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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON D.C. 20549

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FORM 10-Q



|(Mark One)
|----------
|x         

For the
quarterly period ended June 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                                                        
|                                                                
|(State or Other Jurisdiction of
  Incorporation of Organization)
|                                                                
|555 Madison Avenue, New York, New York                          
|                                                                
|(Address of Principal Executive Offices)                        

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
      No _____

Indicate by
check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).     Yes  _____      No  X
The number of shares outstanding of the
issuers Class A Stock, its only authorized common stock, is 19,722,800 (as of
August 6, 2003).

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AMPAL-AMERICAN ISRAEL
CORPORATION AND SUBSIDIARIES

Index to Form 10-Q

|         |                       | Page                                                                                      
|-------- | --------------------- | ------------------------------------------------------------------------------------------
|         |                       |                                                                                           
|Part I   | Financial Information |                                                                                           
|         |                       |                                                                                           
|         | Item 1.               | Financial
  Statements                                                                    
|         |                       |                                                                                           
|         |                       | Consolidated
  Statements of Operations                                                   
|         |                       |                                                                                           
|         |                       |                                                                                           
|         |                       |                                                                                           
|         |                       |                                                                                           
|         |                       |                                                                                           
|         |                       | Consolidated
  Balance Sheets                                                             
|         |                       |                                                                                           
|         |                       | Consolidated
  Statements of Cash Flows                                                   
|         |                       |                                                                                           
|         |                       | Consolidated
  Statements of Changes in Shareholders
  Equity                            
|         |                       |                                                                                           
|         |                       | Consolidated
  Statements of Comprehensive Gain (Loss)                                    
|         |                       |                                                                                           
|         |                       | Notes to the
  Consolidated Financial Statements.                                         
|         |                       |                                                                                           
|         | Item 2.               | Managements
  Discussion and Analysis of
  Financial Condition and Results of Operations.
|         |                       |                                                                                           
|         | Item 3.               | Quantitative
  and Qualitative Disclosures
  About Market Risks                           
|         |                       |                                                                                           
|         | Item 4.               | Controls and
  Procedures                                                                 
|         |                      
|Part II. | Other
  Information   | 23                                                                                        
|         |                      
|         | Item 1.               | Legal
  Proceedings                                                                       
|         |                       |                                                                                           
|         | Item 2.               | Changes in
  Securities and Use of Proceeds                                               
|         |                       |                                                                                           
|         | Item 3.               | Defaults upon
  Senior Securities                                                         
|         |                       |                                                                                           
|         | Item 4.               | Submission
  to Matters to a Vote of Security Holders                                     
|         |                       |                                                                                           
|         | Item 5.               | Other
  Information                                                                       
|         |                       |                                                                                           
|         | Item 6.               | Exhibits and
  Reports on Form 8-K                                                        

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ITEM 1.  FINANCIAL STATEMENTS

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|SIX MONTHS ENDED JUNE 30,                                 |  | 2003        |        | 2002       
|--------------------------------------------------------- |  | ----------- | ------ | -----------
|                                                          |  |             |        |            
|(Dollars in thousands, except per share
  amounts)        |  | (Unaudited) |        | (Unaudited)
|                                                          |  |             |        |            
|REVENUES                                                  |  |             |        |            
|Equity in
  earnings of affiliates                        |  | $           | 194    |            
|Interest                                                  |  |             | 267    |            
|Real estate
  income                                      |  |             | 4,385  |            
|Realized and
  unrealized gains (losses) on
  investments |  |             | 26,342 |            
|Gain on sale
  of real estate rental property             |  |             | -      |            
|Other                                                     |  |             | 4,739  |            
|                                                          |  |             |        |            
|Total
  revenues                                          |  |             | 35,927 |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|EXPENSES                                                  |  |             |        |            
|Interest                                                  |  |             | 3,634  |            
|Real estate
  expenses                                    |  |             | 3,921  |            
|Loss from
  impairment of investments & real estate       |  |             | 8,133  |            
|Minority
  interests                                      |  |             | 1,095  |            
|Translation
  loss (gain)                                 |  |             | 2,313  |            
|Other
  (mainly general and administrative)               |  |             | 4,583  |            
|                                                          |  |             |        |            
|Total
  expenses                                          |  |             | 23,679 |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Gain (loss)
  before income taxes                         |  |             | 12,248 |            
|Provision
  for income taxes                              |  |             | 4,184  |            
|                                                          |  |             |        |            
|Net
  gain (loss)                                         |  | $           | 8,064  |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Basic EPS                                                 |  |             |        |            
|Gain
  (loss) per Class A share                           |  | $           | 0.40   |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Shares
  used in calculation (in thousands)               |  |             | 19,698 |            
|                                                          |  |             |        |            
|Diluted EPS                                               |  |             |        |            
|Gain
  (loss) per Class A shares                          |  | $           | 0.36   |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Shares
  used in calculation (in thousands)               |  |             | 22,103 |            
|                                                          |  |             |        |            

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

1

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ITEM 1. 
FINANCIAL STATEMENTS

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|THREE MONTHS ENDED JUNE 30,                               |  | 2003        |        | 2002       
|--------------------------------------------------------- |  | ----------- | ------ | -----------
|                                                          |  |             |        |            
|(Dollars in thousands, except per share
  amounts)        |  | (Unaudited) |        | (Unaudited)
|                                                          |  |             |        |            
|REVENUES                                                  |  |             |        |            
|Equity in
  earnings (losses) of affiliates               |  | $           | 703    |            
|Interest                                                  |  |             | 132    |            
|Real estate
  income                                      |  |             | 2,280  |            
|Realized and
  unrealized gains (losses) on
  investments |  |             | 25,434 |            
|Other                                                     |  |             | 2,444  |            
|                                                          |  |             |        |            
|Total
  revenues                                          |  |             | 30,993 |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|EXPENSES                                                  |  |             |        |            
|Interest                                                  |  |             | 1,417  |            
|Real estate
  expenses                                    |  |             | 1,988  |            
|Loss from
  impairment of investments & real estate       |  |             | 8,133  |            
|Minority
  interests                                      |  |             | 586    |            
|Translation
  loss (gain)                                 |  |             | 1,992  |            
|Other
  (mainly general and administrative)               |  |             | 2,246  |            
|                                                          |  |             |        |            
|Total
  expenses                                          |  |             | 16,362 |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Gain (loss)
  before income taxes                         |  |             | 14,631 |            
|Provision
  for income taxes                              |  |             | 4,400  |            
|                                                          |  |             |        |            
|Net
  gain (loss)                                         |  | $           | 10,231 |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Basic EPS                                                 |  |             |        |            
|Gain
  (loss) per Class A share                           |  | $           | 0.52   |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Shares
  used in calculation (in thousands)               |  |             | 19,713 |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Diluted EPS                                               |  |             |        |            
|Gain
  (loss) per Class A shares                          |  | $           | 0.46   |            
|                                                          |  |             |        |            
|                                                          |  |             |        |            
|Shares
  used in calculation (in thousands)               |  |             | 22,103 |            
|                                                          |  |             |        |            

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

2

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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

|ASSETS AS OF                                                                       |  | June 30,
  2003 |         | December 31,
  2002
|---------------------------------------------------------------------------------- |  | --------------- | ------- | -------------------
|                                                                                   |  |                 |         |                    
|(Dollars in thousands)                                                             |  | (Unaudited)     |         | (Audited)          
|                                                                                   |  |                 |         |                    
|Cash and
  cash equivalents                                                        |  | $               | 2,784   |                    
|                                                                                   |  |                 |         |                    
|Deposits,
  notes and loans receivable                                             |  |                 | 12,259  |                    
|                                                                                   |  |                 |         |                    
|Investments                                                                        |  |                 | 237,271 |                    
|                                                                                   |  |                 |         |                    
|Real estate
  property, less accumulated
       Depreciation of $10,069 and $9,166 |  |                 | 66,445  |                    
|                                                                                   |  |                 |         |                    
|Other assets                                                                       |  |                 | 29,530  |                    
|                                                                                   |  |                 |         |                    
|                                                                                   |  |                 |         |                    
|Total Assets                                                                       |  | $               | 348,289 |                    
|                                                                                   |  |                 |         |                    

