<Page>
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 No. 811-06120
------------------------------------------------
THE FIRST ISRAEL FUND, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue, New York, New York 10017-3140
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
J. Kevin Gao, Esq.
The First Israel Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3140
Registrant's telephone number, including area code: (212) 875-3500
Date of fiscal year end: September 30
Date of reporting period: October 1, 2004 to March 31, 2005
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
<Page>
THE FIRST ISRAEL FUND, INC.
SEMI-ANNUAL REPORT
MARCH 31, 2005
<Page>
CONTENTS
<Table>
Letter to Shareholders 1
Portfolio Summary 4
Schedule of Investments 5
Statement of Assets and Liabilities 8
Statement of Operations 9
Statement of Changes in Net Assets 10
Financial Highlights 12
Notes to Financial Statements 14
Results of Annual Meeting of Shareholders 20
Privacy Policy Notice 21
Description of InvestLink(SM) Program 22
Advisory Agreement Approval Disclosure 25
Proxy Policy and Portfolio Holdings Information 29
</Table>
<Page>
LETTER TO SHAREHOLDERS
May 3, 2005
DEAR SHAREHOLDER:
We are writing to report on the activities of The First Israel Fund, Inc. (the
"Fund") for the six months ended March 31, 2005.
At March 31, 2005, total net assets of the Fund were approximately $73.0
million. The Fund's investments in securities listed and trading on the Tel Aviv
Stock Exchange ("TASE") were $40.5 million, with another $17.4 million in
Israeli and Israeli-related companies listed and trading in the United States.
Combined, these totaled $57.9 million, as compared with $50.9 million on
September 30, 2004. The Fund also held investments valued at approximately $7.1
million in unlisted securities, as compared to approximately $6.6 million on
September 30, 2004. In percentage terms, at March 31, 2005, 89.1% of the Fund's
net assets were invested in Israeli and Israeli-related companies, of which
79.3% were listed and trading on the TASE and in the United States and 9.8% were
in unlisted securities.
At March 31, 2005, net asset value ("NAV") per share was $17.14, compared with
$14.27 on September 30, 2004. The Fund's common stock closed on the New York
Stock Exchange, Inc. (the "NYSE") on March 31, 2005 at $16.44 per share,
representing a discount of 4.08% to the Fund's NAV.
According to its charter, the Fund's investment objective is long-term capital
appreciation via investment primarily in equity securities of Israeli companies.
These securities may be listed on the TASE or elsewhere, notably the NYSE and
NASDAQ. Up to 30% of the Fund's total assets may be invested in illiquid
securities, including securities of private equity funds that invest primarily
in emerging markets.
PERFORMANCE
Based on NAV, the Fund had a gain of 20.11% for the six month period, compared
with increases of 22.23% and 22.17%, respectively, for the Morgan Stanley
Capital International Israel Index* (the "MSCI Index") and the Tel Aviv 100
Index**.
On an absolute basis the top performing components of the Fund during the period
were in the communications services, real estate, insurance and materials
sectors. Relative to the MSCI Index, the Fund's performance in the period was
buoyed by our overweight to the insurance, real estate and banking sectors.
More specifically, with respect to the private placement holdings, the
Israeli-focused technology venture capital funds declined in value overall
during the period, but at a significantly reduced rate from the previous six
months. Following a series of consecutive write-downs related to the difficult
market environment for technology and telecom providers, the most recent
six-month period saw more widespread stability in valuations along with
appreciation of select investments. Write-ups of these types of investments
typically lag recovery in the public markets, as these write-ups are generally
the result of a third-party financing round, an IPO or a sale of an investment,
while write-downs also reflect the manager's judgment with respect to any
impairment of value. In 2004 and into 2005, activity in Israel's high-tech
sector rebounded from the depressed levels of the prior three years.
Distributions in this period declined from the previous six months
(approximately $183,000 as compared to $376,000); however, we believe that this
reflects a traditional lag of distributions to realizations as the improving
technology sector, in combination with the maturation of the
1
<Page>
underlying portfolio companies, is beginning to drive a growing number of
liquidity events (strategic sales or sales in the public markets). We would hope
to see this trend continue and accelerate over the coming quarters. With this
improved environment, the investment pace of the Fund continues to accelerate,
with over $730,000 of capital calls made by Fund investments during the
semi-annual period (19.5% of unfunded commitments at the beginning of the
period).
THE MARKET
In our view, a distinct change in sentiment on the part of investors towards
Israel helped propel the robust performance of the Israeli market during the
period under review. We believe that this new optimism was generated by a number
of factors, both political and economic.
The death of Yasir Arafat in November and the early January elections to
establish new leadership for the Palestinian Authority opened the possibility of
renewed engagement between Israelis and Palestinians. In addition, economic
relations with Egypt improved with a mutual prison release and a new trade
agreement. Finally, the establishment of a national unity government involving
both Labor and Likud was also a positive factor in the period
After a strong climb in the fourth quarter of 2004, the Israeli stock market
took a brief pause as it entered 2005, oscillating through much of the first
quarter. But in our view this hiatus represented not so much a potential shift
in direction as a maturation of the growth story. In fact, we believe the
Israeli markets are now particularly attractive, with an accommodative policy
interest rate of 3.5%, inflation dropping to an annual rate of 0.8% and
unemployment reaching a low of 9.9%. In our view, many of these positive
developments in the economy may be traced to the free-market reform strategy
initiated by Finance Minister Benjamin Netanyahu. We believe these reforms have
helped accelerate GDP growth to 4.2% in 2004 from 1.3% in 2003.
THE PORTFOLIO
Strong performance in the banking, insurance, chemicals and computer security
sectors helped fuel the Fund's performance during the period. Specifically, the
announcement by a leading U.S.-based maker of generic medicines to acquire one
of our larger pharmaceutical holdings bolstered the Fund's returns, as shares of
our holding rose on takeover speculation. Strong performance in the Israeli
banking sector, led by increasing domestic growth, also contributed
significantly to our performance. In addition, due to a lack of new capacity and
improved pricing power, agrochemicals did well. Our exposure to several leading
Israeli chemical producers therefore helped buoy the portfolio. Those factors
that detracted from performance, in addition to the private placement holdings,
were the Fund's exposure to the health care equipment and retail sectors.
