Aberdeen Israel Fund (ISL) N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number			811-6120
THE FIRST ISRAEL FUND, INC.
(Exact name of registrant as specified in charter)
Eleven Madison Avenue, New York, New York					10010
(Address of principal executive offices)					(Zip code)
J. Kevin Gao, Esq. The First Israel Fund, Inc. Eleven Madison Avenue New York, New York  10010
(Name and address of agent for service)
Registrant’s telephone number, including area code:				(212) 325-2000
Date of fiscal year end:	December 31st
Date of reporting period:		January 1, 2008 to December 31, 2008

Item 1. Reports to Stockholders.

THE FIRST ISRAEL FUND, INC.

ANNUAL REPORT
DECEMBER 31, 2008

ISL-AR-1208

LETTER TO SHAREHOLDERS (UNAUDITED)

February 12, 2009

Dear Shareholder:

For the annual period ended December 31, 2008, The First Israel Fund, Inc. (the "Fund") had a loss of 45.71% based on net asset value, vs. a loss of 50.6% for the Tel Aviv 100 Index* (the "TA-100"). Based on market price, the Fund had a decrease of 57.01% for the year.

Market Review:

The year ended December 31, 2008, was a difficult one for all emerging markets. The Tel Aviv 100 Index of Israeli equities, the Fund's benchmark, fell 50.6%, while the MSCI Emerging Market Index fell 54.5% and the MSCI Israel Index fell 31.6% (all price returns in U.S. dollar terms). The dominance of telecoms and health care in the MSCI Israel Index were the key sources of its out-performance of the TA 100 Index.

The Israeli market was affected by the same types of issues as the global equity markets. For example, Israeli banks took notable write-downs on overseas investments in toxic assets, there were liquidity concerns on real estate and holding companies, tighter domestic credit conditions, and sizeable redemptions in the equity market among retail investors.

The first half of 2008 saw diverging performance such as strength in the chemicals sector and weakness in real estate developers. Another feature during the first half of the year was the performance difference between the larger capitalized stocks and mid/small cap stocks. The TA-25 Index of blue chip companies, for example, returned 2.5% over the first half of the year, while the TA-75 Index of second tier stocks returned -18.6%. Investors were staying with tradable stocks and avoiding less liquid names irrespective of comparable valuations.

The second half of 2008 saw a broad based rout in the Israeli stock market in line with events globally. The global cyclical sectors such as chemicals and fertilizers suffered the worst after the first half strength, however, banking, insurance and real estate stocks were again hard hit. The traditionally defensive areas of healthcare/pharmaceuticals and telecommunications did hold up better then the overall market.

Strategic Review and Outlook:

For the 12-months ended December 31, 2008, the Fund outperformed the benchmark on an NAV basis. Positive contributions to relative performance came from underweight positions in the cyclically exposed businesses of The Israel Corporation (a holding company with a large holding in Israel Chemicals, 1.6% of the Fund as of 12/31/08, -76% return) and Makhteshim-Agan Industries (agricultural chemicals, 2.1% of the Fund as of 12/31/08, -59% return). Additionally, over the year, the Fund was underweight in Israel Chemicals (5.5% of the Fund as of 12/31/08, -41% return). Being underweight in this stock during its strong performance in the first half of 2008 hindered Fund performance, but this was offset to a large degree by the stock's weak performance in the second half of the year. The Fund also benefited from an overweight position in Bezeq Israeli Telecommunication Corporation (8.8% of the Fund as of 12/31/08, -3% return).

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LETTER TO SHAREHOLDERS (UNAUDITED) (CONTINUED)

Significant investments that detracted from relative performance were overweight positions in Harel Insurance (7.1% of the Fund as of 12/31/08, -56% return) and Housing & Construction Holdings (1.9% of the Fund as of 12/31/08, -68% return). There were also a number of holdings that outperformed, like Teva Pharmaceutical (9.3% of the Fund as of 12/31/08, -8% return) and Perrigo (4.0% of the Fund, -9% return). But, as the Fund held small underweights in these stocks, the relative performance benefit to the Fund was slightly negative.

With regard to the Fund's private equity holdings, the twelve months ended December 2008 have been a volatile period for Israel's technology sector. The values of the Fund's underlying investments have decreased as a result of writedowns of investment values as well as lower public security prices. We also saw a slowdown in both capital call and distribution activities. For the period of January through December 2008, the Fund received distributions from limited partnerships totaling $676,150, compared to a total of $939,097 during the same period of 2007. The largest distribution in 2008 came from Emerging Markets Ventures in the amount of $469,672, composed of its uninvested escrow funds and distribution proceeds of its underlying investments. We do not expect to see recovery in distribution levels in 2009 as the economic downturn creates a more difficult environment for investment exits. Indeed, portfolio companies are focused on conservi ng as much cash as possible in this difficult environment. The investment pace of the funds slowed, with only $197,500 of capital calls made during this period compared to $212,500 during the same period of the prior year. The unfunded commitments of the Fund have decreased to $1,111,432 at December 31, 2008, compared with $1,308,933 at the end of 2007.

In our opinion, the Israeli market will continue to be affected by the broader backdrop for both developed and emerging markets. On the negative side, since the beginning of the fourth quarter of 2008, economic momentum has been decelerating rapidly across emerging markets and the full impact of the growth downturn has yet to be seen in developed markets. As a small and open economy, Israel is very much tied to the global economy (the United States and Europe account for 70% of exports) and expects to see a contraction in economic activity in 2009. While the Bank of Israel has already embarked on interest rate cuts, and fiscal expenditure is to be stepped up post elections, the risks to growth and earnings will most likely remain high.

On the positive side, some abatement of the panic selling and volatility seen in the second half of 2008 may provide a more stable basis for markets going forward. While we would expect investor sentiment to remain cautious, we are hopeful that the bulk of the de-leveraging may be behind us. Nevertheless, retail investor participation in the equity market, which has been a key engine of market performance in recent years, is likely to remain more muted in 2009.

We expect that politics and geopolitics will continue to be a point of focus given the upcoming Knesset elections in February 2009 and the ongoing conflict in Gaza. While the political environment remains challenging, historically elections in Israel have only had a minor or very short-term impact on market performance. To date, the conflict in Gaza has not had any meaningful impact on the equity market.

We believe it is likely that in the short term the defensive sectors, such as pharmaceuticals and telecommunications will outperform. Small cap stocks may also start to attract investor interest, as there are a number of stocks with market capitalization at net cash levels. We expect the banking and insurance sectors will see further downgrades and may require some capital. In our opinion, the technology sector will continue to depend on the United States and the state of its technology exports. Similarly, those Israeli real estate companies which have internationalized will be dependant on some

2

LETTER TO SHAREHOLDERS (UNAUDITED) (CONTINUED)

recovery in the North American and Central/Eastern European commercial and residential property sectors where the near term developments are likely to be negative but with stock valuations at depressed levels. In the global cyclicals, while the short term demand outlook remains very weak, we see attractive long term value in specific areas such as fertilizer related products.

Neil Gregson Chief Investment Officer**	George Hornig Chief Executive Officer and President***

International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods. There are also risks associated with investing in Israel, including the risk of investing in a single-country fund as well as risks associated with investing in private equities.

In addition to historical information, this report contains forward-looking statements, which may concern, among other things, domestic and foreign markets, industry and economic trends and developments and government regulation and their potential impact on the Fund's investments. These statements are subject to risks and uncertainties and actual trends, developments and regulations in the future and their impact on the Fund could be materially different from those projected, anticipated or implied. The Fund has no obligation to update or revise forward-looking statements.

* The Tel Aviv 100 Index is an index of the 100 largest companies (i.e., in terms of market capitalization) listed on the Tel Aviv Stock Exchange. Investors cannot invest directly in an index.

** Neil Gregson, who is a Managing Director of Credit Suisse Asset Management Limited ("Credit Suisse Ltd."), is head of emerging market equities, based in London. Prior to assuming this role in 2003, he was chief investment officer for equities in Emerging Europe, the Middle East and Africa. Mr. Gregson joined Credit Suisse Ltd. in 1990 after working as an investment analyst in Johannesburg. Previously, he was a mining engineer with Anglo American Corporation in South Africa. Mr. Gregson holds a BSc (Hons.) in mining engineering from Nottingham University.

***George Hornig is a Managing Director of Credit Suisse. He is the Co-Chief Operating Officer of Asset Management and Head of Asset Management Americas. Mr. Hornig has been associated with Credit Suisse since 1999.

3

THE FIRST ISRAEL FUND, INC.

PORTFOLIO SUMMARY
DECEMBER 31, 2008 (UNAUDITED)

SECTOR ALLOCATION

TOP 10 HOLDINGS, BY ISSUER

	Holdings	Sector	Percent of Net Assets
1.	Teva Pharmaceutical Industries Ltd.	Pharmaceuticals		9.3
2.	Bezeq Israeli Telecommunication Corporation Ltd.	Diversified Telecommunication Services		8.8
3.	Harel Insurance Investments Ltd.	Insurance		7.1
4.	Bank Leumi Le-Israel Ltd.	Commercial Banks		6.4
5.	Bank Hapoalim Ltd.	Commercial Banks		6.1
6.	Israel Chemicals Ltd.	Chemicals		5.5
7.	Perrigo Co.	Pharmaceuticals		4.0
8.	Walden-Israel Ventures III, L.P.	Venture Capital		2.8
9.	SVE Star Ventures Enterprises GmbH & Co. No. IX KG	Venture Capital		2.5
10.	BPA Israel Ventures LLC	Venture Capital		2.4

4

THE FIRST ISRAEL FUND, INC.

AVERAGE ANNUAL RETURNS
DECEMBER 31, 2008 (UNAUDITED)

	1 Year			3 Years			5 Years			10 Years
Net Asset Value (NAV)		(45.71	)%		(8.39	)%		0.19	%		3.94	%
Market Value		(57.01	)%		(8.60	)%		1.28	%		5.14	%

Credit Suisse currently waives fees and/or reimburse expenses, without which performance would be lower. Waivers and/or reimbursements are subject to change and may be discontinued at any time. Returns represent past performance. Total investment return at net asset value is based on changes in the net asset value of fund shares and assumes reinvestment of dividends and distributions, if any. Total investment return at market value is based on changes in the market price at which the fund's shares traded on the stock exchange during the period and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the fund's dividend reinvestment program. Because the fund's shares trade in the stock market based on investor demand, the fund may trade at a price higher or lower than its NAV. Therefore, returns are calculated based on share price and NAV. Past performance is no guarantee of future results. The current performance of the fund may be lower or higher than the figures shown. The fund's yield, return and market price and NAV will fluctuate. Performance information current to the most recent month-end is available by calling 800-293-1232.

The annualized gross expense ratio is 2.02%. The annualized net expense ratio after fee waivers and/or expense reimbursements is 1.73%.

5

THE FIRST ISRAEL FUND, INC.

SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008

Description	No. of Shares		Value
EQUITY OR EQUITY-LINKED SECURITIES-100.10%
ISRAEL-99.23%
AEROSPACE & DEFENSE-2.15%
Azimuth Technologies Ltd.		75,000	$	16,520
Elbit Systems Ltd.		10,500		481,476
FMS Enterprises Migun Ltd.		19,498		265,186
Rabintex Industries Ltd.†		86,800		63,522
				826,704
AIRLINES-0.13%
EL AL Israel Airlines		275,000		49,013
BEVERAGES-0.08%
Mayanot Eden Ltd.†		40,000		30,009
CAPITAL MARKETS-1.08%
IBI Investment House Ltd.		100,000		294,717
Poalim IBI Management		112,600		118,669
				413,386
CHEMICALS-7.60%
Israel Chemicals Ltd.		302,000		2,112,651
Makhteshim-Agan Industries Ltd.		247,500		807,793
				2,920,444
COMMERCIAL BANKS-16.71%
Bank Hapoalim Ltd.†		1,080,000		2,327,017
Bank Leumi Le-Israel Ltd.		1,175,000		2,469,668
F.I.B.I. Holdings Ltd.†		32,273		234,570
First International Bank of Israel Ltd.†		100,000		137,758
Israel Discount Bank Ltd., Class A		950,000		857,911
United Mizrahi Bank Ltd.		74,900		386,973
				6,413,897
COMMERCIAL SERVICES & SUPPLIES-0.29%
Leadcom Integrated Solutions Ltd.		250,000		16,338
Tefen Industrial Engineering & Management & Systems Analysis Ltd.†		86,250		96,670
				113,008

