</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>March 31, 2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>March 31, 2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman" SIZE=2>$ millions</FONT></TH><TH></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman" SIZE=2>%</FONT></TH><TH></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman" SIZE=2>$ millions</FONT></TH><TH></TH>
     <TH COLSPAN=1><FONT FACE="Times New Roman" SIZE=2>%</FONT></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=34% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Israel</FONT></TD>
     <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>96.1</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>23.8</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>94.2</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>28.2</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>United States</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>145.5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>36.1</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>111.0</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>33.2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Europe</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>83.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>20.8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>54.6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>16.3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other countries</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>78.1</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>19.3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>74.6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>22.3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Total</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>403.6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100.0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>334.4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100.0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
changes in revenues by geographic distribution were the result of standard quarterly
fluctuations.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Gross
Profit</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s gross profit represents the aggregate results of the Company&#146;s
activities and projects, and is based on the mix of programs in which the Company is
engaged during the reported period.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Gross
profit in the quarter ended March 31, 2007 was $103.5 million, as compared to $87.5
million in the quarter ended March 31, 2006. The gross profit margin in the first quarter
of 2007 was 25.7%, as compared to 26.2% in the first quarter of 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
decrease in the gross profit margin was caused mainly by the impact of the change of the
U.S. dollar &#150; New Israeli Shekel (&#147;NIS&#148;) exchange rate, which increased the
effective labor cost incurred in Israel. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Research
and Development (&#147;R&amp;D&#148;)</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company continually invests in R&amp;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. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s R&amp;D included programs which are partially funded by, third parties,
including the Israeli Ministry of Defense (&#147;IMOD&#148;), the Office of the Chief
Scientist (&#147;OCS&#148;) and bi-national and European Development funds. The R&amp;D
was performed in all major areas of core technological activities of the Company and
mainly in the areas of advanced airborne systems, cutting edge electro-optics technology
and products for surveillance, aerial reconnaissance, lasers and space based sensors and
homeland security technologies and products. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Gross
R&amp;D expenses in the quarter ended March 31, 2007 totaled $29.7 million (7.4% of
revenues), as compared to $28.6 million (8.5% of revenues) in the quarter ended March 31,
2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
R&amp;D expenses (after reduction of third party participation) in the quarter ended March
31, 2007 totaled $24.1 million (6.0% of revenues), as compared to $21.4 million (6.4% of
revenues) in the quarter ended March 31, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Marketing
and Selling Expenses</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company maintains its activities in developing new markets and pursues at any given time
various business opportunities according to the Company&#146;s plan. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Marketing
and selling expenses in the quarter ended March 31, 2007 were $32.4 million (8.0% of
revenues), as compared to $26.2 million (7.9% of revenues) in the quarter ended March 31,
2006.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>General
and Administrative (&#147;G&amp;A&#148;) Expenses</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
G&amp;A
expenses were $20.3 million (5.0% of revenues) in the quarter ended March 31, 2007, as
compared to $19.0 million (5.7% of revenues) in the quarter ended March 31, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Finance
Expense (Net)</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
finance expense in the quarter ended March 31, 2007 was $2.9 million, as compared to $4.2
million in the quarter ended March 31, 2006.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Taxes
on Income</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Provision
for taxes in the quarter ended March 31, 2007 was $6.7 million (effective tax rate of
28.1%), as compared to a provision for taxes of $4.6 million (effective tax rate of
26.3%) in the quarter ended March 31, 2006.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;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&#146;s companies generating the taxable income operate.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6 </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Company&#146;s
Share in Earnings of Affiliated Entities</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
the first quarter of 2007 the Company had net income of $3.4 million from its share in
earnings of affiliated companies and partnerships, as compared to $2.3 million in the
first quarter of 2006.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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&#146;s core business activities, including
electro-optics, airborne systems and communications.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<U><B>Net
Earnings and Earnings Per Share (&#147;EPS&#148;)</B></U> </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
earnings in the quarter ended March 31, 2007 were $19.1 million (4.7% of revenues), as
compared to net earnings of $14.5 million (4.3% of revenues) in the quarter ended March
31, 2006. Diluted EPS in the quarter ended March 31, 2007 was $0.45, as compared to $0.35
in the quarter ended March 31, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
number of shares used for computation of diluted EPS in the quarter ended March 31, 2007
was 42,175 thousand shares, as compared to 41,736 thousand shares in the quarter ended
March 31, 2006. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>H.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Liquidity
and Capital Resources</U></B>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s net cash flow generated from operating activities in the quarter ended
March 31, 2007 was $86.8 million, resulting mainly from net income and advances received
from customers. The cash inflows were partially offset, mainly by an increase in
inventories.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
cash flow used for investment activities in the quarter ended March 31, 2007 was $12.5
million, which was used mainly for procurement of various assets and equipment.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
cash flow used for financing activities in the quarter ended March 31, 2007 was $4.2
million, which was used mainly for repayment of short-term bank credit and loans. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
March 31, 2007, the Company had total borrowings in the amount of $148.9 million,
including $125.3 million in long-term loans, and $761.3 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 March 31, 2007, the Company had a cash
balance amounting to $154.7 million. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of March 31, 2007, the Company had working capital of $150.7 million and its current ratio
was 1.18. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>I.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U><B>Derivatives
and Hedges</B></U>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Market
risks relating to the Company&#146;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 NIS. The Company may enter from time to time into forward contracts related to NIS,
based on market conditions. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 17" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
March 31, 2007, the Company&#146;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 its shareholdings in Tadiran Communications Ltd. The Company&#146;s deposits
and loans are based on variable interest rates, and their value as of March 31, 2007 was
therefore not exposed to changes in interest rates. Should interest rates either increase
or decrease, such change may affect the Company&#146;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. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s functional currency is the U.S. dollar. On March 31, 2007, the Company had
exposure due to liabilities denominated in NIS of $87 million in excess of its NIS
denominated assets. These liabilities represent mostly wages and trade payables. The