OUTLOOK
Looking forward, economic data suggests to us that while growth is expected to
slow in 2005, most fundamentals should remain positive, with an expansionist
monetary position, inflation well in control and an overall reduction in the
risk premium. However, we believe the key sources of growth will evolve: while
it was export strength that mainly contributed to GDP growth in 2004, 2005 may
be more of an internal story, with unemployment down, real wages rising and
increased consumer lending driving domestic growth. Regarding the investment
landscape, we believe that 2004 saw a
2
<Page>
general financial improvement across the board, with the rising tide lifting all
index-tracking boats. But we think top-line growth rates will moderate in 2005
and that selective stock-picking may be the only way to generate sustained
out-performance.
Within the portfolio, we expect no major changes in the Fund's strategy. Any
re-positioning will seek to capitalize on specific views within our growth
outlook. Therefore we are maintaining our overweight to the banking and
agrochemicals sectors, with increased private consumption and robust global
demand being two powerful positives for us in those markets.
Respectfully,
/s/ Neil Gregson
Neil Gregson
Chief Investment Officer***
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 INVESTMENT PORTFOLIO. 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 Morgan Stanley Capital International Israel Index is an unmanaged index
(with no defined investment objective) of Israeli equities that includes
reinvestment of dividends (net of taxes), and is the exclusive property of
Morgan Stanley Capital International Inc. Investors cannot invest directly in an
index.
** The Tel Aviv100 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,
LLC ("CSAM"), 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 CSAM 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. Mr.
Gregson is also the Chief Investment Officer of The Emerging Markets
Telecommunications Fund, Inc.
3
<Page>
THE FIRST ISRAEL FUND, INC.
PORTFOLIO SUMMARY - AS OF MARCH 31, 2005 (UNAUDITED)
[CHART]
SECTOR ALLOCATION
AS A PERCENT OF NET ASSETS
<Table>
<Caption>
MARCH 31, 2005 SEPTEMBER 30, 2004
- ---------------------------------------------------------------
Banking 10.63% 11.13%
Chemicals 7.41% 6.66%
Computer Data Security 5.60% 5.25%
Conglomerates 5.12% 5.48%
Financial Services 3.22% 2.96%
Industrial Technology 2.00% 1.92%
Insurance 7.60% 7.11%
Mortgage Banking 4.10% 4.33%
Pharmaceuticals 13.77% 18.13%
Telecommunications 6.63% 6.42%
Venture Capital 9.57% 10.72%
Other 13.44% 14.55%
Cash & Other Assets 10.91% 5.34%
</Table>
TOP 10 HOLDINGS, BY ISSUER
<Table>
<Caption>
PERCENT OF
HOLDING SECTOR NET ASSETS
- ---------------------------------------------------------------------------------------------------
1. Teva Pharmaceutical Industries Ltd. Pharmaceuticals 10.4
2. Harel Insurance Investments Ltd. Insurance 6.7
3. Bank Hapoalim Ltd. Banking 5.7
4. Check Point Software Technologies Ltd. Computer Data Security 5.6
5. Bezeq Israeli Telecommunication Corporation Ltd. Telecommunications 4.5
6. Israel Chemicals Ltd. Chemicals 4.4
7. Bank Leumi Le-Israel Ltd. Banking 3.9
8. Perrigo Co. Pharmaceuticals 3.2
9. Makhteshim-Agan Industries Ltd. Chemicals 3.0
10. Israel Discount Bank Ltd. Mortgage Banking 2.4
</Table>
4
<Page>
THE FIRST ISRAEL FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2005 (UNAUDITED)
<Table>
<Caption>
NO. OF
DESCRIPTION SHARES VALUE
- ------------------------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-89.09%
ISRAEL-86.87%
AEROSPACE/DEFENSE-EQUIPMENT-0.75%
Elbit Systems Ltd. 23,500 $ 546,096
--------------
BANKING-10.63%
Bank Hapoalim Ltd. 1,230,000 4,140,643
Bank Leumi Le-Israel Ltd. 1,027,500 2,877,118
United Mizrahi Bank Ltd. 160,000 746,257
--------------
7,764,018
--------------
BUILDING-HEAVY CONSTRUCTION-0.54%
Housing & Construction
Holdings Ltd.+ 525,000 396,628
--------------
CHEMICALS-7.41%
Israel Chemicals Ltd. 1,175,000 3,215,458
Makhteshim-Agan
Industries Ltd. 392,501 2,191,028
--------------
5,406,486
--------------
COMPUTER DATA SECURITY-5.60%
Check Point Software
Technologies Ltd.+ 188,100 4,089,294
--------------
COMPUTER SOFTWARE-1.74%
Formula Systems (1985) Ltd.+ 68,500 1,266,974
--------------
CONGLOMERATES-5.12%
Discount Investment
Corporation 20,000 496,903
Elco Holdings Ltd. 87,601 878,785
IDB Development
Corporation Ltd. 44,501 1,380,408
IDB Holding Corporation Ltd. 42,751 979,248
--------------
3,735,344
--------------
CONSTRUCTION-0.23%
Bayside Land Corporation Ltd. 1,174 168,232
--------------
DIVERSIFIED OPERATIONS-0.60%
Elbit Medical Imaging Ltd.+ 19,501 $ 290,182
Macpell Industries Ltd. 116,074 81,385
Plasson Ltd. 4,000 69,726
--------------
441,293
--------------
ELECTRONIC COMPONENTS/SEMICONDUCTORS-0.38%
Telsys Ltd. 50,000 280,970
--------------
ELECTRONICS/ELECTRICAL EQUIPMENT-1.91%
Camtek Ltd.+ 29,400 98,490
Electra Consumer Products Ltd. 50,000 411,698
Electra (Israel) Ltd. 9,142 656,086
Nisko Industries (1992) Ltd. 32,500 225,561
--------------
1,391,835
--------------
FINANCIAL SERVICES-3.22%
F.I.B.I. Holdings Ltd.+ 165,000 1,721,586
Gachelet Investments Co., Ltd. 9,500 631,610
--------------
2,353,196
--------------
FOOD & BEVERAGES-0.12%
Gan Shmuel Food Industries 16,940 85,551
--------------
FOOD-RETAIL-0.35%
Supersol Ltd. 100,000 256,672
--------------
INDUSTRIAL TECHNOLOGY-2.00%
Orbotech, Ltd.+ 66,755 1,461,935
--------------
INSURANCE-7.60%
Clal Insurance Enterprise
Holdings Ltd. 31,500 634,985
Harel Insurance
Investments Ltd. 120,000 4,911,052
--------------
5,546,037
--------------
INTERNET SOFTWARE-0.98%
MIND C.T.I. Ltd. 72,200 280,858
RADWARE Ltd.+ 18,400 431,848
--------------
712,706
--------------
</Table>
See accompanying notes to financial statements.