Description	No. of Shares		Value
COMMUNICATIONS EQUIPMENT-2.34%
AudioCodes Ltd.†		73,822	$	126,233
Internet Gold-Golden Lines Ltd.†		23,750		54,890
NICE Systems Ltd., ADR†		20,000		449,400
RADWARE Ltd.†		49,300		267,453
				897,976
CONSTRUCTION & ENGINEERING-2.27%
Housing & Construction Holdings Ltd.†		1,212,500		726,520
Maman Cargo Terminal & Handling Ltd.		47,756		32,868
Minrav Holdings Ltd.†		7,290		111,869
				871,257
DIVERSIFIED FINANCIAL SERVICES-2.68%
Ampal-American Israel Corp., Class A†		126,800		73,544
Habas†		76,578		74,913
Kardan Israel Ltd.†		14,334		9,500
Kardan NV		56,250		128,436
The Israel Corp., Ltd.		2,705		617,769
Marathon Investments Ltd.†		100,000		18,859
Polar Investments Ltd.†		31,000		106,981
				1,030,002
DIVERSIFIED TELECOMMUNICATION SERVICES-8.83%
Bezeq Israeli Telecommunication Corporation Ltd.		2,062,500		3,390,754
ELECTRICAL EQUIPMENT & INSTRUMENTS-3.65%
Electra (Israel) Ltd.		3,750		173,909
Elron Electronic Industries Ltd.†		69,505		92,644
Melta Inter Industry Ltd.		162,500		161,236
Nisko Industries (1992) Ltd.†		50,000		55,600
Orbotech, Ltd.†		79,255		318,605
PCB Technologies Ltd.		30,000		8,741
Priortech Ltd.†		112,500		103,909
Rapac Electronics Ltd.		107,500		185,577
Starlims Technologies Ltd.		42,500		175,295
Telsys Ltd.†		42,500		124,060
				1,399,576

See accompanying notes to financial statements.
6

THE FIRST ISRAEL FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2008

Description	No. of Shares		Value
FOOD & STAPLES RETAILING-0.13%
Gan Shmuel Food Industries		16,940	$	49,452
HEALTH CARE EQUIPMENT & SUPPLIES-0.51%
Medtechnica Ltd.		39,860		148,074
Shamir Optical Industry Ltd.		15,082		46,935
				195,009
HEALTH CARE TECHNOLOGY-0.07%
Procognia (Israel) Ltd.†		600,000		27,077
HOUSEHOLD DURABLES-1.41%
Africa Israel Investments Ltd. (Shares 0.1)		15,000		119,779
Elco Holdings Ltd.		115,000		422,693
				542,472
HOUSEHOLD PRODUCTS-0.75%
Albaad Massuot Yitzhak Ltd.		43,582		286,670
INDUSTRIAL CONGLOMERATES-3.63%
Clal Industries Ltd.		177,500		386,040
Delek Group Ltd.		3,875		127,868
Discount Investment Corporation		21,500		165,775
Granite Hacarmel Investments Ltd.†		100,000		159,379
IDB Development Corporation Ltd.		12,333		101,058
IDB Holding Corporation Ltd.		21,037		347,344
Koor Industries Ltd.†		10,000		106,709
				1,394,173
INSURANCE-8.21%
Clal Insurance Enterprise Holdings Ltd.		50,000		271,663
Harel Insurance Investments Ltd.		107,721		2,737,058
Menorah Mivtachim Holdings Ltd.†		15,000		77,397
Migdal Insurance & Financial Hodling Ltd.		62,500		66,042
				3,152,160

Description	No. of Shares		Value
INVESTMENT & HOLDING COMPANIES-0.39%
Kaman Holdings Mendelson Group Ltd.		72,178	$	70,520
Molodan Ltd.†		102,500		76,227
The Renaissance Fund LDC†^		60		3,332
				150,079
MACHINERY-0.19%
Plasson Ltd.		7,000		70,830
METALS & MINING-0.73%
Africa Israel Industries Ltd.		6,500		206,748
Scope Metals Group Ltd.		17,500		72,529
				279,277
OIL, GAS & CONSUMABLE FUELS-0.47%
Jerusalem Oil Exploration Ltd.†		21,250		104,370
Oil Refineries Ltd.		300,000		75,682
				180,052
PAPER & FOREST PRODUCTS-0.50%
Hadera Paper Ltd.†		6,602		191,575
PHARMACEUTICALS-13.57%
Bioline RX Ltd.†		540,357		121,480
DeveloGen AG†^^		50		33
Perrigo Co.		46,750		1,517,682
Teva Pharmaceutical Industries Ltd., ADR		83,820		3,568,217
				5,207,412
REAL ESTATE MANAGEMENT & DEVELOPMENT-2.74%
Africa Israel Properties Ltd.†		8,500		52,245
Elbit Imaging Ltd.		16,750		145,458
Gazit Globe (1982) Ltd.		85,000		390,947
Industrial Buildings Corporation Ltd.		276,839		337,562
Jerusalem Economic Corporation Ltd.†		47,250		84,337
Mishorim Development Group†		35,000		39,327
				1,049,876

See accompanying notes to financial statements.
7

THE FIRST ISRAEL FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2008

Description	No. of Shares			Value
ROAD & RAIL-0.63%
Dan Vehicle & Transportation		97,500		$	217,398
Raval ACS Ltd.		42,011			24,678
					242,076
SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT-1.00%
Camtek Ltd.†		29,400			10,143
DSP Group Inc.†		46,781			375,184
					385,327
SOFTWARE-3.65%
Aladdin Knowledge Systems Ltd.†		21,300			131,208
Aladdin Knowledge Systems Ltd.†		4,656			27,268
Babylon Ltd.†		50,000			54,400
Check Point Software Technologies Ltd.†		17,653			335,230
ECtel Ltd.†		899			503
Formula Systems (1985) Ltd.		83,713			530,653
Jacada Ltd.†		12,500			37,500
MIND C.T.I. Ltd.		72,200			59,197
ORT Technologies Ltd.		56,250			224,298
					1,400,257
SPECIALTY RETAIL-0.40%
Dor Alon Energy in Israel (1988) Ltd.		14,996			60,173
Golf & Co., Ltd.		27,500			92,312
					152,485
TEXTILES, APPAREL & LUXURY GOODS-0.36%
Fox Wizel Ltd .		75,000			112,729
Tefron Ltd.		59,720			24,920
					137,649
VENTURE CAPITAL-12.08%
ABS GE Capital Giza Fund, L.P.†^		1,250,001	*		140,563
Advent Israel (Bermuda) L.P.†^		1,682,293	*		40,503
BPA Israel Ventures LLC†^#		1,674,588	*		930,131

Description	No. of Shares			Value
VENTURE CAPITAL (CONTINUED)
Concord Ventures II Fund L.P.†^		2,000,000	*	$	491,736
Delta Fund I, L.P.†^		250,440	*		140,256
Giza GE Venture Fund III L.P.†^		1,250,000	*		358,400
K.T. Concord Venture Fund L.P.†^		1,000,000	*		111,195
Neurone Ventures II, L.P.†^#		663,684	*		165,484
Pitango Fund II LLC†^		1,000,000	*		199,221
SVE Star Ventures Enterprises GmbH & Co. No. IX KG†^		2,001,470	*		977,198
Walden-Israel Ventures III, L.P.†^#		1,249,188	*		1,081,047
					4,635,734
TOTAL ISRAEL (Cost $54,589,627)					38,085,668
GLOBAL-0.87%
VENTURE CAPITAL-0.87%
Emerging Markets Ventures I, L.P. (Cost $842,778)†^#		2,237,292	*		334,587
TOTAL EQUITY OR EQUITY-LINKED SECURITIES (Cost $55,432,405)					38,420,255

See accompanying notes to financial statements.
8

THE FIRST ISRAEL FUND, INC.

SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2008

	Principal Amount (000's)		Value
SHORT-TERM INVESTMENT-21.32%
UNITED STATES-21.32%
Citibank N.A., overnight deposit, 0.06%, 1/1/09 (Cost $8,182,000)	$	8,182	$	8,182,000
TOTAL INVESTMENTS-121.42% (Cost $63,614,405)				46,602,255
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS-(21.42)%				(8,220,309	)
NET ASSETS-100.00%			$	38,381,946

†  Non-income producing security.

^  Restricted security, not readily marketable; security is valued at fair value as determined in good faith by, or under the direction of, the Board of Directors under procedures established by the Board of Directors. (See Notes B and H).

^^  Not readily marketable security; security is valued at fair value as determined in good faith by, or under the direction of, the Board of Directors under procedures established by the Board of Directors. (See Note B).

#  As of December 31, 2008, the aggregate amount of open commitments for the Fund is $1,111,432. (See Note H).

*  Represents contributed capital.

ADR  American Depositary Receipts.

See accompanying notes to financial statements.
9

THE FIRST ISRAEL FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008

ASSETS
Investments, at value (Cost $63,614,405) (Notes B, E, G)	$	46,602,255
Foreign currencies (Cost $339,840)		343,868
Receivables:
Dividends		1,483
Israeli tax refunds (Note B)		212,475
Prepaid expenses		1,426
Total Assets		47,161,507
LIABILITIES
Due to custodian		1,312
Payables:
Dividends and distributions (Note B)		8,497,170
Investment advisory fees (Note C)		104,337
Administration fees (Note C)		19,940
Investments purchased		5,935
Directors' fees		2,938
Other accrued expenses		147,929
Total Liabilities		8,779,561
NET ASSETS (applicable to 4,271,645 shares of common stock outstanding) (Note D)	$	38,381,946
NET ASSETS CONSIST OF
Capital stock, $0.001 par value; 4,271,645 shares issued and outstanding (100,000,000 shares authorized)	$	4,272
Paid-in capital		54,591,784
Accumulated net investment loss		(6,556	)
Accumulated net realized gain on investments and foreign currency related transactions		800,515
Net unrealized depreciation in value of investments and translation of other assets and liabilities denominated in foreign currency		(17,008,069	)
Net assets applicable to shares outstanding	$	38,381,946
NET ASSET VALUE PER SHARE ($38,381,946 ÷ 4,271,645)	$	8.99
MARKET PRICE PER SHARE	$	8.02

See accompanying notes to financial statements.
10

THE FIRST ISRAEL FUND, INC.

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008

INVESTMENT INCOME
Income (Note B):
Dividends	$	2,543,865
Interest		53,593
Securities lending		810
Less: Foreign taxes withheld		(435,398	)
Total Investment Income		2,162,870
Expenses:
Investment advisory fees (Note C)		957,348
Custodian fees		240,632
Directors' fees		80,900
Audit and tax fees		59,497
Legal fees		43,499
Printing fees (Note C)		42,699
Administration fees (Note C)		38,716
Accounting fees (Note C)		32,358
Shareholder servicing fees		24,638
Insurance fees		2,385
Stock exchange listing fees		1,490
Miscellaneous		15,072
Total Expenses		1,539,234
Less: Fee waivers (Note C)		(221,224	)
Net Expenses		1,318,010
Net Investment Income		844,860
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments		8,422,067
Foreign currency related transactions		88,666
Net change in unrealized depreciation in value of investments and translation of other assets and liabilties denominated in foreign currencies		(50,516,298	)
Net realized and unrealized loss on investments and foreign currency related transactions		(42,005,565	)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	(41,160,705	)

See accompanying notes to financial statements.
11

THE FIRST ISRAEL FUND, INC.

STATEMENTS OF CHANGES IN NET ASSETS

	For the Years Ended December 31,
	2008			2007
INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income	$	844,860		$	1,180,339
Net realized gain on investments and foreign currency related transactions		8,510,733			8,310,311
Net change in unrealized appreciation/(depreciation) in value of investments and translation of other assets and liabilities denominated in foreign currency		(50,516,298	)		9,848,265
Net increase/(decrease) in net assets resulting from operations		(41,160,705	)		19,338,915
Dividends and distributions to shareholders:
Net investment income		(1,280,980	)		(1,618,929	)
Net realized gain on investments		(8,240,973	)		(7,753,591	)
Total dividends and distributions to shareholders		(9,521,953	)		(9,372,520	)
Capital share transactions:
Issuance of 8,814 and 1,045 shares, respectively from reinvestments of dividends and distributions		190,852			21,191
Issuance of 2,491 and 0 shares through the directors compensation plan (Note C)		29,463			—
Total capital share transactions		220,315			21,191
Total increase/(decrease) in net assets		(50,462,343	)		9,987,586
NET ASSETS
Beginning of year		88,844,289			78,856,703
End of year	$	38,381,946		$	88,844,289

See accompanying notes to financial statements.
12

THE FIRST ISRAEL FUND, INC.

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2008

CASH FLOWS FROM OPERATING ACTIVITIES
Net decrease in net assets from operations	$	(41,160,705	)
Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities:
Purchase of investment securities		(13,914,348	)
Proceeds from disposition of investment securities		18,121,534
Decrease in short-term investment		2,720,000
Decrease in investments sold receivable		917,537
Decrease in dividend receivables		50,378
Increase in Israeli tax refunds		(35,075	)
Increase in prepaid expenses		(1,023	)
Decrease in investment advisory fees payable		(154,526	)
Decrease in investments purchased payable		(234,904	)
Increase in administration fees payable		2,296
Decrease in other accrued expenses		(31,685	)
Net realized gain from investments and currencies		(8,510,733	)
Unrealized depreciation on securities		50,483,563
Net cash provided by operating activities		8,252,309
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions paid		(9,269,403	)
Directors compensation		22,446
Net cash used in financing activities		(9,246,957	)
Net decrease in cash		(994,648	)
CASH
Beginning of year		1,337,204
End of year	$	342,556

Noncash financing activities not included herein consist of reinvestment of dividends and distributions of $190,852.

See accompanying notes to financial statements.
13

THE FIRST ISRAEL FUND, INC.

Financial Highlights

Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements and market price data for the Fund's shares.

