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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended                            September 30, 2003

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from _______________________ to_______________

Commission file number 0-538

AMPAL-AMERICAN ISRAEL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)


                     New York 13-0435685
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification Number

555 Madison Avenue, New York, New York 10022
(Address of Principal Executive Offices) (Zip code)

Registrant's Telephone Number, Including Area Code      (212) 593-9842

Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report.

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) , and (2) has been subject to such filing requirements for the past 90 days.

Yes x    Noo

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o    No x

The number of shares outstanding of the issuer’s Class A Stock, its only authorized common stock, is 19,732,506 (as of November 6, 2003).

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES

Index to Form 10-Q

Part I Financial Information
Page
  Item 1     Financial Statements        
    Consolidated Statements of Operations  
      Nine Months Ended September 30, 2003 and 2002    1  
      Three Months Ended September 30, 2003 and 2002    2  
    Consolidated Balance Sheets    3  
    Consolidated Statements of Cash Flows    5  
    Consolidated Statements of Changes in Shareholders'
Equity		    7  
    Consolidated Statements of Comprehensive Gain (Loss)    9  
    Notes to the Consolidated Financial Statements.    10  
 Item 2
 		   Management's Discussion and Analysis of
Financial Condition and Results of Operations.		    14  
 Item 3
 		   Quantitative and Qualitative Disclosures
About Market Risks		    21  
  Item 4   Controls and Procedures    22  
Part II    Other Information       22  
    Item 1.    Legal Proceedings    22  
     Item 2.    Changes in Securities and Use of Proceeds    24  
      Item 3.    Defaults upon Senior Securities    24  
      Item 4.    Submission of Matters to a Vote of Security Holders    24  
    Item 5.    Other Information    24  
    Item 6.   Exhibits and Reports on Form 8-K    24  

ITEM 1. FINANCIAL STATEMENTS

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30,
 2003
 2002
(Dollars in thousands, except per share amounts) (Unaudited) (Unaudited)
 
REVENUES            
Equity in earnings of affiliates   $ 1,925   $ 1,301  
Interest    420    830  
Real estate income    6,686    5,647  
Realized and unrealized gains (losses) on  
investments    24,662    (7,573 )
Gain on sale of real estate rental property    -    141  
Other    7,490    7,753  
        Total revenues    41,183    8,099  
EXPENSES  
Interest    4,381    6,129  
Real estate expenses    6,212    5,804  
Loss from impairment of investments & real estate    10,884    13,561  
Minority interests    1,463    289  
Translation loss (gain)    2,739    (1,877 )
Other (mainly general and administrative)    6,987    5,501  
        Total expenses    32,666    29,407  
Gain (loss) before income taxes    8,517    (21,308 )
Benefit (provision) for income taxes    1,067    (5,464 )
        Net gain (loss)   $ 9,584   $ (26,772 )
Basic EPS:  
        Gain (loss) per Class A share   $ 0.48   $ (1.38 )
       Shares used in calculation (in thousands)    19,706    19,501  
Diluted EPS:  
        Gain (loss) per Class A shares   $ 0.43   $ (1.38 )
        Shares used in calculation (in thousands)    22,103    19,501  

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

1

ITEM 1. FINANCIAL STATEMENTS

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30,
 2003
 2002
(Dollars in thousands, except per share amounts) (Unaudited) (Unaudited)
 
REVENUES            
Equity in earnings of affiliates   $ 1,731   $ 261  
Interest    153    216  
Real estate income    2,301    1,991  
Realized and unrealized (losses) on  
investments    (1,680 )  (736 )
Other    2,751    2,437  
        Total revenues    5,256    4,169  
EXPENSES  
Interest    747    1,951  
Real estate expenses    2,291    2,024  
Loss from impairment of investments    2,751    7,481  
Minority interests    368    92  
Translation loss (gain)    426    (920 )
Other (mainly general and administrative)    2,404    2,018  
        Total expenses    8,987    12,646  
(Loss) before income taxes    (3,731 )  (8,477 )
Benefit (provision) for income taxes    5,251    (2,962 )
        Net gain (loss)   $ 1,520   $ (11,439 )
Basic EPS:  
        Gain (loss) per Class A share   $ 0.07   $ (0.58 )
        Shares used in calculation (in thousands)    19,724    19,654  
Diluted EPS:  
        Gain (loss) per Class A shares   $ 0.07   $ (0.58 )
        Shares used in calculation (in thousands)    22,103    19,654  