amount of the Company&#146;s exposure to the changes in the NIS-U.S. dollar exchange rate
varies from time to time, and as indicated above, impacted the Company&#146;s expenses for
the first quarter of 2007. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Most
of the Company&#146;s assets and liabilities which are denominated in currencies other
than the NIS and the U.S. dollar were covered as of March 31, 2007 by forward contracts.
On March 31, 2007, the Company had forward contracts for the sale and purchase of such
foreign currencies totaling $327.4 million ($137.7 million in Euro, $181.7 million in GBP
and $8 million in other currencies). The financial derivative activities in the first
quarter of 2007 resulted in an unrealized net loss of approximately $8.9 million, which
was recorded as other comprehensive income. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
March 31, 2007, the Company had options for hedging future cash flow denominated in NIS in
the amount of $64 million. The fair market value of the options as of March 31, 2007 was
not material. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>J.</B>  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>Dividends</U></B>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Board of Directors declared on May 14, 2007 a dividend of $0.16 per share.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Center Rule" FSL="Default" -->
     <P ALIGN=CENTER>*&nbsp;&nbsp;*&nbsp;&nbsp;*&nbsp;&nbsp;*&nbsp;&nbsp;*</P>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>




<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 28; page: 28" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>

<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><A NAME="ex-3">Exhibit 3</A> </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND ITS SUBSIDIARIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONDENSED INTERIM
CONSOLIDATED<BR>FINANCIAL STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>AS OF MARCH 31, 2007</U></B><BR>
(Unaudited)<BR>
(In thousands of U.S. dollars)  </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 1" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>

<!-- MARKER FORMAT-SHEET="Page Rule Single" FSL="Default" -->
     <HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE>

<!-- MARKER FORMAT-SHEET="Head Minor Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C O N T E N T S</FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=70%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>P a g e</FONT><HR WIDTH=90% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=92% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>CONSOLIDATED FINANCIAL STATEMENTS</FONT></TD>
     <TD WIDTH=8% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>&nbsp;&nbsp;&nbsp;&nbsp;Consolidated Balance Sheets</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2 - 3</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>&nbsp;&nbsp;&nbsp;&nbsp;Consolidated Statements of Income</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>4</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>&nbsp;&nbsp;&nbsp;&nbsp;Consolidated Statements of Changes in Shareholder's Equity</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>5</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>&nbsp;&nbsp;&nbsp;&nbsp;Consolidated Statements of Cash Flows</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>6-7</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2><BR>&nbsp;&nbsp;&nbsp;&nbsp;Notes to the Consolidated Financial Statements</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>8-10</FONT></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Center Rule" FSL="Default" -->
     <P ALIGN=CENTER>#&nbsp;&nbsp;#&nbsp;&nbsp;#&nbsp;&nbsp;#&nbsp;&nbsp;#&nbsp;&nbsp;#</P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-1- </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 2" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Head Major Right Bold" FSL="Project" -->
<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>CONSOLIDATED BALANCE SHEETS</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands)</FONT></TD></TR>
</TABLE>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>March 31,<BR>
2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>December 31,<BR>
2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Unaudited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Audited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=76% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>CURRENT ASSETS:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   154,705</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    84,564</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Short-term bank deposits</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,117</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>836</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Available for sale marketable securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,179</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,106</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Trade receivables, (net of allowance for doubtfulaccounts in the amount of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;$3,522 and $3,390 as of March 31, 2007 and December 31, 2006, respectively)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>339,782</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>384,487</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other receivables and prepaid expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>85,328</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>78,835</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Inventories, net of advances</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>395,015</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>371,962</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total current assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>978,126</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>922,790</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>INVESTMENTS AND LONG-TERM RECEIVABLES:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Investments in affiliated companies and a partnership</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>231,941</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>235,723</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Compensation receivable in respect of fire damages, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>15,530</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>15,530</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Long-term bank deposits and trade receivables</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5,427</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,030</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Deferred income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>7,514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>7,056</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Severance pay fund</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>162,972</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>160,620</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>423,384</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>424,959</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>PROPERTY, PLANT AND EQUIPMENT,  NET</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>294,090</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>294,628</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>INTANGIBLE ASSETS:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Goodwill</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>58,401</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>58,401</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Other intangible assets, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>68,255</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>70,594</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>126,656</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>128,995</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,822,256</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 1,771,372</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes
are an integral part of the consolidated financial statements  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-2- </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 3" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Right Bold" FSL="Project" -->
<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>CONSOLIDATED BALANCE SHEETS</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands)</FONT></TD></TR>
</TABLE>
<BR>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>March 31,<BR>
2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>December 31,<BR>