	For the Years Ended December 31,									For the Three Months Ended December 31,
	2008			2007			2006			2005
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period	$	20.85		$	18.51		$	17.44		$	18.28
Net investment income/(loss)		0.20	†		0.28	†		0.17			0.01
Net realized and unrealized gain/(loss) on investments and foreign currency related transactions		(9.83	)		4.26			2.25			0.75
Net increase/(decrease) in net assets resulting from operations		(9.63	)		4.54			2.42			0.76
Dividends and distributions to shareholders:
Net investment income		(0.30	)		(0.38	)		(0.18	)		—
Net realized gain on investments and foreign currency related transactions		(1.93	)		(1.82	)		(1.17	)		(1.60	)
Total dividends and distributions to shareholders		(2.23	)		(2.20	)		(1.35	)		(1.60	)
Anti-dilutive impact due to capital shares repurchased		—			—			—			—
Net asset value, end of period	$	8.99		$	20.85		$	18.51		$	17.44
Market value, end of period	$	8.02		$	23.49		$	18.65		$	15.67
Total investment return (a)		(57.01	)%		38.96	%		27.77	%		6.15	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)	$	38,382		$	88,844		$	78,857		$	74,273
Ratio of expenses to average net assets (b)		1.73	%		1.71	%		1.73	%		1.65	%(c)
Ratio of expenses to average net assets, excluding fee waivers		2.02	%		1.99	%		1.97	%		1.87	%(c)
Ratio of net investment income/(loss) to average net assets (b)		1.14	%		1.34	%		0.95	%		0.16	%(c)
Portfolio turnover rate		19.43	%		9.32	%		9.82	%		1.53	%

†  Based on average shares outstanding.

(a)  Total investment return at market value is based on the changes in market price of a share during the period and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the Fund's dividend reinvestment program.

(b)  Ratios reflect actual expenses incurred by the Fund. Amounts are net of fee waivers.

(c)  Annualized.

See accompanying notes to financial statements.
14

	For the Fiscal Years Ended September 30,
	2005			2004			2003			2002			2001				2000			1999
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period	$	14.27		$	12.35		$	9.50		$	11.64		$	23.24			$	17.18		$	15.04
Net investment income/(loss)		(0.07	)		(0.03	)		(0.22	)†		(0.17	)†		(0.06	)†	��		(0.02	)†		(0.02	)†
Net realized and unrealized gain/(loss) on investments and foreign currency related transactions		4.08			1.95			3.42			(1.80	)		(8.39	)			7.80			3.21
Net increase/(decrease) in net assets resulting from operations		4.01			1.92			3.20			(1.97	)		(8.45	)			7.78			3.19
Dividends and distributions to shareholders:
Net investment income		—			—			—			—			(0.08	)			(0.41	)		(0.21	)
Net realized gain on investments and foreign currency related transactions		—			—			(0.35	)		(0.17	)		(3.07	)			(1.46	)		(1.20	)
Total dividends and distributions to shareholders		—			—			(0.35	)		(0.17	)		(3.15	)			(1.87	)		(1.41	)
Anti-dilutive impact due to capital shares repurchased		—			—			—			—			—				0.15			0.36
Net asset value, end of period	$	18.28		$	14.27		$	12.35		$	9.50		$	11.64			$	23.24		$	17.18
Market value, end of period	$	16.21		$	12.09		$	10.10		$	7.41		$	9.60			$	18.563		$	14.000
Total investment return (a)		34.08	%		19.70	%		40.57	%		(21.24	)%		(38.21	)%			47.61	%		32.61	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)	$	77,875		$	60,773		$	52,604		$	40,457		$	49,565			$	98,979		$	76,683
Ratio of expenses to average net assets (b)		2.10	%		1.92	%		2.31	%		2.08	%		1.88	%			2.05	%		2.05	%
Ratio of expenses to average net assets, excluding fee waivers		2.33	%		2.13	%		2.54	%		2.30	%		2.09	%			2.28	%		2.30	%
Ratio of net investment income/(loss) to average net assets (b)		(0.39	)%		(0.19	)%		(2.01	)%		(1.44	)%		(0.39	)%			(0.08	)%		(0.12	)%
Portfolio turnover rate		10.65	%		8.53	%		2.94	%		11.26	%		21.11	%			27.06	%		18.65	%

15

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008

NOTE A. ORGANIZATION

The First Israel Fund, Inc. (the "Fund") was incorporated in Maryland on March 6, 1990 and commenced investment operations on October 29, 1992. The Fund is registered under the Investment Company Act of 1940, as amended, as a closed-end, non-diversified management investment company.

NOTE B. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Security Valuation: The net asset value of the Fund is determined daily as of the close of regular trading on the New York Stock Exchange, Inc. (the "Exchange") on each day the Exchange is open for business. Equity investments are valued at market value, which is generally determined using the closing price on the exchange or market on which the security is primarily traded at the time of valuation (the "Valuation Time"). If no sales are reported, equity investments are generally valued at the most recent bid quotation as of the Valuation Time or at the lowest ask quotation in the case of a short sale of securities. Debt securities with a remaining maturity greater than 60 days are valued in accordance with the price supplied by a pricing service, which may use a matrix, formula or other objective method that takes into consideration market indices, yield c urves and other specific adjustments. Debt obligations that will mature in 60 days or less are valued on the basis of amortized cost, which approximates market value, unless it is determined that using this method would not represent fair value. Investments in mutual funds are valued at the mutual fund's closing net asset value per share on the day of valuation.

Securities and other assets for which market quotations are not readily available, or whose values have been materially affected by events occurring before the Fund's Valuation Time, but after the close of the securities' primary market, are valued at fair value as determined in good faith by, or under the direction of, the Board of Directors under procedures established by the Board of Directors. The Fund may utilize a service provided by an independent third party which has been approved by the Board of Directors to fair value certain securities. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. At December 31, 2008, the Fund held 12.96% of its net assets in securities valued at fair value as determined in good faith under procedures established by the Board of Directors with an aggregate cost of $10,796,268 and f air value of $4,973,686. The Fund's estimate of fair value assumes a willing buyer and a willing seller neither acting under the compulsion to buy or sell. Although these securities may be resold in privately negotiated transactions, the prices realized on such sales could differ from the prices originally paid by the Fund or the current carrying values, and the difference could be material.

The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective January 1, 2008. In accordance with FAS 157, fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or

16

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2008

most advantageous market of the investment. FAS 157 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.

•  Level 1—quoted prices in active markets for identical investments

•  Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

•  Level 3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used as of December 31, 2008 in valuing the Fund's investments carried at value:

Valuation Inputs	Investments in Securities		Other Financial Instruments*
Level 1—Quoted Prices	$	5,711,684	$	—
Level 2—Other Significant Observable Inputs		35,916,885		—
Level 3—Significant Unobservable Inputs		4,973,686		—
Total	$	46,602,255	$	—

*  Other financial instruments include futures, forwards and swap contracts.

Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:

	Investments in Securities			Other Financial Instruments*
Balance as of 12/31/07	$	6,084,747		$	—
Accrued discounts/ premiums		—			—
Realized gain/loss and change in unrealized depreciation		(1,012,721	)		—
Net purchases/sales		(98,340	)		—
Net transfers in and/or out of Level 3		—			—
Balance as of 12/31/08	$	4,973,686		$	—
Net change in unrealized depreciation from investments still held as of 12/31/08	$	(701,216	)	$	—

*  Other financial instruments include futures, forwards and swap contracts.

17

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2008

Short-Term Investment: The Fund sweeps available cash into a short-term time deposit available through Brown Brothers Harriman & Co., the Fund's custodian. The short-term time deposit is a variable rate account classified as a short-term investment.

Investment Transactions and Investment Income: Investment transactions are accounted for on a trade date basis. The cost of investments sold is determined by use of the specific identification method for both financial reporting and U.S. income tax purposes. Interest income is accrued as earned; dividend income is recorded on the ex-dividend date.

Taxes: No provision is made for federal taxes as it is the Fund's intention to continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code of 1986, as amended, and to make the requisite distributions to its shareholders, which will be sufficient to relieve it from federal income and excise taxes.

Pursuant to a ruling the Fund received from the Israeli tax authorities, the Fund, subject to certain conditions, will not be subject to Israeli tax on capital gains derived from the sale of securities listed on the Tel Aviv Stock Exchange ("TASE"). Gains derived from Israeli securities not listed on TASE (unlisted securities) will be subject to a 25% Israeli tax provided the security is an approved investment. Generally, stock of corporations that produce a product or provide a service that support the infrastructure of Israel are considered approved investments. Any gains sourced to unlisted unapproved securities are subject to a 40% Israeli tax and an inflationary tax. For the year ended December 31, 2008, the Fund did not incur any Israeli capital gains taxes. The Fund accrues any capital gains tax estimated to be payable as if the security had been sold at the time unrealized gains are recorded.

Dividends derived from listed or approved Israeli securities are subject to a 20% withholding tax, while dividends from unlisted or unapproved securities are subject to a 25% withholding tax. The Fund accrued for a refund of a portion of these amounts withheld. Interest on debt obligations (whether listed or not) is subject to withholding tax of 25% to 35%. Withholding taxes are accrued when the related income is earned in an amount management believes is ultimately payable after any reclaims of taxes withheld.

During June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation 48 ("FIN 48 or the "Interpretation"), Accounting for Uncertainty in Income Taxes—an interpretation of FASB statement 109. The Fund has reviewed its current tax positions and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.

Foreign Currency Translations: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:

  (I)  market value of investment securities, assets and liabilities at the valuation date rate of exchange; and

  (II)  purchases and sales of investment securities, income and expenses at the relevant rates of exchange prevailing on the respective dates of such transactions.

The Fund does not isolate that portion of gains and losses on investments in equity securities which is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. Accordingly, realized and unrealized foreign currency gains and losses with respect to such

18

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2008

securities are included in the reported net realized and unrealized gains and losses on investment transactions balances.

The Fund reports certain foreign currency related transactions and foreign taxes withheld on security transactions as components of realized gains for financial reporting purposes, whereas such foreign currency related transactions are treated as ordinary income for U.S. income tax purposes.

Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation/depreciation in value of investments, and translation of other assets and liabilities denominated in foreign currencies.

Net realized foreign exchange gains or losses represent foreign exchange gains and losses from transactions in foreign currencies and forward foreign currency contracts, exchange gains or losses realized between the trade date and settlement date on security transactions, and the difference between the amounts of interest and dividends recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received.

Securities Lending: In connection with its security lending activities, the Fund received cash as collateral for any securities out on loan to brokers. Such cash collateral was reinvested into either an overnight repurchase agreement or a securities lending fund available through Brown Brothers Harriman & Co. Security loans are required at all times to have collateral at least equal to 100% of the market value of the securities on loan; however, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. During the year ended December 31, 2008, total earnings from the investment of cash collateral received by the Fund in a securities lending arrangement was $810.

Distributions of Income and Gains: The Fund distributes at least annually to shareholders substantially all of its net investment income and net realized short-term capital gains, if any. The Fund determines annually whether to distribute any net realized long-term capital gains in excess of net realized short-term capital losses, including capital loss carryovers, if any. An additional distribution may be made to the extent necessary to avoid the payment of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are recorded by the Fund on the ex-dividend date.

The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for U.S. income tax purposes due to U.S. generally accepted accounting principles/tax differences in the character of income and expense recognition.

Partnership Accounting Policy: The Fund records its pro-rata share of the income/(loss) and capital gains/(losses) allocated from the underlying partnerships and adjusts the cost of the underlying partnerships accordingly. These amounts are included in the Fund's Statement of Operations.

Other: The Fund may invest in securities of foreign countries and governments which involve certain risks in addition to those inherent in domestic investments. Such risks generally include, among others, currency risks (fluctuations in currency exchange rates), information risk (key information may be inaccurate or unavailable) and political risk (expropriation, nationalization or the imposition of capital or currency controls or punitive taxes). Other risks of investing in foreign securities include liquidity and valuation risks.

19

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2008

Securities denominated in currencies other than U.S. dollars are subject to changes in value due to fluctuations in exchange rates.

Investments in Israel may involve certain considerations and risks not typically associated with investments in the United States, including the possibility of future political and economic developments and the level of Israeli governmental supervision and regulation of its securities markets. The Israeli securities markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Fund may be inhibited.

The Fund, subject to local investment limitations, may invest up to 30% of its assets (at the time of commitment) in illiquid equity securities, including securities of private equity funds (whether in corporate or partnership form) that invest primarily in emerging markets. When investing through another investment fund, the Fund will bear its proportionate share of the expenses incurred by that fund, including management fees. Such securities are expected to be illiquid, which may involve a high degree of business and financial risk and may result in substantial losses. Because of the current absence of any liquid trading market for these investments, the Fund may take longer to liquidate these positions than would be the case for publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized on such sales could be substantially less than those originally paid by the Fund or th e current carrying values, and these differences could be material. Further, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements applicable to companies whose securities are publicly traded.

The Board of Directors has removed the limitation set forth in the Fund's original prospectus requiring that the portion of the Fund's investments not invested in Israeli securities be invested in securities of companies that are substantially involved in or with Israel. However, the Fund has adopted a policy to invest under normal circumstances, at least 80% of the value of its assets in investments that are tied economically to Israel.

