Elbit Imaging-M Ltd. — Interim / Quarterly Report 2005

Jun 2, 2005

FOR IMMEDIATE RELEASE

ELBIT MEDICAL IMAGING LTD. ANNOUNCES

FIRST QUARTER 2005 RESULTS

Tel Aviv, Israel - June 2, 2005- Elbit Medical Imaging Ltd. (NASDAQ: EMITF) ("EMI" or the “Company") today announced its consolidated results for the first quarter, which ended March 31, 2005.

First quarter Results:

Net loss for the first quarter of 2005 totaled NIS 11.0 million (US$2.5 million), compared with a net income of NIS 30.3 million (US$6.9 million) in the corresponding period of 2004.

Commentary on the First Quarter:

Mr. Shimon Yitzhaki, President of Elbit Medical Imaging commented: “The results of the first quarter of 2005 include irregular amounts of NIS 10 million (US$2.3 million), resulting from initiation expenses regarding the tender offer for Channel 2 and expenses relating to employee stock benefits. In addition, these results do not reflect the substantial profit we are expecting from the transaction with Klepierre that was recently announced. We anticipate recording that profit during fiscal years 2005 and 2006.

Mr. Yitzhaki further commented: “The dividend distributed during the first quarter of 2005 in the amount of US$ 37 million, demonstrates the Company’s desire to share its success with its shareholders”.

The breakdown of revenue by sector of activity is presented in the following table (in NIS thousands):

	For the	3-month		For the twelve-month	For the twelve-month	For the twelve-month	For the twelve-month
	period ended Mar 31			period ended Dec 31
	2005 %	2004	%	2004	%	2003		%
Operating commercial
centers	51,837 44	95,646	61	311,893	53	347,056		64
Hotels operation and
management	54,543 45	52,087	33	218,365	37	189,205		34
Leasing fees etc.	3,305 3	3,280	2	13,238	2	13,495		2
Medical systems	9,615 8	5,513	4	44,049	8	-		-
Total revenues	119,300 100	156,526	100	587,545	100	549,756		100

The breakdown of gross profit by sector of activity is presented in the following table (in NIS thousands):

	For the 3-month period ended Mar 31	For the 3-month period ended Mar 31	For the 3-month period ended Mar 31	For the 3-month period ended Mar 31	For the twelve-month period ended Dec 31	For the twelve-month period ended Dec 31	For the twelve-month period ended Dec 31	For the twelve-month period ended Dec 31
	2005	%	2004	%	2004	%	2003	%
Operating commercial centers	17,022	33	40,857	43	112,113	36	154,140	44
Hotels operation and management	3,528	6	3,868	7	17,271	8	11,515	6
Leasing fees etc.	2,546	77	2,423	74	10,063	76	9,985	74
Medical systems	7,454	78	4,440	81	34,215	78	-	-
Total Gross Profit	30,550	26	51,588	32	173,662	30	175,640	32

The percentages in the above table refer to gross margins (gross profit as a percentage of the revenue in each respective sector).

The decrease in revenues in the first quarter 2005 was due to the exclusion of the activities of 12 shopping centers in Hungary, which were sold to Klépierre Group at the beginning of the third quarter of 2004.

The consolidated net financial loss in the 3 month period ended March 31, 2005 was NIS 32.8 million (US$7.5 million), compared with a net financial income of NIS 47.4 million (US$10.9 million) in the first quarter of 2004.The substantial decrease results from a combination of the following factors:

1. Income from exchange rate differences of NIS 66.0 million (approximately US$15.0 million) for the 3-month period ended March 31, 2004 was generated by the significant re-valuation (5%) of the Hungarian Forint, which until April 1, 2004 was the functional currency of the operations in that country. There was no income generated from exchange rate differences in Hungary in the first quarter of 2005 due to the fact that the currency used in financing these activities is now the Euro.

2. During the first quarter of 2004 the Company recorded an income of NIS 27.0 million (US$6.2 million) from derivative financial instrument transactions. During the first quarter of 2005 no such transactions were carried out; thus, no income from such activities was recorded.

3. Finance expenses in the 3-month period ended March 31, 2005 resulted from interest on Plaza Center's bank loans totaling NIS 6.0 million (US$1.4 million) compared to NIS 17.0 million (US$3.9 million) during the corresponding period of 2004. This is the result of the reduction in the amount of outstanding loans due to the exclusion of the activities of 12 shopping centers in Hungary, which were sold to Klépierre Group at the beginning of the third quarter of 2004.

Other net income for the 3-month period ended March 31, 2005 was NIS 27.3 million (US$6.3 million), which resulted mainly from an additional gain derived from the sale of the 12 shopping

centers in Hungary. During fiscal year 2004, the Company recorded a gain of NIS 132 million (US$30 million) from this sale.

The basic net loss per share for the three-month period ending March 31, 2005, was NIS 0.5 per share (approximately US$0.11 per share).

First Quarter Highlights:

On February 7, 2005 the Company’s Board of Directors declared a dividend in the aggregate amount of US$37 million (or US$1.689 per Ordinary Share). The dividend was paid on March 17, 2005 to shareholders of record as of March 2, 2005.