2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Unaudited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Audited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=69% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>CURRENT LIABILITIES:</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Short-term bank credit and loans</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     14,460</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     17,802</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Current maturities of long-term loans</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>9,201</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>10,199</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Trade payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>159,451</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>158,361</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dividend payable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6,738</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other payables and accrued expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>284,464</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>274,799</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Customers advances and amounts in excess of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;costs incurred on contracts in progress</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>353,121</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>349,724</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Total current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>827,435</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>810,885</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>LONG-TERM LIABILITIES:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Long-term loans</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>125,251</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>125,266</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Advances from customers</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>134,426</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>126,769</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Deferred income taxes and tax reserve</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>33,742</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>18,930</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Accrued termination liability</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>191,699</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>189,067</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>485,118</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>460,032</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>MINORITY INTERESTS</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>8,380</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6,871</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SHAREHOLDERS' EQUITY:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Share capital</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ordinary shares of New Israeli Shekels (NIS) 1 par value;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Authorized -  80,000,000 shares as of  March 31, 2007</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;and December 31, 2006;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Issued 42,436,132 and 42,425,595 shares as of March 31, 2007</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and December 31, 2006, respectively;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Outstanding 42,027,211 and 42,016,674 shares as of March 31,</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2007 and December 31, 2006, respectively</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>11,878</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>11,876</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Additional paid-in capital</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>290,206</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>289,026</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Accumulated other comprehensive loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(17,704</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(16,746</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Retained earnings</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>221,264</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>213,749</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Treasury shares - 408,921 shares as of March 31, 2007 and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;December 31, 2006</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(4,321</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(4,321</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>501,323</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>493,584</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,822,256</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,771,372</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes
are an integral part of the consolidated financial statements  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-3- </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 4" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Right Bold" FSL="Project" -->
<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>CONSOLIDATED STATEMENTS OF INCOME</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands, except share and per share data)</FONT></TD></TR>
</TABLE>
<BR>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman" SIZE=2>Three months ended<BR>
March 31,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>Year ended<BR>
December 31,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman" SIZE=2>(Unaudited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Audited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=63% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Revenues</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    403,600</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    334,370</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,523,243</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Cost of revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>300,062</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>246,830</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,149,768</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>103,538</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>87,540</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>373,475</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Research and development expenses, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>24,093</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>21,438</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>92,232</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Marketing and selling expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>32,371</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>26,248</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>111,880</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>General and administrative expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20,318</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>19,007</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>77,505</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>76,782</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>66,693</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>281,617</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>26,756</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20,847</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>91,858</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Financial expenses, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(2,928</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(4,241</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(21,456</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other income, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>113</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>908</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,814</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income before taxes on income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>23,941</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>17,514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>72,216</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Taxes on income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,733</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4,604</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20,694</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>17,208</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>12,910</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>51,522</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Equity in net earnings of affiliated companies and partnership</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,400</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,267</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>14,743</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Minority interests in losses (earnings) of subsidiaries</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,509</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(709</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5,977</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     19,099</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     14,468</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     72,242</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Earnings per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic net earnings per share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       0.45</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       0.35</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       1.75</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted net earnings per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>       0.45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>       0.35</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>       1.72</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number of shares used in computation of basic net earnings per share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>42,023</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>41,010</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>41,340</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number of shares used in computation of diluted net earnings per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>42,175</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>41,736</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>41,880</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying
notes are an integral part of the consolidated financial statements  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-4- </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>


<!-- MARKER PAGE="; page: 5" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>STATEMENTS OF CHANGES IN SHAREHOLDERS&#146; EQUITY</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands, except share and per share data)</FONT></TD></TR>
</TABLE>
<BR>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=1>Number of<BR>
outstanding shares</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=1>Share capital</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=1>Additional<BR>
paid-in capital</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=1>Accumulated other<BR>
comprehensive loss<BR>
</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=1>Retained<BR>
earnings</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=1>Treasury shares</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=1>Total shareholders'<BR>
equity<BR>
</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=1>Total comprehensive<BR>
income<BR>
</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=42% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1><B>Balance as of January 1, 2006</B></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>40,966,624</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>    11,636</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   278,679</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>    (1,340</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   166,123</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>    (4,321</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   450,777</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Exercise of options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>1,050,050</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>240</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>8,008</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>8,248</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Tax benefit in respect of options exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>2,144</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>2,144</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Stock based compensation</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>195</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>195</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Dividends declared</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(24,616</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(24,616</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Other comprehensive income, net of tax:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Unrealized gain (loss) on derivative instruments</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(15,642</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(15,642</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>   (15,642</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Foreign currency translation differences</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>2,034</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>2,034</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>2,034</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Increase in additional minimum pension liability per FAS 87</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>2,603</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>2,603</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>2,603</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Adjustment for adoption of FAS 158 for the pension plans as of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2006</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(4,341</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(4,341</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Adjustment for adoption of FAS 158 for the post medical plan as</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of December 31, 2006</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(252</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(252</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Unrealized gain on available for sale securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>192</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>192</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>192</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>72,242</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>72,242</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>72,242</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Total comprehensive income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>    61,429</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="1"><B>Balance as of December 31, 2006</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>42,016,674</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>    11,876</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   289,026</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   (16,746</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   213,749</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>    (4,321</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   493,584</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Exercise of options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>10,537</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>160</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>162</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Tax benefit in respect of options exercised</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>27</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>27</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Stock based compensation</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>993</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>993</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Dividends declared</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(6,738</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(6,738</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Cumulative impact of change in accounting for uncertainties in</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;income taxes (FIN 48)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(4,846</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(4,846</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Other comprehensive income (loss), net of tax:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
      <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Unrealized losses on derivative instruments</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(917</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(917</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(917</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Foreign currency translation differences</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(92</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(92</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(92</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Unrealized gain on available for sale securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>51</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>51</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>51</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>19,099</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>19,099</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>19,099</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>Total comprehensive income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>    18,141</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="1">&nbsp;&nbsp;<B>Balance as of March 31, 2007 (Unaudited)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>42,027,211</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>    11,878</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   290,206</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   (17,704</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   221,264</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>    (4,321</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>   501,323</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes
are an integral part of the consolidated financial statements  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-5- </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 6" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Head Major Right Bold" FSL="Project" -->
<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands)</FONT></TD></TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" WIDTH="100%">
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman" SIZE=2>Three months ended<BR>
March 31,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>Year ended<BR>