NOTE C. AGREEMENTS

Credit Suisse Asset Management, LLC ("Credit Suisse") serves as the Fund's investment adviser with respect to all investments. Credit Suisse is contractually entitled to receive as compensation for its advisory services from the Fund an annual fee, calculated weekly and paid quarterly, equal to 1.30% of the Fund's average weekly market value or net assets (whichever is lower) invested in listed securities (including securities traded over-the-counter in the United States) and 2.00% of the Fund's average weekly market value or net assets (whichever is lower) invested in unlisted securities. The aggregate fee may not exceed an annual rate of 1.40% of the Fund's average weekly market value or net assets (whichever is lower). Credit Suisse has agreed to waive the advisory fee previously payable to the Fund's former investment sub-adviser. For the year ended December 31, 2008, Credit Suisse earned $957,348 for advisory services, of which Credit S uisse waived $221,224. Credit Suisse also provides certain administrative services to the Fund and is reimbursed by the Fund for costs incurred on behalf of the Fund (up to $20,000 per annum). For the year ended December 31, 2008, Credit Suisse was reimbursed $3,333 for administrative services rendered to the Fund.

Credit Suisse Asset Management Limited ("Credit Suisse Ltd.") an affiliate of Credit Suisse, is a sub-investment adviser to the Fund. Credit Suisse Ltd.'s sub-investment advisory fees are paid by Credit Suisse out of Credit Suisse's net investment advisory fee and not paid by the Fund.

20

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2008

Analyst Exchange and Trading Services Ltd. ("Analyst I.M.S.") is also a sub-investment adviser to the Fund. Analyst I.M.S. is paid a fee, out of the advisory fee payable to Credit Suisse, calculated weekly and paid quarterly at an annual rate of 0.30% of the Fund's average weekly market value or net assets (whichever is lower). In addition, Credit Suisse pays Analyst I.M.S., out of its advisory fee, a reimbursement for any Israeli Value Added taxes (currently 15.5%) and $25,000 annually to cover expenses incurred in the execution of sub-advisory services. For the year ended December 31, 2008, Analyst I.M.S. earned $270,601 for sub-advisory services.

Analyst I.M.S. has certain commercial arrangements with banks and brokers in Israel from which Analyst I.M.S. receives a portion of the commissions on the Fund's trades executed in Israel. For the year ended December 31, 2008, such commissions amounted to approximately $7,900.

Bear Stearns Funds Management Inc. ("BSFM") served as the Fund's administrator until July 31, 2008. The Fund paid BSFM a monthly fee that was calculated weekly based on the Fund's average weekly net assets. For the period ended July 31, 2008, BSFM earned $35,368 for administrative services.

Brown Brothers Harriman & Co. ("BBH & Co.") serves as the Fund's administrator. For the period August 1, 2008 to December 31, 2008, BBH & Co. earned $14,242 for administrative and fund accounting services.

Merrill Corporation ("Merrill"), an affiliate of Credit Suisse, has been engaged by the Fund to provide certain financial printing services. For the year ended December 31, 2008, Merrill was paid $28,923 for its services to the Fund.

The Independent Directors receive fifty percent (50%) of their annual retainer in the form of shares. Beginning in 2008, the Independent Directors can elect to receive up to 100% of their annual retainer in shares of the Fund. During the fiscal year end December 31, 2008, 2,491 shares were issued through the directors compensation plan. Directors as a group own less than 1% of the Fund's outstanding shares.

NOTE D. CAPITAL STOCK

The authorized capital stock of the Fund is 100,000,000 shares of common stock, $0.001 par value. Of the 4,271,645 shares outstanding at December 31, 2008, Credit Suisse owned 7,169 shares.

NOTE E. INVESTMENT IN SECURITIES

For the year ended December 31, 2008, purchases and sales of securities, other than short-term investments, were $13,914,348 and $16,017,260, respectively.

NOTE F. CREDIT FACILITY

The Fund, together with other funds/portfolios advised by Credit Suisse (collectively, the "Participating Funds"), participates in a $50 million committed, unsecured, line of credit facility ("Credit Facility") with State Street Bank and Trust Company for temporary or emergency purposes. Under the terms of the Credit Facility, the Participating Funds pay an aggregate commitment fee at a rate of 0.10% per annum on the average unused amount of the Credit Facility, which is allocated among the Participating Funds in such manner as is determined by the governing Boards of the Participating Funds. In addition, the Participating Funds pay interest on borrowings at the Federal Funds rate plus 0.50%. At December 31, 2008, and during the fiscal year ended December 31, 2008, the Fund had no borrowings under the Credit Facility.

NOTE G. FEDERAL INCOME TAXES

Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.

21

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2008

The tax character of dividends and distributions paid during the years ended December 31, 2008 and 2007, respectively, by the Fund were as follows:

Ordinary Income				Long-Term Capital Gains
2008		2007		2008		2007
$	899,423	$	1,423,697	$	8,622,530	$	7,948,823

The tax basis of components of distributable earnings differ from the amounts reflected in the Statement of Assets and Liabilities by temporary book/tax differences. These differences are primarily due to losses deferred on wash sales, investments in partnerships and deferral of post-October losses.

At December 31, 2008, the components of distributable earnings on a tax basis, for the Fund were as follows:

Undistributed long-term capital gain	$	486,828
Deferral of post-October currency losses		(6,556	)
Unrealized appreciation		(16,694,382	)
Total distributable earnings	$	(16,214,110	)

At December 31, 2008, the Fund did not have a capital loss carryforward for U.S. federal income tax purposes.

At December 31, 2008, the identified cost for federal income tax purposes, as well as the gross unrealized appreciation from investments for those securities having an excess of value over cost, gross unrealized depreciation from investments for those securities having an excess of cost over value and the net unrealized depreciation from investments were $63,300,718, $11,048,748, $(27,747,211) and $(16,698,463), respectively.

At December 31, 2008, the Fund reclassified $429,564 from accumulated net realized gain on investments and foreign currency related transactions to accumulated net investment loss. These permanent differences are due to differing book/tax treatments of foreign currency transactions, investments in partnerships, and distribution reclassifications. Net assets were not affected by these reclassifications.

NOTE H. RESTRICTED SECURITIES

Certain of the Fund's investments are restricted as to resale and are valued at fair value as determined in good faith by, or under the direction of, the Board of Directors under procedures established by the Board of Directors in the absence of readily ascertainable market values.

Security	Acquisition Date(s)	Cost		Fair Value At 12/31/08		Value per Share		Percent of Net Assets		Distributions Received		Open Commitments
ABS GE Capital Giza Fund, L.P.	02/03/98 – 02/13/02	$	985,303	$	140,563	$	0.11		0.37	$	1,660,765		—
Advent Israel (Bermuda) L.P.	06/16/93 – 01/16/98		1,436,643		40,503		0.02		0.11		3,851,769		—
BPA Israel Ventures LLC	10/05/00 – 12/09/05		1,187,968		930,131		0.56		2.42		—	$	625,412
Concord Ventures Fund II, L.P.	09/29/00 – 12/15/06		1,316,619		491,736		0.25		1.28		129,290		—
Delta Fund I, L.P.	11/15/00 – 03/28/07		167,473		140,256		0.56		0.37		57,937		—
Emerging Markets Ventures I, L.P.	01/22/98 – 01/10/96		842,778		334,587		0.15		0.87		2,431,185		262,708
Giza GE Venture Fund III, L.P.	01/31/00 – 11/23/06		828,929		358,400		0.29		0.93		329,171		—
K.T. Concord Venture Fund L.P.	12/08/97 – 09/29/00		595,042		111,195		0.11		0.29		660,194		—
Neurone Ventures II, L.P.	11/24/00 – 07/08/08		164,718		165,484		0.25		0.43		297,649		97,500

22

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2008

Security	Acquisition Date(s)	Cost		Fair Value At 12/31/08		Value per Share		Percent of Net Assets		Distributions Received		Open Commitments
Pitango Fund II LLC	10/31/96 – 08/01/01	$	388,547	$	199,221	$	0.20		0.52	$	1,175,618		—
SVE Star Ventures Enterprises GmbH & Co. No. IX KG	12/21/00 – 08/08/08		1,536,590		977,198		0.49		2.55		380,279		—
The Renaissance Fund LDC	03/30/94 – 03/21/97		193,756		3,332		55.53		0.01		586,059		—
Walden-Israel Ventures III, L.P.	02/23/01 – 11/02/06		759,901		1,081,047		0.87		2.81		942,976	$	125,812
Total		$	10,404,267	$	4,973,653				12.96	$	12,502,892	$	1,111,432

The Fund may incur certain costs in connection with the disposition of the above securities.

NOTE I. CONTINGENCIES

In the normal course of business, the Fund may provide general indemnifications pursuant to certain contracts and organizational documents. The Fund's maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.

NOTE J. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2008, FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities ("FAS 161"), an amendment of FASB Statement No. 133. FAS 161 requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and hedging activities are accounted for, and (c) how derivative instruments and related hedging activities affect a fund's financial position, financial performance, and cash flows. Management of the Funds does not believe the adoption of FAS 161 will materially impact the financial statement amounts, but will require additional disclosures. This will include qualitative and quantitative disclosures on derivative positions existing at period end and the effect of using de rivatives during the reporting period. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.

NOTE K. OTHER MATTERS

On December 31, 2008, Credit Suisse, the corporate parent of the Funds' investment adviser, announced it had signed an agreement to sell part of its Global Investors traditional asset management business to Aberdeen Asset Management ("Aberdeen"), an international investment management group, managing assets for both institutions and private individuals from offices around the world. Credit Suisse has stated that the transaction is subject to customary closing conditions, including regulatory approvals in various jurisdictions and approval by Aberdeen shareholders, and is expected to close in the second quarter of 2009.

Pending the closing of the transaction, Credit Suisse Asset Management, LLC ("CSAM"), Credit Suisse Asset Management Limited (U.K.) ("CSAM UK") and Credit Suisse Asset Management Limited (Australia) ("CSAM Australia") are expected to continue to operate in the ordinary course of business as the investment adviser or sub-adviser of the Funds.

23

THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2008

If completed, acquisition of the Credit Suisse business by Aberdeen would constitute an "assignment" of the Funds' Advisory and Sub-Advisory Agreements with CSAM, CSAM UK and CSAM Australia and, by law, would automatically terminate those agreements. Accordingly, each Fund's Board of Directors is considering various options in connection with the transaction, including possibly entering into new investment advisory and sub-advisory agreements with Aberdeen. If approved by a Fund's Board of Directors, including the Directors who are not "interested persons" of the investment manager and its affiliates or the Fund, any new investment advisory and sub-advisory agreements will require the approval of the Fund's shareholders.

24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
The First Israel Fund, Inc.:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of The First Israel Fund, Inc. (the "Fund") at December 31, 2008, the results of its operations for the year then ended and the changes in its net assets and financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Ov ersight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at December 31, 2008 by correspondence with the custodian, brokers and private equity issuers, provides a reasonable basis for our opinion.

As explained in Note B, the financial statements include securities valued at $4,973,686 (12.96% of net assets), whose fair values have been determined in good faith under procedures established by the Board of Directors in the absence of readily ascertainable market values. We have reviewed the procedures established by the Board of Directors to value such securities and have inspected underlying documentation, and, in the circumstances, we believe the procedures are reasonable and the documentation appropriate. However, these values may differ significantly from the values that would have been used had a ready market for the securities existed, and the difference could be material.

PricewaterhouseCoopers LLP

Baltimore, Maryland
February 26, 2009

25

RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)

On April 10, 2008, the Annual Meeting of Shareholders of the Fund (the "Meeting") was held and the following matter was voted upon:

(1)  To re-elect two directors to the Board of Directors of the Fund:

Name of Director	For		Withheld
James J. Cattano (Class II)		3,573,752		153,718
Steven N. Rappaport (Class II)		3,573,731		153,739

In addition to the directors elected at the Meeting, Enrique R. Arzac and Lawrence J. Fox continued as directors of the Fund. Subsequent to the Meeting, Lawrence D. Haber resigned as a director of the Fund.

TAX INFORMATION (UNAUDITED)

For the fiscal year ended December 31, 2008, the Fund designates approximately $1,847,570, or up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code, as qualified dividend income eligible for reduced tax rates. These lower rates range from 5% to 15% depending on an individual's tax bracket. If the Fund pays a distribution during calendar year 2008, complete information will be reported in conjunction with Form 1099-DIV.

During the year ended December 31, 2008, the Fund declared $8,622,530 in dividends that were designated as long-term capital gains dividends.

The Fund has made an election under Section 853 to pass through foreign taxes paid by the Fund to its shareholders. The amount of foreign taxes that were passed through to shareholders for the year ended December 31, 2008, was $481,191. The amount of foreign source income was $2,158,253. Shareholders should refer to their Form 1099-DIV to determine the amount includable on their respective tax returns for 2008.

Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund.

