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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 March 31, 2005

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

111 Arlozorov Street, Tel Aviv, Israel
 62098
(Address of Principal Executive Offices) (Zip code)

Registrant's Telephone Number, Including Area Code (866) 447-8636
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 No o

        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 19,951,426 (as of May 2, 2005).

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES

Index to Form 10-Q

Part I Financial Information
Page
   Item 1. Financial Statements  
     Consolidated Statements of Operations
     Three Months Ended March 31, 2005 and 2004 1 
     Consolidated Balance Sheets 2 
     Consolidated Statements of Cash Flows 4 
     Consolidated Statements of Changes in Shareholders' Equity 6 
     Consolidated Statements of Comprehensive Gain (Loss) 8 
     Notes to the Consolidated Financial Statements. 9 
   Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 14 
   Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 
   Item 4. Controls and Procedures 21 
Part II. Other Information 21 - 24
   Item 1. Legal Proceedings 21 - 22
   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23 
   Item 3. Defaults upon Senior Securities 23 
   Item 4. Submission of Matters to a Vote of Security Holders 23 
   Item 5. Other Information 24 
   Item 6. Exhibits 24 

ITEM 1. FINANCIAL STATEMENTS

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31,
 2005
 2004
(Dollars in thousands, except per share amounts) (Unaudited) (Unaudited)
 
REVENUES            
Equity in earnings of affiliates   $ 6,633   $ 1,916  
Real estate income    2,336    2,174  
Realized and unrealized gains on investments    4,027    830  
Interest    127    128  
Other    2,511    2,421  
        Total revenues    15,634    7,469  
   
EXPENSES  
Interest    1,144    843  
Real estate expenses    2,159    2,131  
Loss from impairment of investments    -    1,463  
Translation loss    564    1,227  
Other (mainly general and administrative)    2,188    2,518  
        Total expenses    6,055    8,182  
   
Gain (loss) before income taxes    9,579    (713 )
Provision for income taxes    2,506    473  
        Gain (loss) after income tax    7,073    (1,186 )
Minority interest    (345 )  375  
       Net Gain (loss)   $ 6,728   $ (811 )
   
   
Basic EPS:  
        Gain (loss) per Class A share   $ 0.33   $ (0.04 )
   
       Shares used in calculation (in thousands)    19,925    19,793  
   
Diluted EPS:  
       Gain (loss) per Class A share   $ 0.30   $ (0.04 )
       Shares used in calculation (in thousands)    22,342    19,793  

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

1

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS AS OF
 March 31,
2005
 December 31,
2004
(Dollars in thousands) (Unaudited) (Audited)
 
Cash and cash equivalents     $ 21,025   $ 17,618  
   
Deposits, notes and loans receivable    1,379    3,534  
   
Marketable Securities    53,988    50,433  
Other investment    117,660    127,023  
Total Investments    171,648    177,456  
   
Real estate property, less accumulated  
depreciation of $12,605 and $12,190    63,397    63,191  
   
Other assets    46,043    43,148  
   
   
   
   
Total Assets   $ 303,492   $ 304,947  

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

2

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

LIABILITIES AND
SHAREHOLDERS' EQUITY AS OF
 March 31,
2005
 December 31,
2004
 
(Dollars in thousands except per share amounts) (Unaudited) (Audited)
 
LIABILITIES            
Notes and loans payable   $ 119,114   $ 118,760  
Debentures    -    2,036  
Deposits from tenants    52,334    52,152  
Accounts payable, accrued  
expense and others    24,078    26,002  
        Total Liabilities    195,526    198,950  
   
Minority interests    6,303    5,984  
   
SHAREHOLDERS EQUITY  
4% Cumulative Convertible Preferred Stock, $5  
   par value; authorized 189,287 shares; issued  
   122,408 and 124,024 shares; outstanding 119,058  
   and 120,674 shares    612    620  
   
6-1/2% Cumulative Convertible Preferred Stock,  
   $5 par value; authorized 988,055 shares; issued  
   643,419 and 662,219 shares; outstanding 520,883  
   and 539,683 shares    3,217    3,311  
   
Class A Stock; $1 par value; authorized  
   60,000,000 shares; issued 25,779,783 and  
   25,715,303 shares; outstanding 19,948,119  
   and 19,883,639 shares    25,780    25,715  
   
Additional paid-in capital    58,248    58,211  
   
Retained earnings    64,252    57,524  
   
Accumulated other comprehensive loss    (19,350 )  (14,272 )
   
Treasury Stock, at cost    (31,096 )  (31,096 )
   
        Total shareholders' equity    101,663    100,013  
   
   
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 303,492   $ 304,947  

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

3

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

THREE MONTHS ENDED MARCH 31,
 2005
 2004
 
(Dollars in thousands) (Unaudited) (Unaudited)
 
Cash flows from operating activities:            
   Net gain (loss)   $ 6,728   $ (811 )
   Adjustments to reconcile net loss to net  
   cash provided by operating activities:  
   Equity in earnings of affiliates    (6,633 )  (1,916 )
   Realized and unrealized gain  
   on investments    (4,027 )  (830 )
   Depreciation expense    521    538  
   Amortization of deposits from tenants    (494 )  (448 )
   Impairment of investments and loans    -    1,463  
   Translation loss    564    1,227  
   Minority interests    345    (375 )
   Increase in other assets    (2,831 )  (2,228 )
   Increase (decrease) in accounts payable,  
   accrued expenses and others    3,504    (3,993 )
   Investments made in trading securities    (12,052 )  (15,241 )
   Proceeds from sale of trading securities    16,996    31,835  
   Dividends received from affiliates    2,351    76  
   
   Net cash provided by operating activities    4,972    9,297  
   
Cash flows from investing activities:  
   Deposits, notes and loans receivable collected    2,066    4,850  
   Deposits, notes and loans receivable granted    -    (5,057 )
   Investments made in affiliates and others    (314 )  (5,788 )
   Proceeds from sale of investments    1,066    1,522  
   Return of capital by partnership    -    35  
   Capital improvements    (649 )  (214 )
   
   Net cash provided by (used in) investing  
   activities    2,169    (4,652 )

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

4

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

THREE MONTHS ENDED MARCH 31,
 2005
 2004
 
(Dollars in thousands) (Unaudited) (Unaudited)
 
Cash flows from financing activities:            
Notes and loans payable received    $-   $ 6,247  
Notes and loans payable repaid    (1,586 )  (2,496 )
Debentures repaid    (2,023 )  (1,753 )
   
Net cash (used in) provided by financing  
activities    (3,609 )  1,998  
Effect of exchange rate changes on cash and  
cash equivalents    (125 )  (3,546 )
   
Net increase in cash and cash equivalents    3,407    3,097  
Cash and cash equivalents at beginning of period    17,618    4,572  
   
Cash and cash equivalents at end of period   $ 21,025   $ 7,669  
   
Supplemental Disclosure of Cash Flow Information  
Cash paid during the period:  
Interest paid to others   $ 1,162   $ 2,257  
   
Income taxes paid   $ 23   $ 3,700  
Supplemental Disclosure of Non-cash  
Investing Activities:  
Proceeds in tradable securities received from  
realization of an investment    3,316    2,267  
   
Dividend in kind from an affiliate    6,541    -  

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

5

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

March 31
2005
 December 31
2004
 
(Dollars in thousands, except share amounts) (Unaudited) (Audited)
 
4% PREFERRED STOCK            
Balance, beginning of year   $ 620   $ 660  
Conversion of 1,616 and 7,9