December 31,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman" SIZE=2>(Unaudited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Audited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="69%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>CASH FLOWS FROM OPERATING ACTIVITIES</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   19,099</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   14,468</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   72,242</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>15,373</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>14,649</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>58,500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Stock based compensation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>993</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>195</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Deferred income taxes</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(8,286</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,698</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(4,659</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Accrued severance pay, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>280</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2,464</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(5,197</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Gain on sale of property, plant, equipment and investment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(433</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(231</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2,351</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Minority interests in earnings (losses) of subsidiaries</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,509</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>709</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(5,977</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Equity in net losses (earnings) of affiliated companies and partnership, net of dividend received (*)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4,156</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,736</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,696</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Changes in operating assets and liabilities:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Decrease (increase) in short and long-term receivables and prepaid expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>42,695</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(9,806</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(58,793</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Increase in inventories, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(32,992</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(20,933</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(69,974</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Increase in trade payable, other payables and accrued expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>23,434</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>30,251</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>75,869</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Increase in advances received from customers</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20,993</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>52,300</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>142,844</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Other adjustments</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(98</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(35</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Net cash provided by operating activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>86,821</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>75,411</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>200,968</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>CASH FLOWS FROM INVESTING ACTIVITIES</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Purchase of property, plant and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(14,033</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(14,628</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(64,809</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Investments in affiliated companies</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(158</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(31,930</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Proceeds from sale of property, plant and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,970</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,323</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5,705</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Proceeds from sale of investment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Investment in long-term bank deposits</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(170</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(215</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(880</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Proceeds from sale of long-term bank deposits</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>180</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>168</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>780</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Short-term bank deposits, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(303</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>334</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(862</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Net cash used in investing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(12,514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(13,018</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(86,996</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>CASH FLOWS FROM FINANCING ACTIVITIES</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Proceeds from exercise of options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>162</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>455</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>8,248</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Repayment of long-term bank loans</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(26,096</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(82,031</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(188,723</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Receipt of long-term bank loans</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>32,371</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>18,353</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>85,053</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Dividends paid</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(24,322</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Tax benefit in respect of options exercised</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>27</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,144</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Change in short-term bank credit and loans, net</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(10,630</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(5,488</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(5,695</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Net cash provided by (used in) financing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(4,166</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(68,711</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(123,295</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>70,141</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(6,318</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(9,323</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>84,564</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>93,887</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>93,887</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  154,705</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   87,569</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   84,564</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>* Dividend received</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    7,556</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   13,047</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>



<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes
are an integral part of the consolidated financial statements  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-6- </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 7" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Right Bold" FSL="Project" -->
<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands)</FONT></TD></TR>
</TABLE>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman" SIZE=2>Three months ended<BR>
March 31,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>Year ended<BR>
December 31,</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=5><FONT FACE="Times New Roman" SIZE=2>(Unaudited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Audited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=58% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><B>SUPPLEMENTARY CASH FLOW ACTIVITIES:</B></FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Cash paid (received) during the period for:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Income taxes</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   (641</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  4,218</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 15,955</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2><BR>Interest</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  3,062</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  4,930</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 14,311</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying notes
are an integral part of the consolidated financial statements  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-7- </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 8" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Right Bold" FSL="Project" -->
<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS &#151; UNAUDITED</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands)</FONT></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Head Left Bold Size 2" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note 1 &#151; GENERAL </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
accompanying financial statements have been prepared in a condensed format
               as of March 31, 2007, and for the three months then ended in accordance
with                generally accepted accounting principles in the United States &#147;)U.S.