26

INFORMATION CONCERNING DIRECTORS AND OFFICERS (UNAUDITED)

Name, Address (Year of Birth)	Position(s) Held with Fund	Term of Office and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Director		Other Directorships Held by Director
Independent Directors
Enrique R. Arzac c/o Credit Suisse Asset Management, LLC Attn: General Counsel Eleven Madison Avenue New York, New York 10010 (1941)	Chairman of the Board of Directors; Nominating Committee Chairman and Audit Committee Member	Director since 1996; Chairman since 2005; current term ends at the 2009 annual meeting	Professor of Finance and Economics, Graduate School of Business, Columbia University since1971		33	Director of Epoch Holding Corporation (an Investment management and investment advisory services company); Director of The Adams Express Company (a closed-end investment company); Director of Petroleum and Resources Corporation (a closed-end investment company)
James J. Cattano c/o Primary Resources, Inc. 5100 Tamiami Trail N. Naples, FL 34103 (1943)	Director; Nominating Committee Member and Audit Committee Chairman	Since 2005; current term ends at the 2011 annual meeting	President, Primary Resources Inc. (an international trading and manufacturing company specializing in the sale of agricultural commodities throughout Latin American markets) since October 1996		7	None
Lawrence J. Fox One Logan Square 18th & Cherry Streets Philadelphia, Pennsylvania 19103 (1943)	Director; Nominating and Audit Committee Member	Since 2006; Current term ends at the 2010 annual meeting	Partner, Drinker Biddle & Reath (law firm) since 1972		6	None

27

INFORMATION CONCERNING DIRECTORS AND OFFICERS (UNAUDITED) (CONTINUED)

Name, Address (Year of Birth)	Position(s) Held with Fund	Term of Office and Length of Time Served	Principal Occupation(s) During Past Five Years	Number of Portfolios in Fund Complex Overseen by Director		Other Directorships Held by Director
Independent Directors—(continued)
Steven N. Rappaport Lehigh Court, LLC 555 Madison Ave., 29th Floor New York, New York 10022 (1948)	Director; Nominating and Audit Committee Member	Since 1992; current term ends at the 2011 annual meeting	Partner of Lehigh Court, LLC and RZ Capital (private investment firms) since July 2002		33	Director of iCAD, Inc. (Surgical & Medical Instruments & Apparatus); Director of Presstek, Inc. (digital imaging technologies company); Director of Wood Resources, LLC (a plywood manufacturing company)

28

INFORMATION CONCERNING DIRECTORS AND OFFICERS (UNAUDITED) (CONTINUED)

Name, Address (Year of Birth)	Position(s) Held with Fund	Length of Time Served	Principal Occupation(s) During Past Five Years
Officers
George R. Hornig Credit Suisse Asset Management, LLC Eleven Madison Avenue New York , New York 10010 (1954)	Chief Executive Officer and President	Since 2008	Managing Director of Credit Suisse; Co-Chief Operating Officer of Asset Management and Head of Asset Management Americas; Associated with Credit Suisse since 1999; Officer of other Credit Suisse Funds.
Neil Gregson c/o Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1962)	Chief Investment Officer	Since 2004	Managing Director of Credit Suisse Asset Management Limited ("Credit Suisse Ltd"); Associated with Credit Suisse Ltd. since 1990.
Michael A. Pignataro Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1959)	Chief Financial Officer	Since 1993	Director and Director of Fund Administration of Credit Suisse; Associated with Credit Suisse or its predecessor since 1984; Officer of other Credit Suisse Funds.
Emidio Morizio Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1966)	Chief Compliance Officer	Since 2004	Director and Global Head of Compliance of Credit Suisse; Associated with Credit Suisse since July 2000; Officer of other Credit Suisse Funds.
J.Kevin Gao Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1967)	Chief Legal Officer since 2006; Senior Vice President And Secretary since 2004	Since 2004	Director and Legal Counsel of Credit Suisse; Associated with Credit Suisse since July 2003; Associated with the law firm of Willkie Farr & Gallagher LLP from 1998 to 2003; Officer of other Credit Suisse Funds.
Cecilia Chau Credit Suisse Asset Management, LLC Eleven Madison Avenue New York, New York 10010 (1973)	Treasurer	Since 2008	Assistant Vice President of Credit Suisse since June 2007; Associated with Alliance Bernstein LP. From January 2007 to May 2007; Associated with Credit Suisse from August 2000 to December 2006; Officer of other Credit Suisse Funds.

29

ADVISORY AGREEMENT APPROVAL DISCLOSURE (UNAUDITED)

Board Consideration and Re-Approval of Investment Advisory and Sub-Advisory Agreements

The Board of Directors (the "Board") of The First Israel Fund, Inc. (the "Fund"), including a majority of the Directors who have no direct or indirect interest in the investment advisory and sub-advisory agreements and are not "interested persons" of the Fund, as defined in the Investment Company Act of 1940 (the "Independent Directors"), is required annually to review and re-approve the terms of the Fund's investment advisory and sub-advisory agreements. During the most recent six months covered by this report, the Board reviewed and re-approved (i) an investment advisory agreement with Credit Suisse Asset Management, LLC ("Credit Suisse"), (ii) a sub-advisory agreement with Analyst Exchange Trading Services Ltd. ("Analyst") for the Fund, and (iii) a sub-advisory agreement with Credit Suisse Asset Management Limited ("Credit Suisse U.K."). These agreements are collectively referred to as the "Advisory Agreements."

More specifically, at a meeting held on November 19-20, 2008, the Board, including the Independent Directors advised by their independent legal counsel, considered the factors and reached the conclusions described below relating to the selection of Credit Suisse, Credit Suisse U.K. and Analyst and the re-approval of the Advisory Agreements.

Nature, Extent and Quality of Services

The Board received and considered various data and information regarding the nature, extent and quality of services provided to the Fund by Credit Suisse and the Sub-Advisers under the Advisory Agreements. The most recent investment adviser registration forms for Credit Suisse and the Sub-Advisers were provided to the Board, as were responses of Credit Suisse and the Sub-Advisers to a detailed series of requests submitted by the Independent Directors' independent legal counsel on their behalf. The Board reviewed and analyzed these materials, which included, among other things, information about the background and experience of senior management and investment personnel of Credit Suisse and Credit Suisse U.K. In this regard, the Board specifically reviewed the qualifications, backgrounds and responsibilities of the individuals primarily responsible for day-to-day portfolio management services for the Fund.

In addition, the Board considered the investment and legal compliance programs of Credit Suisse and the Sub-Advisers including their compliance policies and procedures and reports of the Fund's Chief Compliance Officer.

The Board also evaluated the ability of Credit Suisse and the Sub-Advisers, including their respective resources, reputations and other attributes, to attract and retain qualified investment professionals, including research, advisory, and supervisory personnel.

Finally, the Board considered preliminary information from Credit Suisse's corporate parent about its search for a strategic partner for part of its asset management business. In reaching its determination to continue the agreements and arrangements, the Board relied upon Credit Suisse's undertaking and assurances to continue providing quality management, personnel and other resources necessary to continue providing advisory services of a nature, extent and quality at least comparable to those currently provided to the Funds.

30

ADVISORY AGREEMENT APPROVAL DISCLOSURE (UNAUDITED) (CONTINUED)

Based on the above factors, together with those referenced below, the Board concluded that it was satisfied with the nature, extent and quality of the investment advisory services provided to the Fund by Credit Suisse and the Sub-Advisers.

Fund Performance and Expenses

The Board considered the performance results of the Fund in comparison to the Fund's benchmark index, the Tel Aviv 100 Index. The Board noted that the Fund's NAV and market price returns had underperformed the Fund's benchmark index in 2008, but the Fund's market price return had outperformed the benchmark index in 2007.

The Board also considered information regarding the Fund's total expense ratio and its various components in comparison to expense information for a group of funds that was determined to be the most similar to the Fund (the "Peer Group") and a broader universe of relevant funds (the "Expense Universe"). Lipper Inc. ("Lipper"), an independent provider of investment company data, determined the Peer Group and Expense Universe for the Fund and provided the comparative data. The Board noted that the overall expense ratio of the Fund was higher than the median overall expense ratios of its Peer Group and Expense Universe, both including and excluding investment-related expenses and taxes.

Based on the above-referenced considerations and other factors, the Board concluded that the overall performance results and expense comparisons supported the re-approval of the Advisory Agreements.

Investment Advisory and Sub-Advisory Fee Rates

The Board reviewed the contractual investment advisory fee rate (the "Advisory Agreement Rate") payable by the Fund to Credit Suisse for investment advisory services. The Board noted that Credit Suisse had contractually agreed to base its current investment advisory fee upon the lower of the average weekly stock price or its average weekly net assets. The Board also reviewed and considered the fee waiver/cap arrangements applicable to the Advisory Agreement Rate and considered the Advisory Agreement Rate after taking the waivers into account (the "Net Advisory Rate"). The Board also reviewed and considered the contractual investment sub-advisory fee rates (the "Sub-Advisory Agreement Rates") payable by Credit Suisse to the Sub-Advisers for investment sub-advisory services.

Additionally, the Board considered information comparing the Net Advisory Rate (both on a stand-alone basis and on a combined basis with the Fund's administration fee rate) with that of the other funds in its Peer Group. The Board noted that the Net Advisory Rate for the Fund was not appreciably higher than the median rate of the Fund's Peer Group. The Board also noted that the Fund's administrator is not affiliated with Credit Suisse and that the Fund's administration agreement and corresponding fees were negotiated at arm's length. The Board concluded that the combined rates of investment advisory and administration fees for the Fund, considering the effective voluntary fee waivers, were consistent with the combined median rates of its Peer Group and lower than the combined median rates of its Expense Universe. The Board concluded that these factors supported the Advisory Agreement Rate and the Net Advisory Rate.

31

ADVISORY AGREEMENT APPROVAL DISCLOSURE (UNAUDITED) (CONTINUED)

The Board also reviewed the Sub-Advisory Agreement Rates charged by Credit Suisse U.K. and Analyst, which are payable by Credit Suisse and not by the Fund, and concluded that they were not excessive.

Profitability

The Board received and considered an estimated profitability analysis of Credit Suisse based on the Advisory Agreement Rate and the Net Advisory Rate and on revenues earned from other relationships between the Fund and Credit Suisse and its affiliates, including Credit Suisse U.K. The Board concluded that, in light of the costs of providing investment management and other services to the Fund, the profits and other ancillary benefits that Credit Suisse and its affiliates derived from providing these services to the Fund were not excessive.

The Board received and considered a profit statement from Analyst for the Fund based on its Sub-Advisory Agreement Rate. The Board observed the costs of providing portfolio management and other services to the Fund. The Board also noted that the sub-advisory fees are paid to Analyst by Credit Suisse and not directly by the Fund, and were negotiated at arm's length. Based on these factors, the Board concluded that the profits and other ancillary benefits that Analyst and its affiliates received with regard to providing these services to the Fund were not excessive.

Economies of Scale

The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Fund, whether the Fund has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale.

The Board observed that the Advisory Agreements do not offer breakpoints, but considered the diminished opportunity to achieve economies of scale in the context of closed-end funds.

Information about Services to Other Clients

The Board considered information about the nature and extent of services and fee rates offered by Credit Suisse to other clients, including other registered investment companies, separate accounts and institutional investors and investment companies to which Credit Suisse serves as an unaffiliated sub-adviser. The Board also received and considered information about the nature and extent of services offered, and general information about the fees charged, by Credit Suisse U.K. to other clients. The Board concluded that the Advisory Agreement Rate and Sub-Advisory Agreement Rate for Credit Suisse U.K. were not excessive given the nature and extent of services offered and comparison with rates charged to other clients. The Board did not receive comparative fee rate materials for Analyst, but concluded that the Sub-Advisory Agreement Rate for Analyst was not excessive based on other considerations, including the performance of the Fund as sub-a dvised by Analyst. The Board also considered that sub-advisory fees are paid to Analyst by Credit Suisse and not the Fund, and such fees were negotiated at arm's length.

32

ADVISORY AGREEMENT APPROVAL DISCLOSURE (UNAUDITED) (CONTINUED)

Other Benefits to Credit Suisse and the Sub-Advisers

The Board also considered information regarding potential "fall-out" or ancillary benefits received by Credit Suisse, the Sub-Advisers and their respective affiliates as a result of their relationship with the Fund. In particular, the Board considered that Credit Suisse and the Sub-Advisers may gain certain reputational benefits from managing the Fund.

Other Factors and Broader Review

As discussed above, the Board reviews detailed materials received from Credit Suisse and the Sub-Advisers as part of the annual re-approval process. The Board also reviews and assesses the quality of the services that the Fund receives throughout the year. In this regard, the Board reviews reports of Credit Suisse and the Sub-Advisers at least quarterly, which include, among other things, detailed portfolio and market reviews and detailed fund performance reports.

After considering the above-described factors and based on the deliberations and its evaluation of the information provided to it, the Board concluded that re-approval of the Advisory Agreements for the Fund was in the best interest of the Fund and its shareholders. Accordingly, the Board members unanimously re-approved the Advisory Agreements.

33

PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)

Information regarding how the Fund voted proxies related to its portfolio securities during the 12-month period ended June 30, of each year, as well as the policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities are available:

•  By calling 1-800-293-1232;

•  On the Fund's website, www.credit-suisse.com/us

•  On the website of the Securities and Exchange Commission, www.sec.gov.