5
<Page>
<Table>
<Caption>
NO. OF
DESCRIPTION SHARES/UNITS VALUE
- ------------------------------------------------------------------------------------
INVESTMENT & HOLDING COMPANIES-1.24%
Ampal-American Israel Corp.,
Class A 206,000 $ 871,380
The Renaissance Fund LDC+@ 60 34,188
--------------
905,568
--------------
METAL PRODUCTS-0.18%
Klil Industries Ltd.+ 18,654 132,201
--------------
MORTGAGE BANKING-4.10%
Discount Mortgage Bank Ltd.+ 11,970 1,266,184
Israel Discount Bank Ltd.,
Class A+ 1,250,000 1,726,147
--------------
2,992,331
--------------
PAPER & RELATED PRODUCTS-0.35%
American Israeli Paper Mills Ltd. 5,201 258,343
--------------
PHARMACEUTICALS-13.77%
Develogen AG+* 497 112,014
Perrigo Co.+ 121,767 2,335,357
Teva Pharmaceutical
Industries Ltd., ADR 245,400 7,607,400
--------------
10,054,771
--------------
REAL ESTATE OPERATIONS/DEVELOPMENT-1.31%
Industrial Buildings
Corporation Ltd. 180,279 208,941
Property & Building
Corporation Ltd. 8,525 746,640
--------------
955,581
--------------
SEMICONDUCTOR & RELATED TECHNOLOGY-1.46%
DSP Group, Inc.+ 41,300 1,063,888
--------------
TECHNOLOGY-0.00%
Lenslet Ltd.,
Series E Preferred+* 30,838 0
Oren Semiconductor, Inc.,
Series A-1 Preferred+* 29 0
Oren Semiconductor, Inc.,
Series A-2 Preferred+* 30 0
Oren Semiconductor, Inc.,
Series C Preferred+* 46 0
--------------
0
--------------
TELECOMMUNICATIONS-6.63%
Bezeq Israeli Telecommunication
Corporation Ltd.+ 2,800,000 $ 3,288,073
ECI Telecom Ltd.+ 105,164 756,129
NICE Systems Ltd., ADR+ 24,600 792,612
--------------
4,836,814
--------------
TRADING COMPANIES-0.55%
Rapac Electronics Ltd. 116,278 314,615
Rapac Technologies 2000 Ltd. 31,801 87,526
--------------
402,141
--------------
TRANSPORTATION SERVICES-0.75%
Dan Vehicle &
Transportation Ltd. 100,000 547,216
--------------
VENTURE CAPITAL-7.35%
ABS GE Capital Giza Fund, L.P.+@ 1,250,001 273,500
Advent Israel (Bermuda) L.P.+@ 1,682,293 106,358
BPW Israel Ventures LLC+@# 1,500,098 878,049
Concord Ventures II Fund L.P.+@# 1,820,000 723,354
Delta Fund I, L.P.+@# 212,940 133,165
Formula Ventures L.P.+@ 1,000,000 144,300
Giza GE Venture
Fund III L.P.+@# 1,025,000 551,778
K.T. Concord Venture
Fund L.P.+@ 1,000,000 446,130
Neurone Ventures II, L.P.+@# 483,684 220,947
Pitango Fund II LLC+@ 1,000,000 236,876
SVE Star Ventures Enterprises
GmbH & Co. No. IX KG+@# 1,500,000 984,870
SVE Star Ventures
Enterprises No. II+@ 5 96,000
Walden-Israel Ventures, L.P.+@ 500,000 84,920
Walden-Israel
Ventures III, L.P.+@# 664,813 487,201
--------------
5,367,448
--------------
TOTAL ISRAEL
(Cost $49,765,248) 63,419,569
--------------
</Table>
See accompanying notes to financial statements.
6
<Page>
<Table>
<Caption>
NO. OF
DESCRIPTION UNITS VALUE
- ------------------------------------------------------------------------------------
GLOBAL-2.22%
VENTURE CAPITAL-2.22%
Emerging Markets
Ventures I L.P.+@#
(Cost $1,553,955) 2,216,375 $ 1,622,963
--------------
TOTAL EQUITY OR EQUITY-LINKED
SECURITIES
(Cost $51,319,203) 65,042,532
--------------
<Caption>
PRINCIPAL
DESCRIPTION AMOUNT (000'S) VALUE
- ------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT-10.62%
GRAND CAYMAN-10.62%
Wells Fargo Bank, NA, overnight
deposit, 2.04%, 04/01/05**
(Cost $7,751,000) $ 7,751 $ 7,751,000
--------------
TOTAL INVESTMENTS-99.71%
(Cost $59,070,203) (A,D,F) 72,793,532
--------------
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES-0.29% 210,834
--------------
NET ASSETS-100.00% $ 73,004,366
==============
</Table>
- ----------
+ 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 A and G.)
# As of March 31, 2005, the aggregate amount of open commitments for the Fund
is $3,013,715. (See Note G.)
* 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.
** Variable rate account. Rate resets on a daily basis; amounts are available
on the same business day.
ADR American Depository Receipts.
See accompanying notes to financial statements.
7
<Page>
THE FIRST ISRAEL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - MARCH 31, 2005 (UNAUDITED)
<Table>
ASSETS
Investments, at value (Cost $59,070,203) (Notes A,D,F) $ 72,793,532
Cash 336
Receivables:
Israeli tax refunds (Note A) 399,870
Dividends 188,672
Prepaid expenses 19,899
--------------
Total Assets 73,402,309
--------------
LIABILITIES
Payables:
Investment advisory fees (Note B) 187,801
Directors' fees 10,405
Administration fees (Note B) 8,992
Other accrued expenses 190,745
--------------
Total Liabilities 397,943
--------------
NET ASSETS (applicable to 4,259,295 shares of common stock outstanding) (Note C) $ 73,004,366
==============
NET ASSETS CONSIST OF
Capital stock, $0.001 par value; 4,259,295 shares issued and outstanding
(100,000,000 shares authorized) $ 4,259
Paid-in capital 54,647,162
Accumulated net investment loss (118,789)
Accumulated net realized gain on investments and foreign currency related transactions 4,749,315
Net unrealized appreciation in value of investments and translation of other
assets and liabilities denominated in foreign currency 13,722,419
--------------
Net assets applicable to shares outstanding $ 73,004,366
==============
NET ASSET VALUE PER SHARE ($73,004,366 DIVIDED BY 4,259,295) $ 17.14
==============
MARKET PRICE PER SHARE $ 16.44
==============
</Table>
See accompanying notes to financial statements.