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

3

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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|LIABILITIES AND
  SHAREHOLDERS EQUITY AS OF                                                                                                                                             |  | June 30,
  2003 |         | December 31,
  2002
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | -------------------
|                                                                                                                                                                                         |  |                 |         |                    
|(Dollars in thousands except per share
  amounts)                                                                                                                                        |  | (Unaudited)     |         | (Audited)          
|                                                                                                                                                                                         |  |                 |         |                    
|LIABILITIES                                                                                                                                                                              |  |                 |         |                    
|Notes and
  loans payable                                                                                                                                                                |  | $               | 135,123 |                    
|Debentures                                                                                                                                                                               |  |                 | 4,010   |                    
|Accounts
  payable, accrued expense and others                                                                                                                                           |  |                 | 95,740  |                    
|                                                                                                                                                                                         |  |                 |         |                    
|                                                                                                                                                                                         |  |                 |         |                    
|Total
  Liabilities                                                                                                                                                                      |  |                 | 234,873 |                    
|                                                                                                                                                                                         |  |                 |         |                    
|                                                                                                                                                                                         |  |                 |         |                    
|SHAREHOLDERS
  EQUITY                                                                                                                                                                    |  |                 |         |                    
|4%
  Cumulative Convertible Preferred Stock, $5
       par value; authorized 189,287 shares; issued
       134,476 and 139,391 shares; outstanding 131,126
       and 136,041 shares     |  |                 | 672     |                    
|                                                                                                                                                                                         |  |                 |         |                    
|6-1/2%
  Cumulative Convertible Preferred Stock,
       $5 par value; authorized 988,055 shares; issued
       698,802 and 706,450 shares; outstanding 576,266
       and 583,914 shares |  |                 | 3,494   |                    
|                                                                                                                                                                                         |  |                 |         |                    
|Class A
  Stock; $1 par value; authorized
       60,000,000 shares; issued 25,550,324 and
       25,502,805 shares; outstanding 19,718,660
       and 19,671,141 shares                  |  |                 | 25,550  |                    
|                                                                                                                                                                                         |  |                 |         |                    
|Additional
  paid-in capital                                                                                                                                                             |  |                 | 58,141  |                    
|                                                                                                                                                                                         |  |                 |         |                    
|Retained
  earnings                                                                                                                                                                      |  |                 | 75,539  |                    
|                                                                                                                                                                                         |  |                 |         |                    
|Treasury
  Stock, at cost                                                                                                                                                                |  |                 | (31,096 | )                  
|                                                                                                                                                                                         |  |                 |         |                    
|Accumulated
  other comprehensive loss                                                                                                                                                   |  |                 | (18,884 | )                  
|                                                                                                                                                                                         |  |                 |         |                    
|                                                                                                                                                                                         |  |                 |         |                    
|Total
  shareholders equity                                                                                                                                                             |  |                 | 113,416 |                    
|                                                                                                                                                                                         |  |                 |         |                    
|                                                                                                                                                                                         |  |                 |         |                    
|TOTAL
  LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                             |  | $               | 348,289 |                    
|                                                                                                                                                                                         |  |                 |         |                    

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

4

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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS

|SIX MONTHS ENDED JUNE 30,                                                                       |  | 2003        |         | 2002       
|----------------------------------------------------------------------------------------------- |  | ----------- | ------- | -----------
|                                                                                                |  |             |         |            
|(Dollars in thousands)                                                                          |  | (Unaudited) |         | (Unaudited)
|                                                                                                |  |             |         |            
|Cash flows
  from operating activities:                                                         |  |             |         |            
|Net
  gain (loss)                                                                               |  | $           | 8,064   |            
|Adjustments
  to reconcile net gain (loss) to net
       cash provided by operating activities: |  |             |         |            
|Equity
  in earnings of affiliates                                                              |  |             | (194    | )          
|Realized
  and unrealized gains (losses)
       on investments                                  |  |             | (26,342 | )          
|Gain
  on sale of real estate rental property                                                   |  |             | -       |            
|Depreciation
  expense                                                                          |  |             | 1,024   |            
|Net
  amortization                                                                              |  |             | (586    | )          
|Loss
  from impairment of investments and loans                                                 |  |             | 8,133   |            
|Translation
  loss (gain)                                                                       |  |             | 2,313   |            
|Minority
  interests                                                                            |  |             | 1,095   |            
|Decrease
  in other assets                                                                      |  |             | 1,284   |            
|Increase
  in accounts payable,
       accrued expenses and others                              |  |             | 5,938   |            
|Investments
  made in trading securities                                                        |  |             | (20,057 | )          
|Proceeds
  from sale of trading securities                                                      |  |             | 22,191  |            
|Dividends
  received from affiliates                                                            |  |             | 3,529   |            
|                                                                                                |  |             |         |            
|                                                                                                |  |             |         |            
|Net
  cash provided by operating activities                                                     |  |             | 6,392   |            
|                                                                                                |  |             |         |            
|                                                                                                |  |             |         |            
|Cash flows
  from investing activities:                                                         |  |             |         |            
|Deposits,
  notes and loans receivable collected                                                |  |             | 1,853   |            
|Deposits,
  notes and loans receivable granted                                                  |  |             | (3,363  | )          
|Investments
  made in      affiliates and others                                                |  |             | (1,000  | )          
|Proceeds
  from sale of real estate property,
       net of commissions and transfer taxes      |  |             | -       |            
|Return
  of capital by partnership                                                              |  |             | 157     |            
|Capital
  improvements                                                                          |  |             | (2,520  | )          
|Change
  of minority interest due to acquisition                                                |  |             | 1,464   |            
|                                                                                                |  |             |         |            
|                                                                                                |  |             |         |            
|Net
  cash provided (used) by investing
       activities                                       |  |             | (3,409  | )          
|                                                                                                |  |             |         |            

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

5

---

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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS

|SIX MONTHS ENDED JUNE 30,                                        |  | 2003        |         | 2002       
|---------------------------------------------------------------- |  | ----------- | ------- | -----------
|                                                                 |  |             |         |            
|(Dollars in thousands)                                           |  | (Unaudited) |         | (Unaudited)
|                                                                 |  |             |         |            
|Cash flows
  from financing activities:                          |  |             |         |            
|Notes and
  loans payable received                               |  | $           | 20,263  |            
|Notes and
  loans payable repaid:                                |  |             |         |            
|Others                                                           |  |             | (4,350  | )          
|Proceeds
  from exercise of stock options                        |  |             | -       |            
|Debentures
  repaid                                              |  |             | (19,271 | )          
|                                                                 |  |             |         |            
|Net
  cash used in financing
       activities                   |  |             | (3,358  | )          
|                                                                 |  |             |         |            
|                                                                 |  |             |         |            
|Effect of
  exchange rate changes on cash and
  cash equivalents |  |             | 1,602   |            
|                                                                 |  |             |         |            
|                                                                 |  |             |         |            
|Net increase
  (decrease) in cash and cash equivalents           |  |             | 1,227   |            
|Cash and
  cash equivalents at beginning of
  period             |  |             | 1,557   |            
|                                                                 |  |             |         |            
|                                                                 |  |             |         |            
|Cash and
  cash equivalents at end of period                     |  | $           | 2,784   |            
|                                                                 |  |             |         |            
|                                                                 |  |             |         |            
|Supplemental
  Disclosure of Cash Flow Information               |  |             |         |            
|Cash paid
  during the period:                                   |  |             |         |            
|Interest
  paid to others:                                       |  | $           | 4,444   |            
|                                                                 |  |             |         |            
|                                                                 |  |             |         |            
|Income taxes
  paid                                              |  | $           | 60      |            
|                                                                 |  |             |         |            
|                                                                 |  |             |         |            
|Supplemental
  Disclosure of Non-cash                            |  |             |         |            
|Investing
  Activities:                                          |  |             |         |            
|Investments
  in investees                                       |  |             | 780     |            
|                                                                 |  |             |         |            