The Fund files a complete schedule of its portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling 1-202-551-8090.

34

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (UNAUDITED)

The First Israel Fund, Inc. (the "Fund") offers a Dividend Reinvestment and Cash Purchase Plan (the "Plan") to its common stockholders. The Plan offers common stockholders a prompt and simple way to reinvest net investment income dividends and capital gains and other periodic distributions in shares of the Fund's common stock. Computershare Trust Company, N.A. ("Computershare") acts as Plan Agent for stockholders in administering the Plan.

Participation in the Plan is voluntary. In order to participate in the Plan, you must be a registered holder of at least one share of stock of the Fund. If you are a beneficial owner of the Fund having your shares registered in the name of a bank, broker or other nominee, you must first make arrangements with the organization in whose name your shares are registered to have the shares transferred into your own name. Registered shareholders can join the Plan via the Internet by going to www.computershare.com, authenticating your online account, agreeing to the Terms and Conditions of online "Account Access" and completing an online Plan Enrollment Form. Alternatively, you can complete the Plan Enrollment Form and return it to Computershare at the address below.

By participating in the Plan, your dividends and distributions will be promptly paid to you in additional shares of common stock of the Fund. The number of shares to be issued to you will be determined by dividing the total amount of the distribution payable to you by the greater of (i) the net asset value per share ("NAV") of the Fund's common stock on the payment date, or (ii) 95% of the market price per share of the Fund's common stock on the payment date. If the NAV of the Fund's common stock is greater than the market price (plus estimated brokerage commissions) on the payment date, then Computershare (or a broker-dealer selected by Computershare) shall endeavor to apply the amount of such distribution on your shares to purchase shares of Fund common stock in the open market.

You should be aware that all net investment income dividends and capital gain distributions are taxable to you as ordinary income and capital gain, respectively, whether received in cash or reinvested in additional shares of the Fund's common stock.

The Plan also permits participants to purchase shares of the Fund through Computershare. You may invest $100 or more monthly, with a maximum of $100,000 in any annual period. Computershare will purchase shares for you on the open market on the 25th of each month or the next trading day if the 25th is not a trading day.

There is no service fee payable by Plan participants for dividend reinvestment. For voluntary cash payments, Plan participants must pay a service fee of $5.00 per transaction. Plan participants will also be charged a pro rata share of the brokerage commissions for all open market purchases ($0.03 per share as of October 2006). Participants will also be charged a service fee of $5.00 for each sale and brokerage commissions of $0.03 per share (as of October 2006).

You may terminate your participation in the Plan at any time by requesting a certificate or a sale of your shares held in the Plan. Your withdrawal will be effective immediately if your notice is received by Computershare prior to any dividend or distribution record date; otherwise, such termination will be effective only with respect to any subsequent dividend or distribution. Your dividend participation option will remain the same unless you withdraw all of your whole and fractional Plan shares, in which case your participation in the Plan will be terminated and you will receive subsequent dividends and capital gains distributions in cash instead of shares.

35

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (UNAUDITED) (CONTINUED)

If you want further information about the Plan, including a brochure describing the Plan in greater detail, please contact Computershare as follows:

By Internet:	www.computershare.com
By phone:	(800) 730-6001 (U.S. and Canada) (781) 575-3100 (Outside U.S. and Canada) Customer service associates are available from 9:00 a.m. to 5:00 p.m. Eastern time, Monday through Friday
By mail:	The First Israel Fund, Inc. c/o Computershare P.O. Box 43078 Providence, Rhode Island 02940-3078 All notices, correspondence, questions or other communications sent by mail should be sent by registered or certified mail, return receipt requested.

The Plan may be terminated by the Fund or Computershare upon notice in writing mailed to each participant at least 30 days prior to any record date for the payment of any dividend or distribution.

36

FUNDS MANAGED BY CREDIT SUISSE ASSET MANAGEMENT, LLC

CLOSED-END FUNDS

Single Country
The Chile Fund, Inc. (AMEX: CH)
The First Israel Fund, Inc. (AMEX: ISL)
The Indonesia Fund, Inc. (AMEX: IF)

Multiple Country
The Emerging Markets Telecommunications Fund, Inc. (AMEX: ETF)
The Latin America Equity Fund, Inc. (AMEX: LAQ)

Fixed Income
Credit Suisse Asset Management Income Fund, Inc. (AMEX: CIK)
Credit Suisse High Yield Bond Fund (AMEX: DHY)

Literature Request—Call today for free descriptive information on the closed-end funds listed above at 800-293-1232 or visit our website at www.credit-suisse.com/us.

OPEN-END FUNDS

Credit Suisse Commodity Return Strategy Fund

Credit Suisse Global Fixed Income Fund

Credit Suisse Global Small Cap Fund

Credit Suisse High Income Fund

Credit Suisse International Focus Fund

Credit Suisse Large Cap Blend Fund

Credit Suisse Large Cap Growth Fund

Credit Suisse Large Cap Value Fund

Credit Suisse Mid-Cap Core Fund

Credit Suisse Small Cap Core Fund

Fund shares are not deposits or other obligations of Credit Suisse Asset Management, LLC or any affiliate, are not FDIC-insured and are not guaranteed by Credit Suisse Asset Management, LLC or any affiliate. Fund investments are subject to investment risks, including loss of your investment. There are special risk considerations associated with international, global, emerging-market, small-company, private equity, high-yield debt, single-industry, single-country and other special, aggressive or concentrated investment strategies. Past performance cannot guarantee future results.

More complete information about a fund, including charges and expenses, is provided in the Prospectus, which should be read carefully before investing. You may obtain copies by calling Credit Suisse Funds at 800-927-2874. Performance information current to the most recent month-end is available at www.credit-suisse.com/us.

Credit Suisse Asset Management Securities, Inc., Distributor.

37

DIRECTORS AND CORPORATE OFFICERS

Enrique R. Arzac   Chairman of the Board of Directors

James J. Cattano   Director

Lawrence J. Fox   Director

Steven N. Rappaport   Director

George R. Hornig   Chief Executive Officer and President

Neil Gregson   Chief Investment Officer

J. Kevin Gao   Chief Legal Officer, Senior Vice President and Secretary

Emidio Morizio   Chief Compliance Officer

Michael A. Pignataro   Chief Financial Officer

Cecilia Chau   Treasurer

INVESTMENT ADVISER

Credit Suisse Asset Management, LLC
Eleven Madison Avenue
New York, NY 10010

INVESTMENT SUB-ADVISER

Credit Suisse Asset Management Limited
One Cabot Square
London, E14 4QJ

INVESTMENT SUB-ADVISER

Analyst Exchange and Trading Services Ltd.
46 Rothchild Boulevard
Tel Aviv, 66883 Israel

ADMINISTRATOR & CUSTODIAN

Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109

SHAREHOLDER SERVICING AGENT

Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940

INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

PricewaterhouseCoopers LLP
100 East Pratt Street
Baltimore, MD 21202

LEGAL COUNSEL

Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019

ISL-AR-1208

This report, including the financial statements herein, is sent to the shareholders of the Fund for their information. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.

Item 2. Code of Ethics.

The registrant has adopted a code of ethics applicable to its Chief Executive Officer, President, Chief Financial Officer and Chief Accounting Officer, or persons performing similar functions. A copy of the code is filed as Exhibit 12(a)(1) to this Form. There were no amendments to the code during the fiscal year ended December 31, 2008. There were no waivers or implicit waivers from the code granted by the registrant during the fiscal year ended December 31, 2008.

Item 3. Audit Committee Financial Expert.

The registrant’s governing board has determined that it has two audit committee financial experts serving on its audit committee: Enrique R. Arzac and Steven N. Rappaport.  Each audit committee financial expert is “independent” for purposes of this item.

Item 4. Principal Accountant Fees and Services.

(a) through (d). The information in the table below is provided for services rendered to the registrant by its independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), for its fiscal years ended December 31, 2007 and December 31, 2008.

	2007		2008
Audit Fees	$	51,700	$	52,730
Audit-Related Fees(1)	$	12,790	$	13,040
Tax Fees(2)	$	8,345	$	5,000
All Other Fees	—		—
Total	$	72,835	$	70,770

(1) Services include agreed-upon procedures in connection with the registrant’s semi-annual financial statements ($3,340 in 2007 and $3,400 in 2008), and an attestation on the Fund’s compliance with an Israeli Tax Ruling ($9,450 in 2007 and $9,640 in 2008).

(2) Tax services in connection with the registrant’s excise tax calculations and review of the registrant’s applicable tax returns.

The information in the table below is provided with respect to non-audit services that directly relate to the registrant’s operations and financial reporting and that were rendered by PwC to the registrant’s investment adviser, Credit Suisse Asset Management, LLC (“Credit Suisse”), and any service provider to the registrant controlling, controlled by or under common control with Credit Suisse that provided ongoing services to the registrant (“Covered Services Provider”), for the registrant’s fiscal years ended December 31, 2007 and December 31, 2008.

2

	2007	2008
Audit-Related Fees	N/A	N/A
Tax Fees	N/A	N/A
All Other Fees	N/A	N/A
Total	N/A	N/A

(e)(1) Pre-Approval Policies and Procedures.  The Audit Committee (“Committee”) of the registrant is responsible for pre-approving (i) all audit and permissible non-audit services to be provided by the independent registered public accounting firm to the registrant and (ii) all permissible non-audit services to be provided by the independent registered public accounting firm to Credit Suisse and any Covered Services Provider if the engagement relates directly to the operations and financial reporting of the registrant.  The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to the Chairperson of the Committee, and the Chairperson shall report to the Committee, at its next regularly scheduled meeting after the Chairperson’s pre-approval of such services, his or her decision(s).  The Committee may also establish detailed pre-approval policies and procedures for pre-approval of such services in accordance with applicable laws, including the delegation of some or all of the Committee’s pre-approval responsibilities to other persons (other than Credit Suisse or the registrant’s officers).  Pre-approval by the Committee of any permissible non-audit services shall not be required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the registrant, Credit Suisse and any Covered Services Provider constitutes not more than 5% of the total amount of revenues paid by the registrant to its independent registered public accounting firm during the fiscal year in which the permissible non-audit services are provided; (ii) the permissible non-audit services were not recognized by the registrant at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.

(e)(2) The information in the table below sets forth the percentages of fees for services (other than audit, review or attest services) rendered by PwC to the registrant for which the pre-approval requirement was waived pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X:

	2007	2008
Audit-Related Fees	N/A	N/A
Tax Fees	N/A	N/A
All Other Fees	N/A	N/A
Total	N/A	N/A

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The information in the table below sets forth the percentages of fees for services (other than audit, review or attest services) rendered by PwC to Credit Suisse and any Covered Services Provider required to be approved pursuant to Rule 2-01(c)(7)(ii)of Regulation S-X, for the registrant’s fiscal years ended December 31, 2007 and December 31, 2008:

	2007	2008
Audit-Related Fees	N/A	N/A
Tax Fees	N/A	N/A
All Other Fees	N/A	N/A
Total	N/A	N/A

(f) Not Applicable.

(g) The aggregate fees billed by PwC for non-audit services rendered to the registrant, Credit Suisse and Covered Service Providers for the fiscal years ended December 31, 2007 and December 31, 2008 were $21,135and $18,040, respectively.

(h) Not Applicable.

Item 5. Audit Committee of Listed Registrants.

The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended.  The members of the committee are Enrique R. Arzac, James Cattano, Lawrence Fox and Steven N. Rappaport.

Item 6. Schedule of Investments.

Included as part of the report to shareholders filed under Item 1 of this Form.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

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CREDIT SUISSE ASSET MANAGEMENT, LLC

CREDIT SUISSE FUNDS

CREDIT SUISSE INSTITUTIONAL FUNDS

CREDIT SUISSE CLOSED-END FUNDS

PROXY VOTING POLICY AND PROCEDURES

Introduction

Credit Suisse Asset Management, LLC (“Credit Suisse”) is a fiduciary that owes each of its clients duties of care and loyalty with respect to proxy voting.  The duty of care requires Credit Suisse to monitor corporate events and to vote proxies.  To satisfy its duty of loyalty, Credit Suisse must cast proxy votes in the best interests of each of its clients.

The Credit Suisse Funds, Credit Suisse Institutional Funds, and Credit Suisse Closed-End Funds (the “Funds”), which have engaged Credit Suisse Asset Management, LLC as their investment adviser, are of the belief that the proxy voting process is a means of addressing corporate governance issues and encouraging corporate actions both of which can enhance shareholder value.

Policy

The Proxy Voting Policy (the “Policy”) set forth below is designed to ensure that proxies are voted in the best interests of Credit Suisse’s clients.  The Policy addresses particular issues and gives a general indication of how Credit Suisse will vote proxies.  The Policy is not exhaustive and does not include all potential issues.

Proxy Voting Committee

The Proxy Voting Committee will consist of a member of the Portfolio Management Department, a member of the Legal and Compliance Department, and a member of the Operations Department (or their designees).  The purpose of the Proxy Voting Committee is to administer the voting of all clients’ proxies in accordance with the Policy.  The Proxy Voting Committee will review the Policy annually to ensure that it is designed to promote the best interests of Credit Suisse’s clients.