8
<Page>
THE FIRST ISRAEL FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED MARCH 31, 2005 (UNAUDITED)
<Table>
INVESTMENT LOSS
Income (Note A):
Dividends $ 774,829
Interest 35,494
Less: Foreign taxes withheld (150,486)
--------------
Total Investment Income 659,837
--------------
Expenses:
Investment advisory fees (Note B) 428,033
Legal fees 162,444
Custodian fees 68,823
Audit fees 64,116
Administration fees (Note B) 42,604
Directors' fees 23,345
Printing (Note B) 20,580
Accounting fees 14,959
NYSE listing fees 11,479
Transfer agent fees 9,965
Insurance 3,693
Miscellaneous 7,989
--------------
Total Expenses 858,030
Less: Fee waivers (Note B) (79,404)
--------------
Net Expenses 778,626
--------------
Net Investment Loss (118,789)
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments 5,570,314
Foreign currency related transactions (13,439)
Net change in unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currency 6,792,946
--------------
Net realized and unrealized gain on investments and foreign currency related transactions 12,349,821
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 12,231,032
==============
</Table>
See accompanying notes to financial statements.
9
<Page>
THE FIRST ISRAEL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE
SIX MONTHS FOR THE
ENDED FISCAL YEAR
MARCH 31, 2005 ENDED
(UNAUDITED) SEPTEMBER 30, 2004
---------------- ------------------
INCREASE IN NET ASSETS
Operations:
Net investment loss $ (118,789) $ (118,846)
Net realized gain on investments and foreign currency related
transactions 5,556,875 1,580,728
Net change in unrealized appreciation in value of investments and
translation of other assets and liabilities denominated in foreign currency 6,792,946 6,707,593
---------------- ------------------
Net increase in net assets resulting from operations 12,231,032 8,169,475
---------------- ------------------
NET ASSETS
Beginning of period 60,773,334 52,603,859
---------------- ------------------
End of period $ 73,004,366 $ 60,773,334
================ ==================
</Table>
See accompanying notes to financial statements.
10
<Page>
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11
<Page>
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.
<Table>
<Caption>
FOR THE
SIX MONTHS
ENDED FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
MARCH 31, 2005 ----------------------------------------
(UNAUDITED) 2004 2003
-------------- -------- --------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 14.27 $ 12.35 $ 9.50
-------------- -------- --------
Net investment income/(loss) (0.03) (0.03) (0.22)+
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions 2.90 1.95 3.42
-------------- -------- --------
Net increase/(decrease) in net assets resulting from operations 2.87 1.92 3.20
-------------- -------- --------
Dividends and distributions to shareholders:
Net investment income -- -- --
Net realized gain on investments and
foreign currency related transactions -- -- (0.35)
-------------- -------- --------
Total dividends and distributions to shareholders -- -- (0.35)
-------------- -------- --------
Anti-dilutive impact due to capital shares repurchased -- -- --
-------------- -------- --------
Net asset value, end of period $ 17.14 $ 14.27 $ 12.35
============== ======== ========
Market value, end of period $ 16.44 $ 12.09 $ 10.10
============== ======== ========
Total investment return (a) 35.98% 19.70% 40.57%
============== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 73,004 $ 60,773 $ 52,604
Ratio of expenses to average net assets (b) 2.28%(c) 1.92% 2.31%
Ratio of expenses to average net assets, excluding fee waivers 2.51%(c) 2.13% 2.54%
Ratio of net investment income/(loss) to average net assets (b) (0.35)%(c) (0.19)% (2.01)%
Portfolio turnover rate 7.03% 8.53% 2.94%
</Table>
- ----------
+ 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.
12
<Page>
<Table>
<Caption>
FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
-----------------------------------------------
2002 2001 2000 1999
-------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 11.64 $ 23.24 $ 17.18 $ 15.04
-------- -------- -------- --------
Net investment income/(loss) (0.17)+ (0.06)+ (0.02)+ (0.02)+
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions (1.80) (8.39) 7.80 3.21
-------- -------- -------- --------
Net increase/(decrease) in net assets resulting from operations (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 (0.17) (3.07) (1.46) (1.20)
-------- -------- -------- --------
Total dividends and distributions to shareholders (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 $ 9.50 $ 11.64 $ 23.24 $ 17.18
======== ======== ======== ========
Market value, end of period $ 7.41 $ 9.60 $ 18.563 $ 14.000
======== ======== ======== ========
Total investment return (a) (21.24)% (38.21)% 47.61% 32.61%
======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 40,457 $ 49,565 $ 98,979 $ 76,683
Ratio of expenses to average net assets (b) 2.08% 1.88% 2.05% 2.05%
Ratio of expenses to average net assets, excluding fee waivers 2.30% 2.09% 2.28% 2.30%
Ratio of net investment income/(loss) to average net assets (b) (1.44)% (0.39)% (0.08)% (0.12)%
Portfolio turnover rate 11.26% 21.11% 27.06% 18.65%
<Caption>
FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
-----------------------------------------------
1998 1997 1996 1995
-------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 18.41 $ 13.10 $ 13.20 $ 11.74
-------- -------- -------- --------
Net investment income/(loss) 0.07 0.35 (0.09) (0.10)
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions (2.97) 6.20 (0.01) 1.56
-------- -------- -------- --------
Net increase/(decrease) in net assets resulting from operations (2.90) 6.55 (0.10) 1.46
-------- -------- -------- --------
Dividends and distributions to shareholders:
Net investment income -- -- -- --
Net realized gain on investments and
foreign currency related transactions (0.47) (1.24) -- --
-------- -------- -------- --------
Total dividends and distributions to shareholders (0.47) (1.24) -- --
-------- -------- -------- --------
Anti-dilutive impact due to capital shares repurchased -- -- -- --
-------- -------- -------- --------
Net asset value, end of period $ 15.04 $ 18.41 $ 13.10 $ 13.20
======== ======== ======== ========
Market value, end of period $ 11.813 $ 14.938 $ 11.250 $ 12.000
======== ======== ======== ========
Total investment return (a) (18.05)% 44.36% (6.25)% (9.43)%
======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 75,373 $ 92,298 $ 65,649 $ 66,150
Ratio of expenses to average net assets (b) 2.06% 2.26% 2.23% 2.57%
Ratio of expenses to average net assets, excluding fee waivers 2.31% 2.30% -- --
Ratio of net investment income/(loss) to average net assets (b) 0.42% 2.20% (0.68)% (0.91)%
Portfolio turnover rate 29.11% 16.98% 21.68% 22.17%
</Table>
13
<Page>
THE FIRST ISRAEL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
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.