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

6

---

---

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

|SIX MONTHS ENDED JUNE 30,                                              |  | 2003        |        | 2002        | 
|---------------------------------------------------------------------- |  | ----------- | ------ | ----------- | 
|                                                                       |  |             |        |             | 
|(Dollars in thousands, except share amounts)                           |  | (Unaudited) |        | (Unaudited) | 
|                                                                       |  |             |        |             | 
|4% PREFERRED
  STOCK                                                   |  |             |        |             | 
|Balance,
  beginning of year                                           |  | $           | 697    |             | 
|Conversion
  of 4,915 and 3,205 shares into 
            Class A Stock |  |             | (25    | )           | 
|                                                                       |  |             |        |             | 
|                                                                       |  |             |        |             | 
|Balance, end
  of period                                               |  | $           | 672    |             | 
|                                                                       |  |             |        |             | 
|                                                                       |  |             |        |             | 
|6-1/2%
  PREFERRED STOCK                                               |  |             |        |             | 
|Balance,
  beginning of year                                           |  | $           | 3,532  |             | 
|Conversion
  of 7,648 and 20,230 shares into
            Class A Stock |  |             | (38    | )           | 
|                                                                       |  |             |        |             | 
|Balance, end
  of period                                               |  | $           | 3,494  |             | 
|                                                                       |  |             |        |             | 
|                                                                       |  |             |        |             | 
|CLASS A
  STOCK                                                        |  |             |        |             | 
|Balance beginning
  of year                                            |  | $           | 25,503 |             | 
|Issuance of
  shares upon conversion of 
       Preferred Stock        |  |             | 47     |             | 
|                                                                       |  |             |        |             | 
|Balance, end
  of period                                               |  | $           | 25,550 |             | 
|                                                                       |  |             |        |             | 
|                                                                       |  |             |        |             | 
|ADDITIONAL
  PAID-IN CAPITAL                                           |  |             |        |             | 
|Balance,
  beginning of year                                           |  | $           | 58,125 |             | 
|Conversion
  of Preferred Stock                                        |  |             | 16     |             | 
|Issuance of
  shares upon exercise
  of stock options                  |  |             | -      |             | 
|                                                                       |  |             |        |             | 
|Balance, end
  of period                                               |  | $           | 58,141 |             | 
|                                                                       |  |             |        |             | 
|                                                                       |  |             |        |             | 
|RETAINED
  EARNINGS                                                    |  |             |        |             | 
|Balance,
  beginning of year                                           |  | $           | 67,475 |             | 
|Net gain
  (loss)                                                      |  |             | 8,064  |             | 
|                                                                       |  |             |        |             | 
|Balance, end
  of period                                               |  | $           | 75,539 |             | 
|                                                                       |  |             |        |             | 

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

7

---

---

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

|SIX MONTHS ENDED JUNE 30,                                                               |  | 2003        |         | 2002        | 
|--------------------------------------------------------------------------------------- |  | ----------- | ------- | ----------- | 
|                                                                                        |  |             |         |             | 
|(Dollars in thousands, except share
  amounts)                                          |  | (Unaudited) |         | (Unaudited) | 
|                                                                                        |  |             |         |             | 
|TREASURY
  STOCK                                                                        |  |             |         |             | 
|                                                                                        |  |             |         |             | 
|4% PREFERRED
  STOCK                                                                    |  |             |         |             | 
|Balance, end
  of period                                                                |  |             | (84     | )           | 
|                                                                                        |  |             |         |             | 
|                                                                                        |  |             |         |             | 
|6-1/2%
  PREFERRED STOCK                                                                |  |             |         |             | 
|Balance, end
  of period                                                                |  |             | (1,853  | )           | 
|                                                                                        |  |             |         |             | 
|                                                                                        |  |             |         |             | 
|CLASS A
  STOCK                                                                         |  |             |         |             | 
|Balance,
  beginning and end of period  5,831,664
       and 6,160,664 shares, at cost |  |             | (29,159 | )           | 
|Issuance of
  shares upon exercise 
  of 329,000 stock options                          |  |             | -       |             | 
|                                                                                        |  |             |         |             | 
|Balance  end of period                                                                  |  |             | (29,159 | )           | 
|                                                                                        |  |             |         |             | 
|                                                                                        |  |             |         |             | 
|Balance, end
  of period                                                                |  | $           | (31,096 | )           | 
|                                                                                        |  |             |         |             | 
|                                                                                        |  |             |         |             | 
|ACCUMULATED
  OTHER COMPREHENSIVE LOSS                                                  |  |             |         |             | 
|                                                                                        |  |             |         |             | 
|Cumulative
  translation adjustments:                                                   |  |             |         |             | 
|Balance,
  beginning of year                                                            |  |             | (20,750 | )           | 
|                                                                                        |  |             |         |             | 
|Foreign
  currency translation adjustment                                               |  |             | 397     |             | 
|                                                                                        |  |             |         |             | 
|Balance,
  end of period                                                                |  |             | (20,353 | )           | 
|                                                                                        |  |             |         |             | 
|Unrealized
  gain on marketable securities:                                             |  |             |         |             | 
|Balance,
  beginning of year                                                            |  |             | (3,308  | )           | 
|Unrealized
  gain (loss), net                                                           |  |             | 7,519   |             | 
|Sale
  of available-for-sale securities                                                 |  |             | (2,742  | )           | 
|                                                                                        |  |             |         |             | 
|Balance,
  end of period                                                                |  |             | 1,469   |             | 
|                                                                                        |  |             |         |             | 
|                                                                                        |  |             |         |             | 
|Balance, end
  of period                                                                |  | $           | (18,884 | )           | 
|                                                                                        |  |             |         |             | 

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

8

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---

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE GAIN (LOSS)

|SIX MONTHS ENDED JUNE 30,                      |  | 2003        |        | 2002        | 
|---------------------------------------------- |  | ----------- | ------ | ----------- | 
|                                               |  |             |        |             | 
|(Dollars in thousands)                         |  | (Unaudited) |        | (Unaudited) | 
|                                               |  |             |        |             | 
|Net gain
  (loss)                              |  | $           | 8,064  |             | 
|                                               |  |             |        |             | 
|                                               |  |             |        |             | 
|Other
  comprehensive gain (loss), net of tax: |  |             |        |             | 
|Foreign
  currency translation adjustments     |  |             | 397    |             | 
|Unrealized
  gain (loss) on securities         |  |             | 7,519  |             | 
|                                               |  |             |        |             | 
|Other
  comprehensive income (loss)            |  |             | 7,916  |             | 
|                                               |  |             |        |             | 
|                                               |  |             |        |             | 
|Comprehensive
  gain (loss)                    |  | $           | 15,980 |             | 
|                                               |  |             |        |             | 
|                                               |  |             |        |             | 
|Related Tax
  benefit (expense) of other       |  |             |        |             | 
|Comprehensive
  gain (loss):                   |  |             |        |             | 
|Foreign
  currency translation adjustments     |  | $           | (175   | )           | 
|Unrealized
  (loss) on securities              |  | $           | (1,998 | )           | 

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

9

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---

|AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    

(Unaudited)

|1. | As used in
  these financial statements, the term the Company refers to Ampal-American
  Israel Corporation (Ampal) and its consolidated subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | The June 30,
  2003 consolidated balance sheet presented herein was derived from the audited
  December 31, 2002 consolidated financial statements of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Reference
  should be made to the Companys consolidated financial statements for the
  year ended December 31, 2002 for a description of the accounting policies,
  which have been continued without change. 
  Also, reference should be made to the notes to the Companys December
  31, 2002 consolidated financial statements for additional details of the
  Companys consolidated financial condition, results of operations and cash
  flows. The details in those notes have not changed except as a result of
  normal transactions in the interim. All adjustments (of a normal recurring
  nature) which are, in the opinion of management, necessary to a fair
  presentation of the results of the interim period have been included.                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | Recently Issued Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In January
  2003, the FASB issued FASB Interpretation No. 46 Consolidation of Variable
  Interest Entities (FIN 46). Under FIN 46 entities are separated into two
  populations: (1) those for which voting interests are used to determine
  consolidation (this is the most common situation) and (2) those for which
  variable interests are used to determine consolidation. FIN 46 explains how
  to identify Variable Interest Entities (VIE) and how to determine when a
  business enterprise should include the assets, liabilities, non-controlling
  interests, and results of activities of a VIE in its consolidated financial
  statements.                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | FIN 46 is
  effective as follows:  for variable
  interests in variable interest entities created after January 31, 2003, FIN
  46 shall apply immediately, for variable interests in variable interest
  entities created before that date, the FIN shall applyfor public entitiesas
  of the beginning of the first interim or annual reporting period beginning
  after June 15, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | FIN 46 is
  effective immediately for certain disclosure requirements and variable
  interest entities created after January 31, 2003 and in fiscal 2003 for all
  other variable interest entities. As the Company does not have variable
  interest entities, the adoption of FIN 46 will not have a material impact on
  the Companys financial position, results of operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In April
  2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
  Instruments and Hedging Activities. This Statement amends and clarifies
  financial accounting and reporting for derivative instruments, including certain
  derivative instruments embedded in other contracts (collectively referred to
  as derivatives) and for hedging activities under FASB Statement No. 133,
  Accounting for Derivative Instruments and Hedging Activities. This Statement
  is effective prospectively for contracts entered into or modified after June
  30, 2003 and prospectively for hedging relationships designated after June
  30, 2003. The Company is currently analyzing the impact of this Statement but
  does not believe that on adoption, it will have a material impact on its
  results of operations or financial position.