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

2

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

September 30, December 31,
ASSETS AS OF
 2003
 2002
(Dollars in thousands) (Unaudited) (Audited)
 
      Cash and cash equivalents     $ 3,043   $ 1,557  
 
      Deposits, notes and loans receivable    12,052    10,962  
 
      Investments    233,729    215,094  
 
      Real estate property, less accumulated  
      depreciation of $16,327 and $8,748    64,986    65,598  
 
      Other assets    34,863    30,488  
   
   
   
   
      Total Assets   $ 348,673   $ 323,699  



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

3

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

LIABILITIES AND September 30, December 31,
SHAREHOLDERS' EQUITY AS OF
 2003
 2002
(Dollars in thousands except per share amounts) (Unaudited) (Audited)
 
      LIABILITIES            
      Notes and loans payable   $ 134,461   $ 114,257  
      Debentures    3,851    22,546  
      Accounts payable, accrued  
      expense and others    96,545    86,718  
              Total Liabilities    234,857    223,521  
      SHAREHOLDERS EQUITY  
       4% Cumulative Convertible Preferred Stock, $5
              par value; authorized 189,287 shares; issued
             132,962 and 139,391 shares; outstanding 129,612
             and 136,041 shares		    665    697  
   
       6-1/2% Cumulative Convertible Preferred Stock,
               $5 par value; authorized 988,055 shares; issued
              697,380 and 706,450 shares; outstanding 574,844
              and 583,914 shares		    3,487    3,532  
   
       Class A Stock; $1 par value; authorized
               60,000,000 shares; issued 25,562,160 and
               25,502,805 shares; outstanding 19,730,496
               and 19,671,141 shares		    25,562    25,503  
   
      Additional paid-in capital    58,143    58,125  
   
      Retained earnings    77,059    67,475  
   
      Treasury Stock, at cost    (31,096 )  (31,096 )
   
      Accumulated other comprehensive loss    (20,004 )  (24,058 )
           Total shareholders' equity    113,816    100,178  
   
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 348,673   $ 323,699  

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

4

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30,
 2003
 2002
(Dollars in thousands) (Unaudited) (Unaudited)
 
Cash flows from operating activities:            
   Net gain (loss)   $ 9,584   $ (26,772 )
   Adjustments to reconcile net (gain) loss to net  
   cash provided by operating activities:  
   Equity in earnings of affiliates    (1,925 )  (1,301 )
   Realized and unrealized (gain) losses  
   on investments    (24,662 )  7,573  
   Gain on sale of real estate rental property    -    (141 )
   Depreciation expense    1,640    1,618  
   Net amortization    (1,081 )  13  
   Loss from impairment of investments and loans    10,884    13,561  
   Translation loss (gain)    2,739    (1,877 )
   Minority interests    1,463    289  
   (Increase) decrease in other assets    (4,513 )  8,519  
   Increase in accounts payable,  
   accrued expenses and others    6,439    4,455  
   Investments made in trading securities    (39,845 )  (3,235 )
   Proceeds from sale of trading securities    41,418    4,514  
   Dividends received from affiliates    3,529    83  
   Net cash provided by operating activities    5,670    7,299  
Cash flows from investing activities:  
   Deposits, notes and loans receivable collected    1,888    3,393  
   Deposits, notes and loans receivable granted    (3,363 )  (1,089 )
   Investments made in affiliates and others    (1,200 )  (1,726 )
   Proceeds from sale of real estate property, net    1,100    264  
   Return of capital by partnership    157    209  
   Capital improvements    (2,851 )  (1,133 )
   Change of minority interest due to acquisition    1,464    -  
   Net cash used in investing activities    (2,805 )  (82 )

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

5

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30,
 2003
 2002
(Dollars in thousands) (Unaudited) (Unaudited)
 
Cash flows from financing activities:            
Notes and loans payable received   $