For the reasons disclosed below under “Conflicts,” the Proxy Voting Committee has engaged the services of an independent third party (initially, Risk Metrics Group’s ISS Governance Services Unit (“ISS”)) to assist in issue analysis and vote recommendation for proxy proposals.  Proxy proposals addressed by the Policy will be voted in accordance with the Policy.  Proxy proposals

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addressed by the Policy that require a case-by-case analysis will be voted in accordance with the vote recommendation of ISS.  Proxy proposals not addressed by the Policy will also be voted in accordance with the vote recommendation of ISS.  To the extent that the Proxy Voting Committee proposes to deviate from the Policy or the ISS vote recommendation, the Committee shall obtain client consent as described below.

Credit Suisse investment professionals may submit a written recommendation to the Proxy Voting Committee to vote in a manner inconsistent with the Policy and/or the recommendation of ISS.  Such recommendation will set forth its basis and rationale.  In addition, the investment professional must confirm in writing that he/she is not aware of any conflicts of interest concerning the proxy matter or provide a full and complete description of the conflict.

Conflicts

Credit Suisse is part of the asset management business of Credit Suisse one of the world’s leading banks.  As part of a global, full service investment-bank, broker-dealer, and asset-management organization, Credit Suisse and its affiliates and personnel may have multiple advisory, transactional, financial, and other interests in securities, instruments, and companies that may be purchased or sold by Credit Suisse for its clients’ accounts.  The interests of Credit Suisse and/or its affiliates and personnel may conflict with the interests of Credit Suisse’s clients in connection with any proxy issue.  In addition, Credit Suisse may not be able to identify all of the conflicts of interest relating to any proxy matter.

Consent

In each and every instance in which the Proxy Voting Committee favors voting in a manner that is inconsistent with the Policy or the vote recommendation of ISS (including proxy proposals addressed and not addressed by the Policy), it shall disclose to the client conflicts of interest information and obtain client consent to vote.  Where the client is a Fund, disclosure shall be made to any one director who is not an “interested person,” as that term is defined under the Investment Company Act of 1940, as amended, of the Fund.

Recordkeeping

Credit Suisse is required to maintain in an easily accessible place for six years all records relating to proxy voting.

These records include the following:

·a copy of the Policy;

·a copy of each proxy statement received on behalf of Credit Suisse clients;

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·a record of each vote cast on behalf of Credit Suisse clients;

·a copy of all documents created by Credit Suisse personnel that were material to making a decision on a vote or that memorializes the basis for the decision; and

·a copy of each written request by a client for information on how Credit Suisse voted proxies, as well as a copy of any written response.

Credit Suisse reserves the right to maintain certain required proxy records with ISS in accordance with all applicable regulations.

Disclosure

Credit Suisse will describe the Policy to each client.  Upon request, Credit Suisse will provide any client with a copy of the Policy.  Credit Suisse will also disclose to its clients how they can obtain information on their proxy votes.

ISS will capture data necessary for Funds to file Form N-PX on an annual basis concerning their proxy voting record in accordance with applicable law.

Procedures

The Proxy Voting Committee will administer the voting of all client proxies. Credit Suisse has engaged ISS as an independent third party proxy voting service to assist in the voting of client proxies.  ISS will coordinate with each client’s custodian to ensure that proxy materials reviewed by the custodians are processed in a timely fashion.  ISS will provide Credit Suisse with an analysis of proxy issues and a vote recommendation for proxy proposals.  ISS will refer proxies to the Proxy Voting Committee for instructions when the application of the Policy is not clear.  The Proxy Voting Committee will notify ISS of any changes to the Policy or deviating thereof.

PROXY VOTING POLICY

Operational Items

Adjourn Meeting

Proposals to provide management with the authority to adjourn an annual or special meeting will be determined on a case-by-case basis.

Amend Quorum Requirements

Proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding will be determined on a case-by-case basis.

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Amend Minor Bylaws

Generally vote for bylaw or charter changes that are of a housekeeping nature.

Change Date, Time, or Location of Annual Meeting

Generally vote for management proposals to change the date/time/location of the annual meeting unless the proposed change is unreasonable.  Generally vote against shareholder proposals to change the date/time/location of the annual meeting unless the current scheduling or location is unreasonable.

Ratify Auditors

Generally vote for proposals to ratify auditors unless: (1) an auditor has a financial interest in or association with the company, and is therefore not independent; (2) fees for non-audit services are excessive, or (3) there is reason to believe that the independent auditor has rendered an opinion, which is neither accurate nor indicative of the company’s financial position.  Generally vote on a case-by-case basis on shareholder proposals asking companies to prohibit their auditors from engaging in non-audit services (or capping the level of non-audit services).  Generally vote on a case-by-case basis on auditor rotation proposals taking into consideration: (1) tenure of audit firm; (2) establishment and disclosure of a renewal process whereby the auditor is regularly evaluated for both audit quality and competitive price; (3) length of the rotation period advocated in the proposal, and (4) significant audit related issues.

Board of Directors

Voting on Director Nominees in Uncontested Elections

Generally votes on director nominees on a case-by-case basis.  Votes may be withheld: (1) from directors who attended less than 75% of the board and committee meetings without a valid reason for the absences; (2) implemented or renewed a dead-hand poison pill; (3) ignored a shareholder proposal that was approved by a majority of the votes cast for two consecutive years; (4) ignored a shareholder proposal approved by a majority of the shares outstanding; (5) have failed to act on takeover offers where the majority of the shareholders have tendered their shares; (6) are inside directors or affiliated outside directors and sit on the audit, compensation, or nominating committee; (7) are inside directors or affiliated outside directors and the full board serves as the audit, compensation, or nominating committee or the company does not have one of these committees; or (8) are audit committee members and the non-audit fees paid to the auditor are excessive

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Cumulative Voting

Proposals to eliminate cumulative voting will be determined on a case-by-case basis. Proposals to restore or provide for cumulative voting in the absence of sufficient good governance provisions and/or poor relative shareholder returns will be determined on a case-by-case basis.

Director and Officer Indemnification and Liability Protection

Proposals on director and officer indemnification and liability protection generally evaluated on a case-by-case basis.  Generally vote against proposals that would: (1) eliminate entirely directors’ and officers’ liability for monetary damages for violating the duty of care; or (2) expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness.  Generally vote for only those proposals providing such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if: (1) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and (2) only if the director’s legal expenses would be covered.

Filling Vacancies/Removal of Directors

Generally vote against proposals that provide that directors may be removed only for cause.  Generally vote for proposals to restore shareholder ability to remove directors with or without cause.  Proposals that provide that only continuing directors may elect replacements to fill board vacancies will be determined on a case-by-case basis.  Generally vote for proposals that permit shareholders to elect directors to fill board vacancies.

Independent Chairman (Separate Chairman/CEO)

Generally vote for shareholder proposals requiring the position of chairman be filled by an independent director unless there are compelling reasons to recommend against the proposal, including: (1) designated lead director, elected by and from the independent board members with clearly delineated duties; (2) 2/3 independent board; (3) all independent key committees; or (4) established governance guidelines.

Majority of Independent Directors

Generally vote for shareholder proposals requiring that the board consist of a majority or substantial majority (two-thirds) of independent directors unless the board composition already meets the adequate threshold.  Generally vote for shareholder proposals requiring the board audit, compensation, and/or nominating committees be composed exclusively of independent directors if they currently do not meet that standard.  Generally withhold votes from insiders and affiliated outsiders sitting on the audit, compensation, or nominating committees.  Generally withhold votes from insiders and affiliated outsiders on boards that are

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lacking any of these three panels.  Generally withhold votes from insiders and affiliated outsiders on boards that are not at least majority independent.

Term Limits

Generally vote against shareholder proposals to limit the tenure of outside directors.

Proxy Contests

Voting on Director Nominees in Contested Elections

Votes in a contested election of directors should be decided on a case-by-case basis, with shareholders determining which directors are best suited to add value for shareholders.  The major decision factors are: (1) company performance relative to its peers; (2) strategy of the incumbents versus the dissidents; (3) independence of directors/nominees; (4) experience and skills of board candidates; (5) governance profile of the company; (6) evidence of management entrenchment; (7) responsiveness to shareholders; or (8) whether takeover offer has been rebuffed.

Amend Bylaws without Shareholder Consent

Proposals giving the board exclusive authority to amend the bylaws will be determined on a case-by-case basis.  Proposals giving the board the ability to amend the bylaws in addition to shareholders will be determined on a case-by-case basis.

Confidential Voting

Generally vote for shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election, as long as the proposal includes a provision for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy.  If the dissidents agree, the policy may remain in place.  If the dissidents will not agree, the confidential voting policy may be waived.  Generally vote for management proposals to adopt confidential voting.

Cumulative Voting

Proposals to eliminate cumulative voting will be determined on a case-by-case basis.  Proposals to restore or provide for cumulative voting in the absence of sufficient good governance provisions and/or poor relative shareholder returns will be determined on a case-by-case basis.

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Antitakeover Defenses and Voting Related Issues

Advance Notice Requirements for Shareholder Proposals/Nominations

Votes on advance notice proposals are determined on a case-by-case basis.

Amend Bylaws without Shareholder Consent

Proposals giving the board exclusive authority to amend the bylaws will be determined on a case-by-case basis.  Generally vote for proposals giving the board the ability to amend the bylaws in addition to shareholders.

Poison Pills (Shareholder Rights Plans)

Generally vote for shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it.  Votes regarding management proposals to ratify a poison pill should be determined on a case-by-case basis.  Plans should embody the following attributes: (1) 20% or higher flip-in or flip-over; (2) two to three year sunset provision; (3) no dead-hand or no-hand features; or (4) shareholder redemption feature

Shareholders’ Ability to Act by Written Consent

Generally vote against proposals to restrict or prohibit shareholders’ ability to take action by written consent.  Generally vote for proposals to allow or make easier shareholder action by written consent.

Shareholders’ Ability to Call Special Meetings

Proposals to restrict or prohibit shareholders’ ability to call special meetings or that remove restrictions on the right of shareholders to act independently of management will be determined on a case-by-case basis.

Supermajority Vote Requirements

Proposals to require a supermajority shareholder vote will be determined on a case-by-case basis Proposals to lower supermajority vote requirements will be determined on a case-by-case basis.

Merger and Corporate Restructuring

Appraisal Rights

Generally vote for proposals to restore, or provide shareholders with, rights of appraisal.

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Asset Purchases

Generally vote case-by-case on asset purchase proposals, taking into account: (1) purchase price, including earnout and contingent payments; (2) fairness opinion; (3) financial and strategic benefits; (4) how the deal was negotiated; (5) conflicts of interest; (6) other alternatives for the business; or (7) noncompletion risk (company’s going concern prospects, possible bankruptcy).

Asset Sales

Votes on asset sales should be determined on a case-by-case basis after considering: (1) impact on the balance sheet/working capital; (2) potential elimination of diseconomies; (3) anticipated financial and operating benefits; (4) anticipated use of funds; (5) value received for the asset; fairness opinion (if any); (6) how the deal was negotiated; or (6) Conflicts of interest

Conversion of Securities

Votes on proposals regarding conversion of securities are determined on a case-by-case basis. When evaluating these proposals, should review (1) dilution to existing shareholders’ position; (2) conversion price relative to market value; (3) financial issues: company’s financial situation and degree of need for capital; effect of the transaction on the company’s cost of capital; (4) control issues: change in management; change in control; standstill provisions and voting agreements; guaranteed contractual board and committee seats for investor; veto power over certain corporate actions; (5) termination penalties; (6) conflict of interest: arm’s length transactions, managerial incentives.  Generally vote for the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved.

Corporate Reorganization

Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders’ position; (2) terms of the offer; (3) financial issues; (4) management’s efforts to pursue other alternatives; (5) control issues; (6) conflict of interest.  Generally vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.

Reverse Leveraged Buyouts

Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders’ position; (2) terms of the offer; (3) financial issues; (4) management’s efforts to pursue other alternatives; (5) control issues; (6) conflict of interest.  Generally vote

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for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.

Formation of Holding Company

Votes on proposals regarding the formation of a holding company should be determined on a case-by-case basis taking into consideration: (1) the reasons for the change; (2) any financial or tax benefits; (3) regulatory benefits; (4) increases in capital structure; (5) changes to the articles of incorporation or bylaws of the company.  Absent compelling financial reasons to recommend the transaction, generally vote against the formation of a holding company if the transaction would include either of the following: (1) increases in common or preferred stock in excess of the allowable maximum as calculated a model capital structure; (2) adverse changes in shareholder rights; (3) going private transactions; (4) votes going private transactions on a case-by-case basis, taking into account: (a) offer price/premium; (b) fairness opinion; (c) how the deal was negotiated; (d) conflicts of interest; (e) other alternatives/offers considered; (f) noncompletion risk.

Joint Ventures

Vote on a case-by-case basis on proposals to form joint ventures, taking into account: (1) percentage of assets/business contributed; (2) percentage ownership; (3) financial and strategic benefits; (4) governance structure; (5) conflicts of interest; (6) other alternatives; (7) noncompletion risk; (8) liquidations.  Votes on liquidations should be determined on a case-by-case basis after reviewing: (1) management’s efforts to pursue other alternatives such as mergers; (2) appraisal value of the assets (including any fairness opinions); (3) compensation plan for executives managing the liquidation.  Generally vote for the liquidation if the company will file for bankruptcy if the proposal is not approved.