10

---

---

|   | In May 2003,
  the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments
  with Characteristics of both Liabilities and Equity. The Statement improves
  the accounting for certain financial instruments that, under previous
  guidance, issuers could account for as equity and requires that these
  instruments be classified as liabilities in statements of financial position.
  This Statement is effective prospectively for financial instruments entered
  into or modified after May 31, 2003 and otherwise is effective at the
  beginning of the first interim period beginning after June 15, 2003. This
  statement shall be implemented by reporting the cumulative effect of a change
  in an accounting principle for financial instruments created before the
  issuance date of the Statement and still existing at the beginning of the
  interim period of adoption. The Company is currently analyzing the impact of
  this Statement but does not believe that on adoption, it will have a material
  impact on its results of operations or financial position.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4. | Employee
  Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company
  accounts for all plans under APB Opinion No. 25, under which no compensation
  costs were incurred. The following table illustrates the effect on net income
  and net loss and EPS as if the Company had applied the fair value-recognition
  provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to
  stock based incentive plans for the periods indicated below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| | Six Months Ended June 30                |  | 2003 |       | 2002 | 
| | --------------------------------------- |  | ---- | ----- | ---- | 
| |                                         |  |      |       |      | 
| | (In thousands, except per share data)   |  |      |       |      | 
| |                                         |  |      |       |      | 
| | Basic EPS:                              |  |      |       |      | 
| |                                         |  |      |       |      | 
| | Net gain
  (loss):                      |  |      |       |      | 
| | As
  reported(1)                        |  | $    | 7,955 |      | 
| | Less-stock
  based compensation expense |  |      |       |      | 
| | Determined
  under fair value method    |  |      | (247  | )    | 
| |                                         |  |      |       |      | 
| |                                         |  |      |       |      | 
| | Pro
  forma                             |  | $    | 7,708 |      | 
| |                                         |  |      |       |      | 
| |                                         |  |      |       |      | 
| | As
  reported                           |  | $    | 0.40  |      | 
| |                                         |  |      |       |      | 
| | Pro
  forma                             |  | $    | 0.39  |      | 
| |                                         |  |      |       |      | 
| |                                         |  |      |       |      | 
| | Diluted EPS:                            |  |      |       |      | 
| |                                         |  |      |       |      | 
| | Net gain
  (loss):                      |  |      |       |      | 
| | As
  reported                           |  | $    | 8,064 |      | 
| | Less-stock
  based compensation expense |  |      |       |      | 
| | Determined
  under fair value method    |  |      | (247  | )    | 
| |                                         |  |      |       |      | 
| |                                         |  |      |       |      | 
| | Pro
  Forma                             |  | $    | 7,817 |      | 
| |                                         |  |      |       |      | 
| |                                         |  |      |       |      | 
| | As
  Reported                           |  | $    | 0.36  |      | 
| |                                         |  |      |       |      | 
| | Pro
  forma                             |  | $    | 0.35  |      | 
| |                                         |  |      |       |      | 

11

---

---

| | Three Months Ended June 30              |  | 2003 |        | 2002 | 
| | --------------------------------------- |  | ---- | ------ | ---- | 
| |                                         |  |      |        |      | 
| | (In thousands, except per share data)   |  |      |        |      | 
| |                                         |  |      |        |      | 
| | Basic EPS:                              |  |      |        |      | 
| |                                         |  |      |        |      | 
| | Net gain
  (loss):                      |  |      |        |      | 
| | As
  reported(1)                        |  | $    | 10,176 |      | 
| | Less-stock
  based compensation expense |  |      |        |      | 
| | Determined
  under fair value method    |  |      | (124   | )    | 
| |                                         |  |      |        |      | 
| |                                         |  |      |        |      | 
| | Pro
  forma                             |  | $    | 10,052 |      | 
| |                                         |  |      |        |      | 
| |                                         |  |      |        |      | 
| | As
  reported                           |  | $    | 0.52   |      | 
| |                                         |  |      |        |      | 
| | Pro
  forma                             |  | $    | 0.51   |      | 
| |                                         |  |      |        |      | 
| |                                         |  |      |        |      | 
| | Diluted EPS:                            |  |      |        |      | 
| |                                         |  |      |        |      | 
| | Net gain
  (loss):                      |  |      |        |      | 
| | As
  reported                           |  | $    | 10,231 |      | 
| | Less-stock
  based compensation expense |  |      |        |      | 
| | Determined
  under fair value method.   |  |      | (124   | )    | 
| |                                         |  |      |        |      | 
| |                                         |  |      |        |      | 
| | Pro
  forma                             |  | $    | 10,107 |      | 
| |                                         |  |      |        |      | 
| |                                         |  |      |        |      | 
| | As
  Reported                           |  | $    | 0.46   |      | 
| |                                         |  |      |        |      | 
| | Pro
  forma                             |  | $    | 0.46   |      | 
| |                                         |  |      |        |      | 

| | (1)After
  deduction of accrued Preferred Stock Dividend of $109 and $113 (for three
  month $55 and $57) respectively.
| | -----------------------------------------------------------------------------------------------------------------------

| | Under SFAS No. 123, the fair value of each option is estimated on the
date of grant using the Black Scholes option-pricing model with the following
assumptions: (1) expected life of options; 
(2) dividend yield; (3) volatility; and (4) risk-free interest
rate.  For the periods of six and three
months ended June 30, 2003 and 2002, no options were granted. The fair value
generated by the Black-Scholes model may not be indicative of the future
benefit, if any, that may be received by the optionholder.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

---

---

|5. | Segment
  information presented below results primarily from operations in Israel.
|-- | ----------------------------------------------------------------------------------

| | SIX MONTHS ENDED JUNE 30,       |  | 2003 |         | 2002 | 
| | ------------------------------- |  | ---- | ------- | ---- | 
| |                                 |  |      |         |      | 
| | (Dollars in thousands)          |  |      |         |      | 
| |                                 |  |      |         |      | 
| | Revenues:                       |  |      |         |      | 
| | Finance                         |  | $    | 30,476  |      | 
| | Real Estate                     |  |      | 4,385   |      | 
| | Leisure-time                    |  |      | 908     |      | 
| | Intercompany
  adjustments      |  |      | (36     | )    | 
| |                                 |  |      |         |      | 
| | Total                           |  | $    | 35,733  |      | 
| |                                 |  |      |         |      | 
| |                                 |  |      |         |      | 
| | Pretax
  Operating Gain (Loss): |  |      |         |      | 
| | Finance                         |  | $    | 13,994  |      | 
| | Real Estate                     |  |      | (909    | )    | 
| | Leisure-time                    |  |      | 64      |      | 
| |                                 |  |      |         |      | 
| | Total                           |  | $    | 13,149  |      | 
| |                                 |  |      |         |      | 
| |                                 |  |      |         |      | 
| | Total
  Assets:                 |  |      |         |      | 
| | Finance*                        |  | $    | 264,810 |      | 
| | Real Estate                     |  |      | 69,820  |      | 
| | Leisure-Time                    |  |      | 16,444  |      | 
| | Intercompany
  adjustments      |  |      | (2,785  | )    | 
| |                                 |  |      |         |      | 
| | Total                           |  | $    | 348,289 |      | 
| |                                 |  |      |         |      | 