               GAAP&#148;( 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.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 3" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
These
statements should be read in conjunction with the Company&#146;s annual financial
statements and accompanying notes as of December 31, 2006.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 3" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
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, 2006 in order to conform to the current year&#146;s
presentation.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 3" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Operating
results for the three months ended March 31, 2007, are not necessarily indicative of the
results that may be expected for the year ending December 31, 2007.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On
April 26, 2007, the Company completed its Cash Tender Offer (&#147;the
               Offer&#148;) for the balance of the ordinary shares of Tadiran
Communications                Ltd. (&#147;Tadiran&#148;), which prior to the completion
of the Offer was a                publicly traded company in Israel, held 43% by the
Company. As a result, and in                accordance with the provisions of Israeli law
relating to tender offers, the                Company acquired under the terms of the
Offer, the remaining shares of Tadiran                from those Tadiran shareholders who
did not provide an acceptance notice                relating to the Offer. In addition,
Tadiran agreed to cancel any stock options                remaining outstanding after
completion of the Offer in consideration for the                same price per share as
under the Offer. As a result, Tadiran became a private,                wholly-owned
subsidiary of the Company. The total amount paid by the Company for                Tadiran&#146;s
shares, relating to the Offer and the remaining shares, was                approximately
$382 million. The results of Tadiran will be consolidated in the                Company&#146;s
financial statements commencing the date of completion of the                Offer. The
Company is in the process of preparing a Purchase Price Allocation                (&#147;PPA&#148;)
related to the acquisition and estimates that it will have a                material
effect, which includes an In-Process Research and Development                (&#147;IPR&amp;D&#148;)
write-off and other related adjustments on its 2007                second quarter
results.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left Bold Size 2" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note 2 &#151;
SIGNIFICANT ACCOUNTING POLICIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> The
significant accounting policies followed in the preparation of these           statements
are identical to those applied in preparation of the latest annual           financial
statements, except for the adoption of FASB Statement No. 48,           &#147;Accounting
for Uncertainty in Income Taxes &#150; an Interpretation of           FASB Statement No.&nbsp;109
(&#147;FIN 48&#148;).  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-8- </FONT></P>

<DIV STYLE="page-break-after:always"></DIV>

<!-- MARKER PAGE="; page: 9" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>



<!-- MARKER FORMAT-SHEET="Head Major Right Bold" FSL="Project" -->
<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS &#151; UNAUDITED</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands)</FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Left Bold Size 2" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note 2 &#151;
SIGNIFICANT ACCOUNTING POLICIES (Cont.) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Level 3" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company adopted the provisions of FIN 48 on January&nbsp;1, 2007. FIN 48 clarifies the
accounting for uncertainty in income taxes by prescribing a minimum recognition threshold
for a tax position taken or expected to be taken in a tax return that is required to be
met before being recognized in the financial statements. FIN 48 also provides guidance on
de-recognition, measurement, classification, interest and penalties, accounting in
interim periods, disclosure and transition.