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. The Fund's 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 curves 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
this method would not represent fair value.
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. At March 31, 2005, the Fund held 9.78% 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 $13,363,269 and
fair value of $7,136,613. The Fund's estimate of fair value assumes a willing
buyer and a willing seller neither acting under a 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.
SHORT-TERM INVESTMENT: The Fund swept available cash at March 31, 2005 into a
short-term deposit issued by Wells Fargo Bank, NA. 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 U.S. income or excise taxes as it is the Fund's
intention to continue to qualify as a regulated investment company and to make
the requisite distributions to its shareholders sufficient to relieve it from
all or substantially all U.S. income and excise taxes.
14
<Page>
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 gain sourced to unlisted unapproved
securities are subject to a 40% Israeli tax and an inflationary tax. For the six
months ended March 31, 2005, 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
15% withholding tax, while dividends from unlisted or unapproved securities are
subject to a 25% withholding tax. Israeli tax refunds represent amounts withheld
in prior years in excess of estimated recoveries. 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.
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
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.
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.
15
<Page>
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.
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 the 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 the current carrying values and this difference
could be material. Further, companies whose securities are not publicly traded
may not be subject to the disclosures 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
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.
NOTE B. AGREEMENTS
Credit Suisse Asset Management, LLC ("CSAM") serves as the Fund's investment
adviser with respect to all investments. CSAM receives 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
Israeli 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).
16
<Page>
CSAM has agreed to waive the advisory fee previously payable to the Fund's
former investment sub-adviser. For the six months ended March 31, 2005, CSAM
earned $428,033 for advisory services, of which CSAM waived $79,404. CSAM 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
six months ended March 31, 2005, CSAM was reimbursed $4,987 for administrative
services rendered to the Fund.
Credit Suisse Asset Management Limited ("Sub-Adviser") serves as the Fund's
sub-investment adviser. CSAM currently pays the Sub-Adviser on a quarterly basis
a fee of $250,000 per annum for services rendered with respect to the Fund and
certain other Credit Suisse Funds for which the Sub-Adviser has been appointed
as such. The Fund does not pay the Sub-Adviser.
Analyst Exchange and Trading Services Ltd. ("Analyst I.M.S.") serves as the
Fund's investment sub-adviser. Analyst I.M.S. is paid a fee, out of the advisory
fee payable to CSAM, 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, CSAM paid Analyst I.M.S., out of its advisory fee, a
reimbursement for any Israeli Value Added taxes (currently 17%) and $25,000
annually to cover expenses incurred in the execution of sub-advisory services.
For the six months ended March 31, 2005, Analyst I.M.S. earned $122,222 for
sub-advisory services.
Analyst I.M.S. has certain commercial arrangements with banks and brokers in
Israel from which they receive a portion of the commission on the Fund's trades
executed in Israel. For the six months ended March 31, 2005, such commissions
amounted to approximately $2,700.
Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's administrator.
The Fund pays BSFM a monthly fee that is computed weekly at an annual rate of
0.11% of the Fund's average weekly net assets. For the six months ended March
31, 2005, BSFM earned $37,617 for administrative services.
Merrill Corporation ("Merrill"), an affiliate of CSAM, has been engaged by the
Fund to provide certain financial printing services. For the six months ended
March 31, 2005, Merrill was paid $11,567 for its services to the Fund.
The Independent Directors receive fifty percent (50%) of their annual retainer
in the form of shares purchased by the Fund's transfer agent in the open market.
Directors as a group own less than 1% of the Fund's outstanding shares.
NOTE C. CAPITAL STOCK
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001, par value. Of the 4,259,295 shares outstanding at March 31, 2005, CSAM
owned 7,169 shares.
NOTE D. INVESTMENT IN SECURITIES
For the six months ended March 31, 2005, purchases and sales of securities,
other than short-term investments, were $3,766,607 and $8,719,186, respectively.
NOTE E. CREDIT FACILITY
The Fund, together with other funds/portfolios advised by CSAM (collectively,
the "Participating Funds"), participates in a $75 million committed, unsecured,
line of credit facility ("Credit Facility") with Deutsche Bank, A.G. as
administrative agent and syndication agent and State Street Bank and Trust
Company as operations agent 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%. The Fund had no borrowings under the Credit Facility at March 31, 2005.
17
<Page>
NOTE F. FEDERAL INCOME TAXES
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of foreign currency transactions, losses
deferred due to wash sales and Post-October losses (as later defined), and
excise tax regulations.
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses"). For the tax period ended September
30, 2004, the Fund elected to defer net realized foreign currency losses of
$16,061.
At September 30, 2004, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $684,300 expiring in 2011.
At March 31, 2005, 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 appreciation from investments were $59,159,077, $23,232,675,
$(9,598,220) and $13,634,455, respectively.
NOTE G. 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.