|   | *Includes an
  investment in MIRS Communications Ltd. of $111 million.                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Corporate
  office expense is principally applicable to the financing operations and has
  been charged to that segment above. Revenues exclude equity in earnings of
  affiliates and pretax operating gain (loss)excludes equity in earnings of
  affiliates and minority interests.                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The real
  estate segment consists of rental property owned in Israel leased to  unrelated parties and of the operations of
  Am-Hal Ltd., the Companys wholly-owned subsidiary which owns and operates a
  chain of senior citizens facilities located in Israel. The leisure-time
  segment consists primarily of Coral World International Limited (marine parks
  located around the world) and Country Club Kfar Saba (the companys 51%-owned
  subsidiary located in Israel).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|6. | The
  following table summarizes securities that were outstanding as of June 30,
  2003 and 2002, but not included in the calculations of diluted earnings per
  Class A share because such shares are anti-dilutive.                                                                                                                                                                                                                                                                

| | (Shares in thousands)    |  | June 30, |      
| | ------------------------ |  | -------- | -----
| |                          |  |          |      
| |                          |  | 2003     |      
| |                          |  |          |      
| |                          |  |          |      
| | Options and
  Rights     |  |          | 1,338
| | 6-1/2%
  Preferred Stock |  |          |     
| | 4% Preferred
  Stock     |  |          |     

|7. | Legal
  Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Yakhin Hakal                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Further to
  the legal proceedings description in the 2002 financial statements, on July
  15, 2003, the Israeli Supreme Court dismissed the appeal filed by the Company
  on March 12, 2002, regarding the Tel Aviv District Courts previous decision
  to dismiss the Companys request for a preliminary injunction and other
  remedies in relation to the validity and enforceability of Etz Vanirs and
  Yakhin Mataims decisions to redeem the debentures owned by the Company and to
  require the Company to surrender all of its preferred shares in Etz Vanir and
  Yakhin Mataim for approximately $0.8 million.

13

---

---

| | MIRS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | A petition
  to certify a class action against MIRS in the amount of NIS 170 million ($36
  million) was filed in the Tel Aviv District Court in September 2001.  The claim is in connection with the change
  in MIRS tariffs resulting from the implementation of MIRS own dialing
  prefix, which replaced its previous dialing prefix, the Tel-Aviv area
  code.  As a result, persons in the Tel
  Aviv area code claimed that they are subject to higher tariffs than those
  they had been subject to under MIRSs previous dialing prefix. On May 14,
  2003 the petitioners withdrew their claim.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | A petition
  to certify a class action against MIRS and the other three cellular operators
  in Israel in the total amount of NIS 600 million ($127 million) was filed in
  the Tel Aviv District Court in May 2002. The claim involves the inter-connect
  fees that were collected from the customers of the other operators with
  regard to phone calls that were made to voice recorder applications through
  the cellular operators dialing numbers. On June 22, 2003 the petitioners
  withdrew their claim.                                                                                       

Item 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES

CRITICAL ACCOUNTING POLICIES

The preparation of Ampals consolidated financial statements is in
conformity with accounting principles generally accepted in the United States
which requires management to make estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying consolidated
financial statements and related footnotes. Actual results may differ from
these estimates.  To facilitate the
understanding of Ampals business activities, described below are certain Ampal
accounting policies that are relatively more important to the portrayal of its
financial condition and results of operations and that require managements
subjective judgments.  Ampal bases its
judgments on its experience and various other assumptions that it believes to
be reasonable under the circumstances. 
Please refer to Note 1 to Ampals consolidated financial statements
included in the Annual Report for the year ended December 31, 2002 for a
summary of all of Ampals significant accounting policies.

Portfolio Investments

The Company accounts for a number of its investments, including many of
its investments in the high-technology and communications industries, on the
basis of the cost method.  Application
of this method requires the Company to periodically review these investments in
order to determine whether to maintain the current carrying value or to write
off some or all of the investment. 
While the Company uses some objective measurements in its review, such
as the portfolio companys liquidity, burn rate, termination of a substantial
number of employees, achievement of milestones set forth in its business plan
or projections and seeks to obtain relevant information from the company under
review, the review process involves a number of judgments on the part of the
Companys management.  These judgments
include assessments of the likelihood of the company under review to obtain
additional financing, to achieve future milestones, make sales and to compete
effectively in its markets.  In making
these judgments the Company must also attempt to anticipate trends in the
particular companys industry as well as in the general economy.  There can be no guarantee that the Company
will be accurate in its assessments and judgments.  To the extent that the Company is not correct in its conclusion
it may decide to write down all or part of the particular investment.

14

---

---

Investment in MIRS

MIRS is our largest investment and is being accounted for at cost (our
equity interest is 25%). The cost method is applied due to preference features
we have been granted in our investment in preferred shares in Mirs. Revenues
from guaranteed payments from Motorola are recognized as income.  We perform annual tests for impairment
regarding our investment.

Marketable Securities

We determine the appropriate classification of marketable securities at
the time of purchase. To date, we hold marketable securities classified as
trading securities that are carried at fair value, and marketable securities
classified as available-for-sale that are carried at fair value with unrealized
gains and losses included in the component of accumulated other comprehensive
loss in stockholders equity. If according to managements assessment it is
determined that a decline in the fair value of any of the investments is other
than temporary, an impairment loss is recorded and included in the consolidated
statements of income as financial expenses.

Long-Lived Assets

On January 1, 2002, Ampal adopted FAS 144, Accounting for the
Impairment or Disposal of Long- Lived Assets. FAS 144 requires that long-
lived assets, to be held and used by an entity, be reviewed for impairment and,
if necessary, written down to the estimated fair values, whenever events or
changes in circumstances indicate that the carrying amount of the assets may
not be recoverable through undiscounted future cash flows.

Accounting for Income Taxes

As part of the process of preparing our consolidated financial statements,
we are required to estimate our income taxes in each of the jurisdictions in
which we operate.  This process involves
us estimating our current tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax and accounting
purposes.  These differences result in
deferred tax assets and liabilities, which are included in our consolidated
balance sheet. We must then assess the likelihood that our deferred tax assets
will be recovered from future taxable income, and, to the extent we believe
that recovery is not likely, we must establish a valuation allowance.  To the extent we establish a valuation
allowance or increase this allowance in a period, we must include an expense
within the tax provision in the statement of operations.  A valuation allowance is currently set
against certain tax assets because management believes it is more likely than
not that these deferred tax assets will not be realized through the generation
of future taxable income.  We also do
not provide for taxes on undistributed earnings of our foreign subsidiaries, as
it is our intention to reinvest undistributed earnings indefinitely outside the
United States.

Significant management judgment is required in determining our
provision for income taxes, our deferred tax assets and liabilities and our
future taxable income for purposes of assessing our ability to realize any
future benefit from our deferred tax assets. In the event that actual results
differ from these estimates or we adjust these estimates in future periods, our
operating results and financial position could be materially affected.

15

---

---

Recently
Issued Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46
Consolidation of Variable Interest Entities (FIN 46). Under FIN 46 entities
are separated into two populations: (1) those for which voting interests are
used to determine consolidation (this is the most common situation) and (2)
those for which variable interests are used to determine consolidation. FIN 46
explains how to identify Variable Interest Entities (VIE) and how to determine
when a business enterprise should include the assets, liabilities,
non-controlling interests, and results of activities of a VIE in its
consolidated financial statements.

FIN 46 is effective as follows: 
for variable interests in variable interest entities created after
January 31, 2003, FIN 46 shall apply immediately, for variable interests in
variable interest entities created before that date, FIN 46 shall applyfor
public entitiesas of the beginning of the first interim or annual reporting
period beginning after June 15, 2003.

FIN 46 is effective immediately for certain disclosure requirements and
variable interest entities created after January 31, 2003 and in fiscal 2003
for all other variable interest entities. As the Company does not have variable
interest entities, the adoption of FIN 46 will not have a material impact on
the Companys financial position, results of operations or cash flows.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
This Statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. This Statement is effective prospectively for contracts
entered into or modified after June 30, 2003 and prospectively for hedging
relationships designated after June 30, 2003. The Company is currently
analyzing the impact of this Statement but does not believe that on adoption,
it will have a material impact on its results of operations or financial
position.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. The
Statement improves the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity and requires that these
instruments be classified as liabilities in statements of financial position.
This Statement is effective prospectively for financial instruments entered
into or modified after May 31, 2003 and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003. This statement shall
be implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
Statement and still existing at the beginning of the interim period of
adoption. The Company is currently analyzing the impact of this Statement but
does not believe that on adoption, it will have a material impact on its
results of operations or financial position.