As
of January 1, 2007, our unrecognized tax benefit (&#147;tax contingencies&#148;) totaled
$18,750. As a result of the implementation of FIN 48, our tax contingencies increased by
$4,846, which were recorded as a reduction to retained earnings. We do not expect a
significant increase or decrease in unrecognized tax benefits over the next 12 months.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 3" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We
record interest related to our tax contingencies as income tax expense. Our January 1,
2007 tax contingencies include $2,450 of interest.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 3" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company and its subsidiaries are subject to examination by various tax authorities in
jurisdictions such as Israel, the United States and Europe. With respect to the Company
and its major subsidiaries, we have completed the examinations by the tax authorities for
tax years through 2000.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Level 2" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left Bold Size 2" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note 3 &#151;
INVENTORIES, NET OF ADVANCES </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=70%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>March 31,<BR>
2007</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>December 31,<BR>
2006</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Unaudited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman" SIZE=2>(Audited)</FONT><HR WIDTH=100% SIZE=1 COLOR=BLACK NOSHADE></TH><TH></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=68% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Cost of long-term contracts in progress</FONT></TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 405,408</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 373,045</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Raw materials</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>92,057</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>90,075</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Advances to suppliers and subcontractors</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>39,826</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>41,037</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>537,291</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>504,157</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Less - Cost incurred on contracts in progress</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;deducted from customer advances</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>80,471</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>49,455</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>456,820</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>454,702</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;Less -Advances received from customers</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>56,169</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>77,246</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for losses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,636</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,494</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 395,015</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 371,962</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=3></TD><TD></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-9- </FONT></P>


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<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Right Bold" FSL="Project" -->
<H1 ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=4>ELBIT SYSTEMS LTD. AND
ITS SUBSIDIARIES  </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=100% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=3><B>NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS &#151; UNAUDITED</B></FONT></TD></TR>
<TR>
     <TD ALIGN=RIGHT><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>U.S. dollars (In thousands)</FONT></TD></TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Head Left Bold Size 2" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note 4 &#150; STOCK
OPTION PLAN </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
January 2007, the Company&#146;s shareholders approved the Company&#146;s 2007 Option
Plan (the &#147;Plan&#148;) to employees of the Company and certain subsidiaries. The
options include: (i) Regular Options &#151; up to 1,250,000 options exercisable into
1,250,000 shares of the Company in consideration for the Exercise Price, all or any
portion of which may be granted as Incentive Stock Options (&#147;Regular Options&#148;)
and (ii) Cashless Options &#151; up to 1,250,000 options, which entitle the participant
to exercise options for an amount reflecting only the benefit factor (&#147;Cashless
Options&#148;). Each of the participants will be granted an equal amount of Regular
Options and Cashless Options. The exercise price for Israeli participants will be the
average closing price of the Company&#146;s share during 30 trading days proceeding the
options grant date. The exercise price of options granted to a non-Israeli participant
residing in the United States will be the fair market value of the share on the day the
options were granted.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
According
to the Plan, the options granted on a certain date (the &#147;Commencement Date&#148;)
will become vested and exercisable in accordance with the following vesting schedule:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fifty
percent (50%) of the options will be vested and exercisable from the           second
anniversary of the Commencement Date;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An
additional twenty-five percent (25%) of the options will be vested and
          exercisable from the third anniversary of the Commencement Date; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
remaining twenty-five (25%) of the options will be vested and exercisable           from
the fourth anniversary of the Commencement Date.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
options expire five years from the grant day.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company grants options to Israeli participants in accordance with the provisions of
Section 102 of the Israel Tax Ordinance related to the Capital Gains Tax Track.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
January 11, 2007, the Company granted to its employees 2,354,300 options under the Plan.
The exercise price per option for Israeli employees was $33.20 and for non-Israeli
employees was $33.10. On March 14, 2007, the Company granted additional 12,000 options
under the plan to employees at the exercise price per option of $34.68. Aggregate
intrinsic value of outstanding options as of March 31, 2007, related to the Plan amount
to $6,379. The aggregate intrinsic value represents the total intrinsic value (the
difference between the Company&#146;s closing stock price on the last trading day of the
first quarter of fiscal 2007 and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option holders had all option
holders exercised their options on March 31, 2007. This amount changes based on the fair
market value of the Company&#146;s stock.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Compensation
expenses, related to the Plan, net amounting to $946 was recorded in the three months
ended March 31, 2007. The expenses were recorded based on SFAS No. 123(R) and SAB 107. As
of March 31, 2007, there was $19,002 of total unrecognized compensation cost related to
share-based compensation arrangements granted under the Company&#146;s stock option Plan.
That cost is expected to be recognized over a weighted-average period of four years.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Center Rule" FSL="Default" -->
     <P ALIGN=CENTER>#&nbsp;#&nbsp;#&nbsp;#&nbsp;#&nbsp;#</P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-10- </FONT></P>

</BODY>
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</TEXT>
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<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>2
<FILENAME>ballot.jpg
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<FILENAME>ballotx.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
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<SEQUENCE>4
<FILENAME>elbitlogo031407.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