Recent Highlights:

• On May 22, 2005 the Elbit Medical Imaging (“EMI”) Board of Directors approved the binding Heads of Terms signed on May 20, 2005 by EMI’s wholly owned subsidiary company, Plaza Centers (Europe) BV ( “Plaza Centers” ), with the Klépierre Group of France for a portfolio that includes four (4) operational malls in Poland and an additional five (5) under development centers in Poland and the Czech Republic. The Heads of Terms is subject to approval by the respective Boards of EMI and Plaza Centers and the Supervisory Board of the Klépierre Group, and is subject to the fulfillment of certain conditions as specified below.

Klépierre SA ( “Klépierre” ), one of the leading owners and operators of shopping centers in Europe, will acquire the entire equity and voting rights (100%) of the companies owning four operational shopping centers in Poland in consideration for payment of a purchase price calculated on the basis of the gross rentals of these centers as of the Closing date, at agreed upon yields. An adjustment of the purchase price will be conducted on December 31, 2005 on the basis of the gross rentals as of the adjustment date, at the agreed yields.

As part of the transaction, Ségécé, a subsidiary of Klépierre ( “Ségécé” ), will acquire the entire outstanding share capital of Plaza Centers Management Poland Sp.z.o.o. ( “Management Company” ), the Polish subsidiary of Plaza Centers which managed the acquired operational malls.

In addition, Klépierre will sign future share purchase agreements for the acquisition of the entire equity and voting rights in the companies presently developing two (2) shopping centers in Poland, as well as a further two (2) companies developing shopping centers in the Czech Republic. Klépierre also has an option to acquire a third shopping center under development in Poland, subject to the attainment of certain conditions. Upon the completion and delivery of the shopping centers, Klépierre will pay the purchase price calculated on the basis of the gross rentals on the date of delivery, at upon agreed yields.

Klépierre will furnish Plaza Centers with an irrevocable bank guarantee in respect of the entire consideration based upon forecasted gross rentals. A final adjustment of the purchase price for each of these development centers will be conducted up to nine (9) months following delivery on the basis of actual gross rentals as of their adjustment dates, at the agreed upon yields.

Following Board Approvals, as noted above, the Heads of Terms constitute a binding agreement, subject to the obtaining of regulatory approvals, customary due diligence investigations, and the execution of definitive agreements in forms to be agreed. It is anticipated that the closing of the Transaction will occur by the end of July 2005.

Subject to verification, as previously mentioned, and assuming the exercise by Klépierre of the option referred to above, the assets sold under the transactions contemplated are valued in the aggregate amount of approximately € 425 million, or approximately US$540 million as of the date of this release.

Within the framework of the transaction, it has also been agreed that Ségécé will acquire the remaining 50% of the equity rights in the Hungarian management company retained by Plaza Centers. In addition, one year following the consummation of the transaction for the acquisition of the twelve Hungarian shopping centers acquired by Ségécé in July 2004, Klépierre has agreed to release a bank guarantee held as security for certain future incomes.

• On April 21, 2005, the Company’s wholly owned subsidiary, Plaza Centers completed the transaction for the sale of four (4) shopping centers owned and operated by Plaza Centers in Hungary to a subsidiary of the Dawnay Day Group (“ Dawnay Day” ), a leading financial and property group in the United Kingdom. The aggregate net cash consideration paid to Plaza Centers and its subsidiaries totaled approximately €16.7 million, or approximately US$21.7 million. Such consideration was determined according to the asset value of the Acquired Companies on the basis of audited financial statements as of the closing date, which was approximately €54.4 million, or approximately US$70.7 million, less the deduction of financial liabilities (mainly, long term bank loans in the aggregate amount of approximately €40.1 million, or approximately US$52 million).

EMI is a subsidiary of Europe Israel (M.M.S.) Ltd. EMI’s activities are divided into three principal fields: (i) ownership, operation, management, acquisition, expansion and development of commercial and entertainment malls in Europe, primarily in Eastern and Central Europe; (ii) ownership, operation, leasing, management, acquisition, expansion and development of hotels in major European cities and ownership, operation and management of a commercial and entertainment mall in Israel through our subsidiary Elscint; and (iii) research and development in the image guided focused ultrasound activities through our subsidiary InSightec - Image Guided Treatment Ltd.