Results of Operations

Six months ended June 30, 2003 compared to six months ended June 30,
2002:

Ampal-American Israel Corporation (Ampal) and its subsidiaries (the
Company) recorded a consolidated net gain of $8.1 million for the six months
ended June 30, 2003, as compared to a net loss of $15.3 million for the same
period in 2002.  The increase in net
gain is primarily attributable to the realized and unrealized gains on
investments in the six months ended June 30, 2003, as compared to the realized
and unrealized losses in the comparable period of fiscal 2002. This increase in
net gain was partially offset by the decreased equity in earnings of
affiliates, higher loss from impairment of investments, lower other income and
a translation loss the six months ended June 30, in 2003 as compared to a
translation gain in the same period of fiscal 2002.

16

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---

In the six moth period
ended June 30, 2003, the Company recorded $26.3 million of realized and unrealized
gains on investments, as compared to $6.8 million of realized and unrealized
losses in the same period in 2002.  The
gains recorded in the six months ended June 30, 2003 are mainly attributable to
the gains on sale of the Companys investment in Blue Square Israel Ltd. (Blue
Square) ($2.6 million) and Granite Hacarmel Investments Ltd. (Granite)
($20.8 million). During the second quarter of 2003, the Company sold 1,466,454
shares in Granite and through July 7, 2003 sold an additional 12,350,000 shares
(See Subsequent Events). Consequently, the Companys investment in Granite,
which was previously accounted for by the equity method, was accounted for as
an investment in a trading marketable security at June 30, 2003. The realized
and unrealized losses recorded in the six months ended June 30, 2002, were
primarily attributable to the Companys investment in shares of Bank Leumi
LeIsrael B.M. (Leumi), Alvarion Ltd. (Alvarion) and Sonic Foundry, Inc.
(Sonic).

Equity in earnings of affiliates decreased to $0.2 million for the six
months ended June 30, 2003 from $1 million for the same period in 2002. The
decrease in 2003 is attributable to a $1.73 million loss in Granite, which was
recorded in the first quarter of 2003.

Real estate income increased to $4.39 million for the six months ended
June 30, 2003, as compared to $3.66 million for the same period in 2002. The
increase is attributable to the higher number of units sold in Am-Hal Ltd., the
Companys 100%-owned subsidiary, which owns and operates a chain of senior
citizen facilities in Israel.

Other income decreased to $4.74 million for the six months ended June
30, 2003, as compared to $5.32 million for the same period of 2002. This
decrease is attributable to a one-time payment received from an insurance
policy.

In the six-month period ended June 30, 2003, the Company recorded $8.1
million in losses from the impairment of its investments in XACCT Technologies
Ltd (XACCT) ($6.2 million), Identify Solutions Ltd (Identify) ($1.3 million), and
Real Estate in Migdal Haemek ($0.6 million). In the same period in 2002, the
Company recorded a $6.1 million loss from the impairment of its
investments.

The Company recorded a translation loss of $2.3 million in the six
months ended June 30, 2003 as compared to a translation gain of $1 million in
the same period in 2002.  The
translation loss in 2003 and the translation gain in 2002 are attributable to
the revaluation and devaluation of the new Israeli shekel against the U.S.
dollar in the respective periods.

The Company recorded lower interest expense in the six months ended
June 30, 2003, as compared to the same period in 2002, primarily as a result of
lower interest rates.

The Company recorded higher
other expenses in the six months ended June 30, 2003 as compared to the same
period in 2002, primarily as a result of higher rates in Directors and Officers
liability insurance premiums.

On January 6,
2003, the Company entered into a definitive agreement to sell its holding in
Carmel Container Systems Ltd (Carmel), a packaging manufacturer based in
Israel. On June 2, 2003, the Company announced that the agreement has been
cancelled due to the fact that the Israeli Antitrust Authority has objected to
the merger between Carmel and Best Carton Ltd., a merger that was a condition
precedent to the closing of the sale of the Ampal groups holdings in Carmel to
a subsidiary of Carmel.

17

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Three months ended June 30, 2003 compared to
three months ended June 30, 2002:

The consolidated net gain increased to $10.2
million for the three months ended June 30, 2003 as compared to a net loss of
$9.2 million for the same period in 2002. The increase in net gain is primarily
attributable to higher realized and unrealized gains on investments in
marketable securities and to the increase in equity in earnings of affiliates.
These increases were partially offset by the lower other income, higher loss
from impairment, and a translation loss in the three months ended
June 30,2003, which was
absent in the same period of fiscal 2002.

In the three-month period ended June 30,
2003, the Company recorded a $25.4 million realized and unrealized gain on
investments, as compared to a $4 million realized and unrealized losses on
investments in the same period of fiscal 2002. The gains recorded
in 2003 are primarily attributable to the Companys investment in Granite
($20.8 million). During the second quarter of 2003, the Company sold 1,466,454
shares in Granite and through July 7, 2003 sold an additional 12,350,000 shares
(See Subsequent Events).  Consequently,
the Companys investment in Granite, which was previously accounted for by the
equity method, was accounted for as an investment in a trading marketable
security at June 30, 2003. The
$4 million realized and unrealized loss on investments recorded in the three
months ended June 30, 2002 consisted of $0.7 million of the losses on
investments in various trading securities and $3.3 million of the unrealized
losses from the permanent impairment in value of Ampals investment in Sonic,
Alvarion and Compugen.

Equity in earnings of affiliates increased to
an income of $0.7 million for the three months ended June 30, 2003, from a loss
of $1 million for the same period in 2002. 
The increase is primarily attributable to the increased earnings of the
Companys affiliates in the three months ended June 30, 2003. Additionally, in
2002, Ophirtech Ltd. (Ophirtech), the Companys 42.5% owned affiliate
recorded higher losses from impairment of investments.

The decrease in other income in the three
months ended June 30, 2003, as compared to the same period in 2002, is
attributable to the income recorded with respect to the guaranteed payment from
Motorola (Israel) Ltd, ($1.7 million in 2003, as compared to $3.6 million in
the same period of fiscal 2002).

In the three-month period ended June 30,
2003, the Company recorded $8.1 million in losses from the impairment of its
investments in XACCT Technologies Ltd (XACCT) ($6.2 million),
Identify Solutions Ltd (Identify) ($1.3 million), and Real Estate in Migdal Haemek ($0.6
million), while in the same period in 2002, the Company recorded a $2.2 million loss from the
impairment of its investments.

The Company recorded a translation loss of
$2.0 million in the three months ended June 30, 2003 as compared to no
translation gain in the same period in 2002. The translation loss in 2003 is
attributable to the revaluation and devaluation of the new Israeli shekel
against the U.S. dollar in the respective periods.

The Company recorded lower interest expense
in the three months ended June 30, 2003, as compared to the same period in
2002, primarily as a result of lower interest rates.

The Company recorded higher
other expenses in the three months ended June 30, 2003 as compared to the same
period of 2002, primarily as a result of higher rates in Directors and Officers
liability insurance premiums.

18

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Liquidity and Capital Resources

Cash Flows

On June 30, 2003, cash and cash equivalents were $2.8 million, as compared with $1.6 million at December 31, 2002.

The
Companys sources of cash include cash and cash equivalents, marketable
securities, cash from operations, cash from investing activities and amounts
available under credit facilities, as described below. The Company believes
that these sources are sufficient to fund the current requirements of
operations, capital expenditures, investing activities, dividends on preferred
stock and other financial commitments of the Company for the next 12
months.  However, to the extent that
contingencies and payment obligations described below and in other parts of
this Report require the Company to make unanticipated payments, the Company
would need to further utilize these sources of cash.  To the extent that the Company intends to rely on the sale of
marketable securities in order to satisfy its cash needs, it is subject to the
risk of a shortfall in the amount of proceeds from any such sale as compared
with the anticipated sale proceeds due to a decline in the market price of
those securities.  In the event of a
decline in the market price of its marketable securities, the Company may need
to draw upon its other sources of cash, which may include additional borrowing,
refinancing of its existing indebtedness or liquidating other assets, the value
of which may also decline.  In addition,
the shares of MIRS owned by the Company have already been pledged as security
for specific loans provided to the Company for the purchase of these shares and
would therefore be unavailable if the Company wished to pledge them in order to
provide an additional source of cash.