<Table>
<Caption>
NUMBER FAIR PERCENT
OF VALUE AT VALUE PER OF NET DISTRIBUTIONS OPEN
SECURITY UNITS/SHARES ACQUISITION DATE(S) COST 03/31/2005 UNIT/SHARE ASSETS RECEIVED COMMITMENTS
- -------- ------------ ------------------- ------------ ----------- ---------- ------- ------------- -----------
ABS GE Capital Giza
Fund, L.P. 1,250,001 02/03/98 - 02/13/02 $ 1,025,576 $ 273,500 $ 0.22 0.37 $ 1,702,071 $ --
------------ ------------ ----------- ------- ------------- -----------
Advent Israel
(Bermuda) L.P. 1,682,293 06/16/93 - 01/16/98 1,836,859 106,358 0.06 0.15 3,852,123 --
------------ ------------ ----------- ------- ------------- -----------
BPW Israel Ventures
LLC 1,482,848 10/05/00 - 07/01/04 1,179,176 867,952 0.59 1.19
17,250 01/03/05 17,250 10,097 0.59 0.01
------------ ------------ ----------- -------
1,500,098 1,196,426 878,049 1.20 -- 799,902
------------ ------------ ----------- ------- ------------- -----------
Concord Ventures II
Fund L.P. 1,760,000 03/29/00 - 08/19/04 1,378,079 699,507 0.40 0.96
60,000 03/04/05 60,000 23,847 0.40 0.03
------------ ------------ ----------- -------
1,820,000 1,438,079 723,354 0.99 -- 180,000
------------ ------------ ----------- ------- ------------- -----------
Delta Fund I, L.P. 212,940 11/15/00 - 07/01/04 133,521 133,165 0.63 0.18 47,456 37,500
------------ ------------ ----------- ------- ------------- -----------
Emerging Markets
Ventures I L.P. 2,205,494 01/22/98 - 07/06/04 1,543,074 1,614,995 0.73 2.21
10,881 01/10/05 10,881 7,968 0.73 0.01
------------ ------------ ----------- -------
2,216,375 1,553,955 1,622,963 2.22 603,504 283,625
------------ ------------ ----------- ------- ------------- -----------
</Table>
18
<Page>
<Table>
<Caption>
NUMBER FAIR PERCENT
OF VALUE AT VALUE PER OF NET DISTRIBUTIONS OPEN
SECURITY UNITS/SHARES ACQUISITION DATE(S) COST 03/31/2005 UNIT/SHARE ASSETS RECEIVED COMMITMENTS
- -------- ------------ ------------------- ------------ ----------- ---------- ------- ------------- -----------
Formula Ventures L.P. 1,000,000 08/06/99 - 06/14/04 $ 328,607 $ 144,300 $ 0.14 0.20 $ 235,247 $ --
------------ ------------ ----------- ------- ------------- -----------
Giza GE Venture
Fund III L.P. 850,000 01/31/00 - 03/15/04 607,469 457,572 0.54 0.63
112,500 10/11/04 112,500 60,561 0.54 0.08
62,500 02/14/05 62,500 33,645 0.54 0.05
------------ ------------ ----------- -------
1,025,000 782,469 551,778 0.76 42,071 225,000
------------ ------------ ----------- ------- ------------- -----------
K.T. Concord Venture
Fund L.P. 1,000,000 12/08/97 - 09/29/00 810,693 446,130 0.45 0.61 329,701 --
------------ ------------ ----------- ------- ------------- -----------
Neurone Ventures II,
L.P. 483,684 11/24/00 - 09/24/04 316,140 220,947 0.46 0.30 30,083 277,500
------------ ------------ ----------- ------- ------------- -----------
Pitango Fund II LLC 1,000,000 10/31/96 - 08/01/01 532,408 236,876 0.24 0.32 1,173,516 --
------------ ------------ ----------- ------- ------------- -----------
SVE Star Ventures
Enterprises GmbH &
Co. No. IX KG 1,250,000 12/21/00 - 08/09/04 966,948 820,725 0.66 1.13
250,000 03/31/05 250,000 164,145 0.66 0.22
------------ ------------ ----------- -------
1,500,000 1,216,948 984,870 1.35 -- 500,000
------------ ------------ ----------- ------- ------------- -----------
SVE Star Ventures
Enterprises No. II 5 10/10/94 327,640 96,000 19,200.04 0.13 4,269,793 --
------------ ------------ ----------- ------- ------------- -----------
The Renaissance Fund
LDC 60 03/30/94 - 03/21/97 213,330 34,188 569.89 0.05 568,067 --
------------ ------------ ----------- ------- ------------- -----------
Walden-Israel Ventures,
L.P. 500,000 09/28/93 - 05/16/97 358,111 84,920 0.17 0.12 442,280 --
------------ ------------ ----------- ------- ------------- -----------
Walden-Israel
Ventures III, L.P. 492,938 02/23/01 - 05/27/04 377,358 361,244 0.73 0.49
75,625 11/10/04 75,625 55,421 0.73 0.08
96,250 03/02/05 96,250 70,536 0.73 0.10
------------ ------------ ----------- -------
664,813 549,233 487,201 0.67 -- 710,188
------------ ------------ ----------- ------- ------------- -----------
Total $ 12,619,995 $ 7,024,599 9.62 $ 13,295,912 $ 3,013,715
============ =========== ======= ============= ===========
</Table>
The Fund may incur certain costs in connection with the disposition of the above
securities.
NOTE H. 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.
19
<Page>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On March 29, 2005, the Annual Meeting of Shareholders of The First Israel Fund,
Inc. (the "Fund") was held and the following matters were voted upon:
(1) To elect two directors to the Board of Directors of the Fund.
<Table>
<Caption>
NAME OF DIRECTOR FOR WITHHELD
- ---------------- --------- ----------
James J. Cattano 3,411,468 97,161
Steven N. Rappaport 3,406,077 102,552
</Table>
In addition to the directors elected at the meeting, Enrique R. Arzac, George W.
Landau and William W. Priest, Jr. continued as directors of the Fund.
Effective April 15, 2005, William W. Priest, Jr. resigned as a director of the
Fund.
20
<Page>
IMPORTANT PRIVACY CHOICES FOR CONSUMERS (UNAUDITED)
We are committed to maintaining the privacy of every current and prospective
customer. We recognize that you entrust important personal information to us,
and we wish to assure you that we take seriously our responsibilities in
protecting and safeguarding this information.
In connection with making available investment products and services to current
and potential customers, we may obtain nonpublic personal information about you.
This information may include your name, address, e-mail address, social security
number, account number, assets, income, financial situation, transaction history
and other personal information.
We may collect nonpublic information about you from the following sources:
- - Information we receive on applications, forms, questionnaires, web sites,
agreements or in the course of establishing or maintaining a customer
relationship; and
- - Information about your transactions with us, our affiliates, or others.
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except with your consent or as otherwise permitted
by law.
RESTRICT INFORMATION SHARING WITH AFFILIATES: In cases where we believe that
additional products and services may be of interest to you, we may share the
information described above with our affiliates unless you say "No."
/ / No, please do not share personal and financial information with your
affiliated companies. [If you check this box, you must send this notice
back to us with your name, address and account number to The First Israel
Fund, Inc., c/o Credit Suisse Asset Management, LLC, 466 Lexington Avenue,
New York, New York 10017.]
We may also disclose this information to firms that perform services on our
behalf. These agents and service providers are required to treat the information
confidentially and use it only for the purpose for which it is provided.
We restrict access to nonpublic personal information about you to those
employees, agents or other parties who need to know that information to provide
products or services to you or in connection with your investments with or
through us. We maintain physical, electronic and procedural safeguards that
comply with federal standards to guard your nonpublic personal information.