Mergers and Acquisitions

Votes on mergers and acquisitions should be considered on a case-by-case basis, determining whether the transaction enhances shareholder value by giving consideration to: (1) prospects of the combined companies; (2) anticipated financial and operating benefits; (3) offer price; (4) fairness opinion; (5) how the deal was negotiated; (6) changes in corporate governance and their impact on shareholder rights; (7) change in the capital structure; (8) conflicts of interest.

Private Placements

Votes on proposals regarding private placements should be determined on a case-by-case basis. When evaluating these proposals, should review: (1) dilution to existing shareholders’ position; (2) terms of the offer; (3) financial issues; (4) management’s efforts to pursue alternatives such as mergers; (5) control issues; (6) conflict of interest.  Generally vote for the

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private placement if it is expected that the company will file for bankruptcy if the transaction is not approved.

Prepackaged Bankruptcy Plans

Votes on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan are determined on a case-by-case basis, after evaluating: (1) dilution to existing shareholders’ position; (2) terms of the offer; (3) financial issues; (4) management’s efforts to pursue other alternatives; (5) control issues; (6) conflict of interest.  Generally vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.

Recapitalization

Votes case-by-case on recapitalizations (reclassifications of securities), taking into account: (1) more simplified capital structure; (2) enhanced liquidity; (3) fairness of conversion terms, including fairness opinion; (4) impact on voting power and dividends; (5) reasons for the reclassification; (6) conflicts of interest; (7) other alternatives considered.

Reverse Stock Splits

Generally vote for management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced.  Generally vote for management proposals to implement a reverse stock split to avoid delisting.  Votes on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue should be determined on a case-by-case basis.

Spinoffs

Votes on spinoffs should be considered on a case-by-case basis depending on: (1) tax and regulatory advantages; (2) planned use of the sale proceeds; (3) valuation of spinoff; fairness opinion; (3) benefits that the spinoff may have on the parent company including improved market focus; (4) conflicts of interest; managerial incentives; (5) any changes in corporate governance and their impact on shareholder rights; (6) change in the capital structure

Value Maximization Proposals

Vote case-by-case on shareholder proposals seeking to maximize shareholder value.

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Capital Structure

Adjustments to Par Value of Common Stock

Generally vote for management proposals to reduce the par value of common stock unless the action is being taken to facilitate an antitakeover device or some other negative corporate governance action.  Generally vote for management proposals to eliminate par value.

Common Stock Authorization

Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a case-by-case basis.  Generally vote against proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.  Generally vote for proposals to approve increases beyond the allowable increase when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.

Dual-class Stock

Generally vote against proposals to create a new class of common stock with superior voting rights.  Generally vote for proposals to create a new class of nonvoting or subvoting common stock if: (1) it is intended for financing purposes with minimal or no dilution to current shareholders; (2) it is not designed to preserve the voting power of an insider or significant shareholder.

Issue Stock for Use with Rights Plan

Generally vote against proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan.

Preemptive Rights

Votes regarding shareholder proposals seeking preemptive rights should be determined on a case-by-case basis after evaluating: (1) the size of the company; (2) the shareholder base; (3) the liquidity of the stock

Preferred Stock

Generally vote against proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (“blank check” preferred stock).  Generally vote for proposals to create “declawed” blank check preferred stock (stock that cannot be used as a takeover defense).  Generally vote for proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.  Generally vote against proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose.  Generally vote case-by-case on proposals to increase the number of blank check

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preferred shares after analyzing the number of preferred shares available for issue given a company’s industry and performance in terms of shareholder returns.

Recapitalization

Vote case-by-case on recapitalizations (reclassifications of securities), taking into account: (1) more simplified capital structure; (2) enhanced liquidity; (3) fairness of conversion terms, including fairness opinion; (4) impact on voting power and dividends; (5) reasons for the reclassification; (6) conflicts of interest; (7) other alternatives considered.

Reverse Stock Splits

Generally vote for management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced.  Generally vote for management proposals to implement a reverse stock split to avoid delisting.  Votes on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue should be determined on a case-by-case basis.

Share Repurchase Programs

Generally vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.

Stock Distributions: Splits and Dividends

Generally vote for management proposals to increase the common share authorization for a stock split or share dividend, provided that the increase in authorized shares would not result in an excessive number of shares available for issuance.

Tracking Stock

Votes on the creation of tracking stock are determined on a case-by-case basis, weighing the strategic value of the transaction against such factors as: (1) adverse governance changes; (2) excessive increases in authorized capital stock; (3) unfair method of distribution; (4) diminution of voting rights; (5) adverse conversion features; (6) negative impact on stock option plans; (7) other alternatives such as a spinoff.

Executive and Director Compensation

Executive and Director Compensation

Votes on compensation plans for directors are determined on a case-by-case basis.

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Stock Plans in Lieu of Cash

Votes for plans which provide participants with the option of taking all or a portion of their cash compensation in the form of stock are determined on a case-by-case basis.  Generally vote for plans which provide a dollar-for-dollar cash for stock exchange.  Votes for plans which do not provide a dollar-for-dollar cash for stock exchange should be determined on a case-by-case basis.

Director Retirement Plans

Generally vote against retirement plans for nonemployee directors.  Generally vote for shareholder proposals to eliminate retirement plans for nonemployee directors.

Management Proposals Seeking Approval to Reprice Options

Votes on management proposals seeking approval to reprice options are evaluated on a case-by-case basis giving consideration to the following: (1) historic trading patterns; (2) rationale for the repricing; (3) value-for-value exchange; (4) option vesting; (5) term of the option; (6) exercise price; (7) participants; (8) employee stock purchase plans.  Votes on employee stock purchase plans should be determined on a case-by-case basis.  Generally vote for employee stock purchase plans where: (1) purchase price is at least 85 percent of fair market value; (2) offering period is 27 months or less, and (3) potential voting power dilution (VPD) is ten percent or less.  Generally vote against employee stock purchase plans where either: (1) purchase price is less than 85 percent of fair market value; (2) Offering period is greater than 27 months, or (3) VPD is greater than ten percent

Incentive Bonus Plans and Tax Deductibility Proposals

Generally vote for proposals that simply amend shareholder-approved compensation plans to include administrative features or place a cap on the annual grants any one participant may receive.  Generally vote for proposals to add performance goals to existing compensation plans.  Votes to amend existing plans to increase shares reserved and to qualify for favorable tax treatment considered on a case-by-case basis.  Generally vote for cash or cash and stock bonus plans that are submitted to shareholders for the purpose of exempting compensation from taxes if no increase in shares is requested.

Employee Stock Ownership Plans (ESOPs)

Generally vote for proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares.)

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401(k) Employee Benefit Plans

Generally vote for proposals to implement a 401(k) savings plan for employees.

Shareholder Proposals Regarding Executive and Director Pay

Generally vote for shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders’ needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company.  Generally vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation.  Generally vote against shareholder proposals requiring director fees be paid in stock only.  Generally vote for shareholder proposals to put option repricings to a shareholder vote.  Vote for shareholders proposals to exclude pension fund income in the calculation of earnings used in determining executive bonuses/compensation.  Vote on a case-by-case basis for all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.

Performance-Based Option Proposals

Generally vote for shareholder proposals advocating the use of performance-based equity awards (indexed, premium-priced, and performance-vested options), unless: (1) the proposal is overly restrictive; or (2) the company demonstrates that it is using a substantial portion of performance-based awards for its top executives.

Stock Option Expensing

Generally vote for shareholder proposals asking the company to expense stock options unless the company has already publicly committed to start expensing by a specific date.

Golden and Tin Parachutes

Generally vote for shareholder proposals to require golden and tin parachutes to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts.  Vote on a case-by-case basis on proposals to ratify or cancel golden or tin parachutes.

May 14, 2008

Item 8.  Portfolio Managers of Closed-End Management Investment Companies.

Information pertaining to the Chief Investment Officer of The First Israel Fund, Inc., as of December 31, 2008, is set forth below.

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Neil Gregson
Chief Investment Officer Since 2005

Year of Birth: 1962 Managing Director of Credit Suisse Asset Management Limited (“CSAML”); Associated with CSAML since 1990; Officer of other Credit Suisse Funds

Registered Investment Companies, Pooled Investment Vehicles and Other Accounts Managed

As reported to the Registrant, the information in the following table reflects the number of registered investment companies, pooled investment vehicles and other accounts managed by Mr. Gregson and the total assets managed within each category as of December 31, 2008.

	Registered Investment Companies		Other Pooled Investment Vehicles		Other Accounts
Neil Gregson	6	$499 million	7	$994 million	0	N/A

No advisory fee is paid based on performance for any of the accounts listed above.

Potential Conflicts of Interest

It is possible that conflicts of interest may arise in connection with the portfolio managers’ management of the Portfolio’s investments on the one hand and the investments of other accounts on the other. For example, the portfolio managers may have conflicts of interest in allocating management time, resources and investment opportunities among the Portfolio and other accounts they advise. In addition due to differences in the investment strategies or restrictions between the Portfolio and the other accounts, the portfolio managers may take action with respect to another account that differs from the action taken with respect to the Portfolio.  Credit Suisse has adopted policies and procedures that are designed to minimize the effects of these conflicts.

If Credit Suisse believes that the purchase or sale of a security is in the best interest of more than one client, it may (but is not obligated to) aggregate the orders to be sold or purchased to seek favorable execution or lower brokerage commissions, to the extent permitted by applicable laws and regulations.  Credit Suisse may aggregate orders if all participating client accounts benefit equally (i.e., all receive an average price of the aggregated orders). In the event Credit Suisse aggregates an order for participating accounts, the method of allocation will generally be determined prior to the trade execution. Although no specific method of allocation of transactions (as well as expenses incurred in the transactions) is expected to be used, allocations will be designed to ensure that over time all clients receive fair treatment consistent with Credit Suisse’s fiduciary duty to its clients (including its duty to seek to obtain best execution of client trades). The accounts aggregated may include registered and unregistered investment companies managed by Credit Suisse’s affiliates and

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accounts in which Credit Suisse’s officers, directors, agents, employees or affiliates own interests. Applicant may not be able to aggregate securities transactions for clients who direct the use of a particular broker-dealer, and the client also may not benefit from any improved execution or lower commissions that may be available for such transactions.

Compensation

Credit Suisse’s compensation to the Mr. Gregson includes both a fixed base salary component and a bonus component.  The bonus component is composed of two parts.  The first part of the bonus component is discretionary and generally is determined by considering various factors, such as the assets held in the Fund and other accounts managed by a portfolio manager, business growth, teamwork, management, corporate citizenship, etc.  The second part of the bonus generally is determined by the pre-tax investment performance of products, including the Fund, for which the portfolio manager is responsible (“Performance-Based Bonus”).  Credit Suisse considers both the short-term (generally one-year) and long-term (generally three-year) performance of a portfolio manager relative to selected benchmarks in determining the portfolio manager’s bonus.  The following table sets forth the benchmark used over a one-year period in determining each portfolio manager’s Performance-Based Bonus.

Portfolio Manager	Benchmark	Peer Group
Neil Gregson	FT Gold Mines Index MSCI Global Emerging Markets MSCI Weighted sub-sectors	Lipper Hindsight Global Emerging Markets Lipper Emerging Markets Fund Lipper Precious Metals

A portion of the bonus may be paid in phantom shares of Credit Suisse Group stock as deferred compensation.  Phantom shares are shares representing an unsecured right to receive on a particular date a specified number of registered shares subject to certain terms and conditions.  A portion of the bonus will receive the notional return of the fund(s) the portfolio manager manages and a portion of the bonus will receive the notional return of a basked of other Credit Suisse funds along the product line of the portfolio manager.

Like all employees of Credit Suisse, all portfolio managers participate in Credit Suisse’s profit sharing and 401(k) plans.

Securities Ownership.  As of December 31, 2008, Mr. Gregson did not own any shares of the registrant.

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Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

None.

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors since the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(g) of Schedule 14A in its definitive proxy statement dated March 3, 2008.

Item 11. Controls and Procedures.

(a) As of a date within 90 days from the filing date of this report, the principal executive officer and principal financial officer concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) were effective based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934.

(b) There were no changes in registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1)       Registrant’s Code of Ethics is an exhibit to this report.

(a)(2)       The certifications of the registrant as required by Rule 30a-2(a) under the Act are exhibits to this report.

(a)(3)       Not applicable.

(b)           The certifications of the registrant as required by Rule 30a-2(b) under the Act are an exhibit to this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE FIRST ISRAEL FUND, INC.

/s/ George R. Hornig

Name: George R. Hornig

Title: Chief Executive Officer

Date: March 6, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ George R. Hornig

Name: George R. Hornig

Title: Chief Executive Officer

Date: March 6, 2009

/s/ Michael A. Pignataro

Name: Michael A. Pignataro

Title: Chief Financial Officer

Date: March 6, 2009