Cash
flows from operating activities

Net
cash provided by operating activities totaled approximately $6.4 million for
the six months ended June 30, 2003, as compared to approximately $5.8 million
for the same period in 2002.  The
increase is primarily attributable to the $3.5 million in dividends received from
affiliates.

Cash
flows from investing activities

Net
cash used in investing activities totaled approximately $3.4 million for the
six months ended June 30, 2003, as compared to approximately $0.8 million
provided by investing activities for the same period in 2002. The increase in
investing activities is primarily attributable to an increase of deposits in
banks.

Cash
flows from financing activities

Net
cash used in financing activities was approximately $3.4 million at June 30,
2003, as compared to approximately $10.6 million at June 30, 2002.  The decrease in the cash used in 2003 is
primarily attributable to the pay down of notes and loans repayments ($4.4
million and $11.8 million in 2003 and 2002, respectively).

Investments

On
June 30, 2003, the aggregate fair value of trading and available-for-sale
securities was approximately $63.5 million, as compared to $18.6 million at
December 31, 2002.  The increase in 2003
is attributable to the change in the accounting treatment of the shares of Granite
as described above and to increases in the market value of marketable
securities.

19

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During
fiscal 2003, the Company made the following investments:

|(1) | A $0.7 million in
  ShellCase Ltd., a developer and manufacturer of chip size packaging. The Company
  currently holds an approximately 14.0% equity interest in ShellCase Ltd.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                
|(2) | A $0.3 million in Star
  Management of Investments No.II (2000) (Star), a venture capital fund.  The Company currently holds an
  approximately 10% equity interest in Star. 

Debt

In
connection with its investment in MIRS, the Company has two long-term loans
from Bank Hapoalim Ltd. (Hapoalim) and Bank Leumi le-Israel B.M. (Leumi) in
the outstanding amount of $37.3 million and $34.9 million, respectively, as of
June 30, 2003. Both loans are due on March 31, 2008 and bear interest at a rate
of LIBOR plus 0.8%.  Other than as
described in this paragraph, the loans are non-recourse to the Company and are
secured by the Companys shares in MIRS. 
The principal payments are due as follows:  10% on March 31, 2004, 15% on March 31, 2005 and 25% on each of
March 31, 2006, 2007 and 2008.  Interest
is required to be paid annually on March 31 of each year from March 31, 2002
until and including March 31, 2008. 
These loans are subject to the compliance by MIRS with covenants
regarding its operations and financial results. As a result of renegotiations
with the bank regarding the covenants, Leumi will have recourse to the Company
for an additional $0.5 million beginning in 2006 with respect to the Companys
repayment obligations under the loan.

On
March 31, 2003, the Company redeemed 17.5 million in principal amount of its
outstanding debentures. The transaction was financed by a loan from Bank
Hapoalim, the principal repayments of which are due as follows: 50% on April 1,
2006, and 10% on each of April 1, 2004, 2005, 2006, 2007 and 2008. The loan
bears interest at a rate of libor plus 2.5% on the 50% of the loan which is to
be repaid on April 1, 2006 and libor plus 2.4% on the balance of the loan. The
interest is payable semi-annually on October 1 and April 1 of each year. The
loan is secured by certain of the Companys marketable securities and the
Companys investment in Ophir Holdings Ltd. As of June 30, 2003, the company
had $4 million in debentures outstanding with interest rates of 7.5% These
debentures, which mature in 2005, are secured by $4.1 million in cash held in a
secured account.

The
Company financed a portion of the development of Am-Hal, a wholly-owned
subsidiary which develops and operates luxury retirement centers for senior
citizens, through bank loans from Hapoalim. 
At June 30, 2003, the amounts outstanding under these loans were $10.1
million, as compared to $12.7 million at December 31, 2002. The loans are
dollar linked, mature through 2007-2010 and have interest rates of LIBOR plus
2.25%.  The Company generally repays
these loans with the proceeds received from deposits and other payments from the
apartments in Am-Hal facilities. The loans are secured by a lien on Am-Hals
properties. The Company also issued guarantees in the amount of $4.7 million in
favor of clients of Am-Hal in order to secure their deposits.

The
Company also finances its general operations and other financial commitments
through short-term borrowings, mainly from Hapoalim.  The term of these borrowings is up to one year.  The weighted average interest rates and the
balances of these short-term borrowings at June 30, 2003 and December 31, 2002
were 3.4% on $36.9 million and 4.03% on $39.8 million, respectively.

As
of June 30, 2003, the Company had issued guarantees on certain outstanding
loans to its investees and subsidiaries in the aggregate principal amount of
$11.7 million. This includes:

$0.5 million guarantee to Leumi with respect to the MIRS loan as
described above.

20

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$5.7 million guarantee on indebtedness incurred by Bay Heart ($4.1
million of which was recorded as a loss in the Companys financial statements)
in connection with the development of its property. There can be no guarantee
that Bay Heart will become profitable or that it will generate sufficient cash
to repay its outstanding indebtedness without relying on the Companys
guarantee.

$4.7 million guarantee to
Am-Hal tenants as described above.

$0.8 million guarantee to Galha 1960 Ltd.

FOREIGN
CURRENCY CONTRACTS

The
Companys derivative financial instruments consist of foreign currency forward
exchange contracts.  These contracts are
utilized by the Company, from time to time, to manage risk exposure to
movements in foreign exchange rates. 
None of these contracts have been designated as hedging
instruments.  These contracts are
recognized as assets or liabilities on the balance sheet at their fair value,
which is the estimated amount at which they could be settled based on market
prices or dealer quotes, where available, or based on pricing models. Changes
in fair value are recognized currently in earnings.

SUBSEQUENT
EVENTS

On
July 7, 2003, Ampal announced the completion of a private sale of 46.3% of its
current holdings in Granite to a group of institutional investors. The sale of
12,350,000 shares at a price of $1.40 (6 NIS) per share resulted in total
proceeds of $17.3 million. Proceeds from the sale have been earmarked for new
investment opportunities. This sale combined with previous sales during the
second quarter in 2003 has reduced Ampals stake in Granite to 14,328,980
shares representing approximately 10.28% of the outstanding share capital of
Granite.

During
July 2003, Ophir Holding Ltd., which is 42.5% owned by the Company, signed an
agreement to sell one of its assets for $3.2 million, which will result in a
gain for Ophir of $1.7 million. Ampals share of the gain ($0.722 million) from
this asset sale will be recognized during the third quarter of 2003.

FORWARD LOOKING STATEMENTS

This Quarterly Report (including but not limited to factors discussed
above, in the Managements Discussion and Analysis of Financial Condition and
Results of Operations, as well as those discussed elsewhere in this Quarterly
Report on Form 10-Q) includes forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) and
information relating to the Company that are based on the beliefs of management
of the Company as well as assumptions made by and information currently
available to the management of the Company. When used in this Quarterly Report,
the words anticipate, believe, estimate, expect, intend, plan, and similar
expressions, as they relate to the Company or the management of the Company,
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events or future financial performance of
the Company, the outcome of which is subject to certain risks and other factors
which could cause actual results to differ materially from those anticipated by
the forward-looking statements, including among others, the economic and
political conditions in Israel, the Middle East, including the situation in
Iraq, and the global business and economic conditions in the different sectors
and markets where the Companys portfolio companies operate.

Should any of those risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results or outcome may vary from
those described herein as anticipated, believed, estimated, expected, intended
or planned. Subsequent written and oral forward-looking statements attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements in this paragraph and elsewhere described
in this quarterly Report and other Reports filed with the Securities and
Exchange Commission.

21

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

MARKET RISKS AND SENSITIVITY ANALYSIS

The
Company is exposed to various market risks, including changes in interest
rates, foreign currency rates and equity price changes.  The following analysis presents the
hypothetical loss in earnings, cash flows and fair values of the financial
instruments which were held by the Company at June 30, 2003, and are sensitive
to the above market risks.

During
the six months ended June 30, 2003, there have been no material changes in the
market risk exposures facing the Company as compared to those the Company faced
in the fiscal year ended December 31, 2002.

Interest Rate Risks

At
June 30, 2003, the Company had financial assets totaling $15 million and
financial liabilities totaling $139.1 million. 
For fixed rate financial instruments, interest rate changes affect the
fair market value but do not impact earnings or cash flows.  Conversely, for variable rate financial
instruments, interest rate changes generally do not affect the fair market
value but do impact future earnings and cash flows, assuming other factors are
held constant.