NOTE: THIS NOTICE IS PROVIDED TO CLIENTS AND PROSPECTIVE CLIENTS OF CREDIT
SUISSE ASSET MANAGEMENT, LLC ("CSAM") AND CREDIT SUISSE ASSET MANAGEMENT
SECURITIES, INC., AND SHAREHOLDERS AND PROSPECTIVE SHAREHOLDERS IN CSAM
SPONSORED AND ADVISED INVESTMENT COMPANIES, INCLUDING CREDIT SUISSE FUNDS, AND
OTHER CONSUMERS AND CUSTOMERS, AS APPLICABLE. THIS NOTICE IS NOT INTENDED TO BE
INCORPORATED IN ANY OFFERING MATERIALS BUT IS MERELY A STATEMENT OF OUR CURRENT
PRIVACY POLICY, AND MAY BE AMENDED FROM TIME TO TIME UPON NOTICE TO YOU. THIS
NOTICE IS DATED AS OF MAY 18, 2005.
21
<Page>
DESCRIPTION OF INVESTLINK(SM) PROGRAM (UNAUDITED)
The InvestLink(SM) Program is sponsored and administered by EquiServe, L.P., not
by The First Israel Fund, Inc. (the "Fund"). EquiServe, L.P., will act as
program administrator (the "Program Administrator") of the InvestLink(SM)
Program (the "Program"). The purpose of the Program is to provide existing
shareholders with a simple and convenient way to invest additional funds and
reinvest dividends in shares of the Fund's common stock ("Shares") at prevailing
prices, with reduced brokerage commissions and fees.
In order to participate in the Program, you must be a registered holder of at
least one Share of stock of the Fund. Purchases of Shares with funds from a
participant's cash payment or automatic account deduction will begin on the next
day on which funds are invested. All cash payments must be drawn on a U.S. bank
and payable in U.S. dollars. Checks must be made payable to EquiServe. If a
participant selects the dividend reinvestment option, automatic investment of
dividends generally will begin with the next dividend payable after the Program
Administrator receives his enrollment form. Once in the Program, a person will
remain a participant until he terminates his participation or sells all Shares
held in his Program account, or his account is terminated by the Program
Administrator. A participant may change his investment options at any time by
requesting a new enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. All optional cash deposit investments will be
subject to a service charge. Sales processed through the Program will have a
service fee deducted from the net proceeds, after brokerage commissions. In
addition to the transaction charges outlined above, participants will be
assessed per share processing fees (which include brokerage commissions.)
Participants will not be charged any fee for reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
investment date for cash payments is the 25th day of each month (or the next
trading day if the 25th is not a trading day). The investment date for dividend
reinvestment is the dividend payment date. The Program Administrator uses
dividends and funds of participants to purchase Shares of the Fund in the open
market. Such purchases will be made by participating brokers as agent for the
participants using normal cash settlement practices. All Shares purchased
through the Program will be allocated to participants as of the settlement date,
which is usually three business days from the purchase date. In all cases,
transaction processing will occur within 30 days of the receipt of funds, except
where temporary curtailment or suspension of purchases is necessary to comply
with applicable provisions of the Federal Securities laws or when unusual market
conditions make prudent investment impracticable. In the event the Program
Administrator is unable to purchase Shares within 30 days of the receipt of
funds, such funds will be returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period. All sale requests
having an
22
<Page>
anticipated market value of $100,000.00 or more are expected to be submitted in
written form. In addition, all sale requests received by the Program
Administrator within thirty (30) days of an address change are expected to be
submitted in written form.
EquiServe L.P., as Program Administrator, administers the Program for
participants, keeps records, sends statements of account to participants and
performs other duties relating to the Program. Each participant in the Program
will receive a statement of his account following each purchase of Shares. The
statements will also show the amount of dividends credited to such participant's
account (if applicable), as well as the fees paid by the participant. In
addition, each participant will receive copies of the Fund's annual and
semi-annual reports to shareholders, proxy statements and, if applicable,
dividend income information for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
23
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A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program Administrator are not subject to protection under the Securities
Investors Protection Act of 1970.
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested shareholder may participate in the Program. All other cash
payments or bank account deductions must be at least $100.00, up to a maximum of
$100,000.00 annually. An interested shareholder may join the Program by reading
the Program description, completing and signing the enrollment form and
returning it to the Program Administrator. The enrollment form and information
relating to the Program (including the terms and conditions) may be obtained by
calling the Program Administrator at one of the following telephone numbers:
(800) 730-6001 (U.S. and Canada) or (781) 575-3100 (outside U.S. and Canada).
All correspondence regarding the Program should be directed to: EquiServe Trust
Company N.A., InvestLink(SM) Program, P.O. Box 43010, Providence,
RI 02940-3010.
InvestLink is a service mark of EquiServe, L.P.
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ADVISORY AGREEMENT APPROVAL DISCLOSURE (UNAUDITED)
BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY
AGREEMENTS
Section 15(c) of the Investment Company Act of 1940 (the "1940 Act")
contemplates that 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 1940 Act (the
"Independent Directors"), will annually review and re-approve the terms of the
Fund's existing investment advisory and sub-advisory agreements. In this regard,
the Board reviewed and re-approved, during the most recent six months covered by
this report: (i) an investment advisory agreement with Credit Suisse Asset
Management, LLC ("CSAM") for the Fund, and (ii) sub-advisory agreements with
Credit Suisse Asset Management Limited (United Kingdom) ("CSAM U.K.") and
Analyst Exchange and Trading Services Ltd. ("Analyst") for the Fund. The
investment advisory agreement with CSAM and the investment sub-advisory
agreements with CSAM U.K. and Analyst (the "Sub-Advisers") are collectively
referred to as the "Advisory Agreements."
More specifically, at a meeting held on December 2, 2004, 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 CSAM and the Sub-Advisers 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 CSAM and the
Sub-Advisers under the Advisory Agreements. The most recent investment adviser
registration forms ("Forms ADV") for CSAM and the Sub-Advisers were provided to
the Board, as were responses of CSAM and the Sub-Advisers to requests submitted
by the Independent Directors' independent legal counsel on behalf of such
Directors. The Board reviewed and analyzed these materials, which included,
among other things, information about the background and experience of the
senior management and the expertise of, and amount of attention devoted to the
Fund by investment personnel of CSAM and the Sub-Advisers. In this regard, the
Board specifically reviewed the qualifications, backgrounds and responsibilities
of the chief investment officer who is primarily responsible for day-to-day
portfolio management services for the Fund.
In addition, the Board received and reviewed information on Securities and
Exchange Commission ("SEC") and other regulatory inquiries and examinations
relating to the Fund, CSAM and the Sub-Advisers. The Board considered the
investment and legal compliance programs of each of these entities, including
their implementation of enhanced compliance policies and procedures in response
to SEC rule changes and other regulatory initiatives. The Board also considered
the Fund's Chief Compliance Officer's report and recommendations.