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

Company Contact: Marc Lavine, Adv. Elbit Medical Imaging Ltd. +972-3-608-6011 mlavine@europe-israel.com

Investor Contact:

Kathy Price The Anne McBride Company +212-983-1702 x212 kprice@annemcbride.com

ELBIT MEDICAL IMAGING LTD. CONSOLIDATED BALANCE SHEETS

Current Assets Cash and cash equivalents Short-term deposits and investments Trade accounts receivable Receivables and other debit balances Inventories Long-Term Investments and Receivables Long-term deposits, debentures, loans and receivables Investments in investees and other companies Fixed Assets Other Assets and Deferred Expenses Assets Related to Discontinuing Operations Current Liabilities Short-term credits Suppliers and service providers Payables and other credit balances Long-Term Liabilities Liabilities Related to Discontinuing Operations Minority Interest Shareholders' Equity	Dec31 2005 2004 2004 172,943 151,936 345,745 271,570 309,228 278,021 32,818 47,780 39,102 84,992 81,239 66,140 10,353 4,828 7,331 572,676 595,011 736,339 111,532 105,008 113,785 70,824 131,554 71,608 182,356 236,562 185,393 3,559,082 4,813,018 3,527,988 57,025 84,056 55,859 13,940 15,979 14,700 4,385,079 5,744,626 4,520,279 586,364 956,983 536,937 71,201 80,023 74,358 158,791 160,728 183,446 816,356 1,197,734 794,741 2,447,071 2,953,549 2,418,897 71,237 83,987 71,986 414,674 469,096 430,687 635,741 1,040,260 803,968 4,385,079 5,744,626 4,520,279 NIS in thousands March31	March31
		2005
		Convenience translation US$'000
	172,943 151,936 271,570 309,228 32,818 47,780 84,992 81,239 10,353 4,828 572,676 595,011 111,532 105,008 70,824 131,554 182,356 236,562 3,559,082 4,813,018 57,025 84,056 13,940 15,979 4,385,079 5,744,626 586,364 956,983 71,201 80,023 158,791 160,728 816,356 1,197,734 2,447,071 2,953,549 71,237 83,987 414,674 469,096 635,741 1,040,260 4,385,079 5,744,626	39,657 62,272 7,525 19,489 2,374
		131,318
		25,575 16,240
		41,815
		816,116
		13,076
		3,197
		1,005,521
		134,456 16,327 36,412
		187,195
		561,126
		16,335
		95,087
		145,779
		1,005,521

ELBIT MEDICAL IMAGING LTD. CONSOLIDATED STATEMENT OF OPERATIONS

Revenues Commercial center operations Hotels operations and management Sale of medical systems Lease of assets Costs of revenues Commercial center operations Hotels operations and management Sale of medical systems Lease of assets Gross profit Project initiation expenses Research and development expenses, net Marketing and selling expenses General and administrative expenses Operating profit (loss) before financial income (expenses), net Financial Income (expenses), net Operating profit (loss) after financial incime (expenses), net Other income (expenses), net Profit (loss) before income taxes Income taxes Profit (loss) after income taxes Share in results of associated companies, net Minority interest in results of subsidiaries, net Profit (loss) from continuing operation Profit (loss) from discontinuing operation, net cumulative effect of accounting change at the beginning of the year Net income (loss) Earnings (loss) per share - (in NIS) Basic earnings (loss) per share: From continuing operation From discontinuing operation cumulative effect of accounting change at the beginning of the year Basic earnings (loss) per share Diluted earnings (loss) per share	Year ended Dec 31 2005 2004 2004 51,837 95,646 311,893 54,543 52,087 218,365 9,615 5,513 44,049 3,305 3,280 13,238 119,300 156,526 587,545 34,815 54,789 199,780 51,015 48,219 201,094 2,161 1,073 9,834 759 857 3,175 88,750 104,938 413,883 30,550 51,588 173,662 5,629 177 2,371 11,559 11,987 38,158 5,963 10,321 43,075 25,968 19,609 92,536 49,119 42,094 176,140 (18,569) 9,494 (2,478) (32,772) 47,391 (53,569) (51,341) 56,885 (56,047) 27,335 (15,114) 96,908 (24,006) 41,771 40,861 793 15,275 15,804 (24,799) 26,496 25,057 (2,145) (3,346) (15,968) 17,121 7,867 27,448 (9,823) 31,017 36,537 (543) (732) 6,810 (605) - - (10,971) 30,285 43,347 (0.45) 1.39 1.59 (0.02) (0.03) 0.30 (0.03) - - (0.50) 1.36 1.89 (0.50) 1.31 1.84 NIS in thousands Three months ended March 31	Three months ended March 31
		2005
		Convenience translation US$'000
	51,837 95,646 54,543 52,087 9,615 5,513 3,305 3,280 119,300 156,526 34,815 54,789 51,015 48,219 2,161 1,073 759 857 88,750 104,938 30,550 51,588 5,629 177 11,559 11,987 5,963 10,321 25,968 19,609 49,119 42,094 (18,569) 9,494 (32,772) 47,391 (51,341) 56,885 27,335 (15,114) (24,006) 41,771 793 15,275 (24,799) 26,496 (2,145) (3,346) 17,121 7,867 (9,823) 31,017 (543) (732) (605) - (10,971) 30,285 (0.45) 1.39 (0.02) (0.03) (0.03) - (0.50) 1.36 (0.50) 1.31	11,886 12,507 2,205 758
		27,356
		7,983 11,698 496 174
		20,351
		7,005 1,291 2,651 1,367 5,955
		11,263
		(4,258) (7,515)
		(11,773) 6,268
		(5,505) 182
		(5,687) (492) 3,926
		(2,252) (125) (139)
		(2,516)
		(0.10) (0.00) (0.01)
		(0.11)
		(0.11)