At
June 30, 2003, the Company had fixed rate financial assets of $8 million and
variable rate financial assets of $7 million. 
Holding other variables constant, a ten percent increase in interest
rates would decrease the unrealized fair value of the fixed financial assets by
approximately $0.1 million.

At
June 30, 2003, the Company had fixed rate debt of $14.7 million and variable
rate debt of $124.4 million.  A ten
percent decrease in interest rates would increase the unrealized fair value of
the fixed rate debt by approximately $0.1 million.

The
net decrease in earnings for the next year resulting from a ten percent
interest rate increase would be approximately $0.5 million, holding other variables constant.

Exchange Rate Sensitivity Analysis

The
Companys exchange rate exposure on its financial instruments results from its
investments and ongoing operations in Israel. 
During 2003, the Company entered into various foreign exchange forward
purchase contracts to partially hedge this exposure. At June 30, 2003, the
Company had open foreign exchange forward purchase contracts in the amount of
$10 million. Holding other variables constant, if there were a ten percent
devaluation of the foreign currency, the Companys cumulative translation
(loss) reflected in the Companys accumulated other comprehensive (loss) would
increase by $1.8 million, and in the statements of operations, a ten percent
devaluation of the foreign currency would decrease net earnings in the amount
of approximately $0.3 million.

Equity Price Risk

The Companys investments at June 30, 2003, included marketable
securities (trading and available-for-sale) which are recorded at fair value of
$63.5 million.   Those securities have
exposure to price risk.  The estimated
potential loss in fair value resulting from a hypothetical ten percent decrease
in prices quoted on stock exchanges is approximately $6.4 million.

22

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ITEM 4. CONTROLS AND
PROCEDURES

Disclosure Controls and Procedures

The Companys management with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Companys disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act)) as of the end of the period covered by this report.
Based on such evaluation, the Companys Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period, the
Companys disclosure controls and procedures are effective. Notwithstanding the
foregoing, a control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that it will detect or uncover
failures within the Company to disclose material information otherwise required
to be set forth in the Companys periodic reports.

Internal Control Over Financial Reporting

There have not been any changes in the Companys internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fiscal quarter to which this report relates
that have materially affected, or are reasonably likely to materially affect
the Companys internal control over financial reporting.

Part II  OTHER INFORMATION

Item
1.          Legal
Proceedings

Yakhin
Hakal

In
February 1995, Yakhin Hakal and its affiliates commenced a legal proceeding in
Tel Aviv District Court seeking to cause Etz Vanir and Yakhin Mataim to redeem
the perpetual debentures owned by the Company for approximately $700,000 and to
require the Company to surrender all of its preferred shares of Etz Vanir and
Yakhin Mataim for their par value (which is a nominal amount), on the alleged
grounds that the perpetual debentures are debt and not equity investments. It
is the Companys view that its investments in these companies, which were made
in the 1950s, are equity investments and are not subject to redemption by
these companies, other than upon liquidation.

On
July 27, 1998, a Tel Aviv District Court ruled in favor of Yakhin Hakal, the
manager and co-owner of the Companys 50%-owned affiliates Etz Vanir and Yakhin
Mataim.  The judges decision allows Etz
Vanir and Yakhin Mataim to redeem debentures owned by the Company for
approximately $800,000 and to require the Company to surrender all of its
preferred shares of Etz Vanir and Yakhin Mataim for their par value.  After the redemption and surrender, the
Company will no longer have any interest in Etz Vanir or Yakhin Mataim.

On
October 15, 1998, the Company filed an appeal with the Israeli Supreme Court in
Jerusalem. On September 30, 2001, the Supreme Court dismissed the appeal filed
by the Company, on the grounds that the Company failed to timely produce a
guarantee to cover Yakhin Hakals expenses in the appeal. On November 1, 2001,
the Company filed a petition to the Israeli Supreme Court, contending that the
dismissal of an appeal due to a delay in producing guarantees as part of the
appeal is unreasonable and that the law allowing this should be changed. The
petition was withdrawn by the Company on October 6, 2002.

23

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On
December 30, 2001, the Company filed a motion to allow it to file a new appeal
in this case. The Supreme Court dismissed the motion on September 10, 2002.

On October
12, 2001, the Company filed a request with the Tel-Aviv District Court for a
preliminary injunction and other remedies in relation to the validity and
enforceability of Etz Vanirs and Yakhin Mataims decisions to redeem the
debentures owned by the Company and to require the Company to surrender all of
its preferred shares in Etz Vanir and Yakhin Mataim.  On January 28, 2002, the Tel Aviv  District Court dismissed the request.  On March 12, 2002, the Company filed an appeal with regard to
this decision with the Israeli Supreme Court. On July 15, 2003, the Israeli
Supreme Court dismissed the appeal.

MIRS

A
petition to certify a class action against MIRS in the amount of NIS 170
million ($36 million) was filed in the Tel Aviv District Court in September
2001.  The claim is in connection with
the change in MIRS tariffs resulting from the implementation of MIRS own
dialing prefix, which replaced its previous dialing prefix, the Tel-Aviv area
code.  As a result, persons in the Tel
Aviv area code claimed that they are subject to higher tariffs than those they
had been subject to under MIRSs previous dialing prefix. On May 14, 2003 the
petitioners withdrew their claim.

A
petition to certify a class action against MIRS and the other three cellular
operators in Israel in the total amount of NIS 600 million ($127 million) was
filed in the Tel Aviv District Court in May 2002. The claim involves the
inter-connect fees that were collected from the customers of the other
operators with regard to phone calls that were made to voice recorder
applications through the cellular operators dialing numbers. On June 22, 2003
the petitioners withdrew their claim.

|Item 2. | Changes in
  Securities and Use of Proceeds          
|------- | -----------------------------------------------------
|        | None.                                                
|        |                                                      
|Item 3. | Defaults
  upon Senior Securities                    
|        | None.                                                
|        |                                                      
|Item 4. | Submission
  of Matters to a Vote of Security Holders
|        | None.                                                
|        |                                                      
|Item 5. | Other
  Information                                  
|        | None.                                                

Item 6.
Exhibits and Reports on Form 8-K

|(a) |  | Exhibits:                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                             
|    |  | 11.1
  Schedule Setting Forth Computation of Loss per Share of Class A Stock.                                                                               
|    |  |                                                                                                                                                             
|    |  | 31.1
  Certification of Jack Bigio pursuant to Section 302 of the Sarbanes-Oxley Act
  of 2002                                                              
|    |  |                                                                                                                                                             
|    |  | 31.2
  Certification of Irit Eluz pursuant to Section 302 of the Sarbanes-Oxley Act
  of 2002.                                                              
|    |  |                                                                                                                                                             
|    |  | 32.1
  Certification of Jack Bigio and Irit Eluz pursuant to 18 U.S.C. Section 1350,
  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|    |  | (b) Reports
  on Form 8-K: None                                                                                                                             

24

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AMPAL-AMERICAN ISRAEL CORPORATION AND
SUBSIDIARIES

SIGNATURES

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 dully authorized.

| | AMPAL-AMERICAN
  ISRAEL CORPORATION
| | -----------------------------------
| |                                    
| |                                    
| | By:/s/                             
| |                                    
| |                                    
| |                                    
| | By:/s/                             
| |                                    
| |                                    
| |                                    
| | By:/s/                             
| |                                    
| |                                    
| |                                    
| | By:/s/                             
| |                                    
| |                                    

Dated:  August 13, 2003

25

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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES

Exhibit Index

|Exhibit No. | Description                                                                                                                                                 
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                             
|11.1        | Schedule
  Setting Forth Computation of Earnings                                                                                                            
|            |                                                                                                                                                             
|            | Per Share of
  Class A Stock                                                                                                                                
|            |                                                                                                                                                             
|            | 31.1
  Certification of Jack Bigio pursuant to Section 302 of the Sarbanes-Oxley Act
  of 2002                                                              
|            |                                                                                                                                                             
|            | 31.2
  Certification of Irit Eluz pursuant to Section 302 of the Sarbanes-Oxley Act
  of 2002.                                                              
|            |                                                                                                                                                             
|            | 32.1
  Certification of Jack Bigio and Irit Eluz pursuant to 18 U.S.C. Section 1350,
  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

26

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