The Board evaluated the ability of CSAM and the Sub-Advisers, based on their
respective resources, reputations and other attributes, to attract and retain
highly qualified investment professionals, including research, advisory, and
supervisory personnel. In this connection, the Board considered information
regarding CSAM's compensation arrangements for its personnel involved in the
management of the Fund.
Based on the above factors, together with those referenced below, the Board
concluded that it was generally satisfied with the nature, extent and quality of
the investment advisory services provided to the Fund by CSAM and the
Sub-Advisers.
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FUND PERFORMANCE AND EXPENSES
The Board considered the performance results of the Fund for each of the
previous seven years as well as for the most recent quarter-end and year-to-date
and since the inception of the Fund. It also considered these results in
comparison to the Fund's benchmark index, the MSCI Israel Index. The Board noted
that the Fund performed lower than its benchmark index for the year-to-date
period. The Board observed, however, that the Fund had outperformed its
benchmark index for the third quarter and significantly outperformed its
benchmark index since inception. The Board also observed that the Fund lagged
the benchmark index for the year-to-date period in part due to restrictions on
diversification of the Fund's portfolio holdings.
The Board received and considered statistical information regarding the Fund's
total expense ratio and its various components, including management fees,
non-management fees, fee waivers/caps and/or expense reimbursements and actual
total expenses of the Fund (including and excluding investment-related expenses
and taxes). It also considered comparisons of these fees to the expense
information for the 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
"Universe"). Lipper Inc. ("Lipper"), an independent provider of investment
company data, determined the Peer Group and Universe for the Fund and provided
the comparative data. The Board was provided with a description of the
methodology used by Lipper to select the closed-end mutual funds in the Fund's
Peer Group and Universe. The Board noted that the overall expense ratio of the
Fund was appreciably higher than the Peer Group's median overall ratio both
including and excluding investment-related expenses and taxes. However, the
Board also observed that the Fund had significantly outperformed its benchmark
index since inception.
Management also discussed the Lipper data and rankings, and other relevant
information, for the Fund. Based on the above-referenced considerations and
other factors, the Board concluded that the overall performance and expense
results supported the re-approval of the Advisory Agreements for the Fund.
INVESTMENT ADVISORY AND SUB-ADVISORY FEE RATES
The Board reviewed and considered the proposed contractual investment advisory
fee rate (the "Advisory Agreement Rate") payable by the Fund to CSAM for
investment advisory services. The Board also reviewed and considered the
proposed contractual investment sub-advisory fee rates (the "Sub-Advisory
Agreement Rates") payable by CSAM to the Sub-Advisers for investment
sub-advisory services. In addition, the Board reviewed and considered the
proposed 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 noted that CSAM had voluntary fee waivers
in effect to base its current investment advisory fee upon the lower of the
average weekly stock price or its average weekly net assets and to waive the
advisory fee previously paid to the Fund's former sub-adviser Giza Ltd.
Additionally, the Board received and 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 concluded that the Net Advisory Rate for the Fund was within a
reasonable range of the median rate of the Fund's Peer Group. The Board noted
that the Net Advisory Rate reflected that CSAM was authorized to invest a
significant percentage of the Fund's assets in privately placed securities. The
Board also noted that the Fund's administrator is not affiliated with CSAM and
that the Fund's administration agreement and corresponding
26
<Page>
fees were negotiated at arm's-length. The Board considered that the combined
investment advisory/administration fee rate for the Fund was within a reasonable
range of the median rate of its Peer Group. The Board concluded that these
factors supported the Advisory Agreement Rate and the Net Advisory Rate.
The Board also reviewed the Sub-Advisory Agreement Rates charged by CSAM U.K.
and Analyst, which serve as Sub-Advisers to the Fund. The Board concluded that
the Sub-Advisory Agreement Rates were fair and equitable, based on its
consideration of the factors described above.
PROFITABILITY
The Board received and considered a detailed estimated profitability analysis of
CSAM based on the Advisory Agreement Rate and the Net Advisory Rate, as well as
on other relationships between the Fund and CSAM and its affiliates, including
CSAM 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 CSAM and its affiliates received with regard to
providing these services to the Fund were not unreasonable.
The Board received and considered a detailed estimated profitability analysis of
CSAM U.K. and a profit and loss statement of Analyst based on their Sub-Advisory
Agreement Rates, as well as on other relationships between the Fund and CSAM
U.K. and its affiliates, and between the Fund and Analyst and its affiliates,
respectively. The Board noted the costs of providing portfolio management and
other services to the Fund. The Board also noted that the sub-advisory fees are
paid to the Sub-Advisers by CSAM and not directly by the Fund, and that the
Board separately determined that the Advisory Agreement Rate for the Fund was
fair and equitable. Based on these factors, the Board concluded that the profits
and other ancillary benefits that the Sub-Advisers and their affiliates received
with regard to providing these services to the Fund were not unreasonable.
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 Agreement for the Fund did not offer
breakpoints. However, the Board considered the diminished opportunity to achieve
economies of scale in the context of a closed-end fund, as well as the Advisory
Agreement Rate and the Sub-Advisory Agreement Rates of the Fund, and concluded
that the fees were fair and equitable based on relevant factors, including the
Fund's performance results.
The Board did not receive information regarding any economies of scale of
unaffiliated sub-advisers given that the sub-advisory fees are paid to Analyst
by CSAM and not directly by the Fund, and that the Board separately determined
that the Advisory Agreement Rate for the Fund was fair and equitable.
INFORMATION ABOUT SERVICES TO OTHER CLIENTS
The Board also received and considered information about the nature, extent and
quality of services and fee rates offered by CSAM and CSAM U.K. and services
offered by Analyst to their other clients, including other registered
27
<Page>
investment companies, separate accounts, fund-of-funds and institutional
investors and investment companies to which CSAM serves as an unaffiliated
sub-adviser. The Board concluded that the Advisory Agreement Rate and
Sub-Advisory Agreement Rate for CSAM U.K. were within a reasonable range of the
fee rates offered to their other clients. Where CSAM's rates offered to its
other clients were appreciably lower, the Board considered that CSAM's voluntary
fee waivers would decrease the Advisory Agreement Rate. The Board concluded,
based on information provided by CSAM, that the costs associated with managing
and operating a registered, closed-end, emerging market country fund,
particularly one that is authorized to invest a significant percentage of its
assets in privately placed securities, compared with an open-end domestic equity
or fixed income fund or a fund to which CSAM serves as sub-adviser, provided a
justification for the higher fee rates charged to the Fund. The Board did not
receive comparative fee rate materials for Analyst, but concluded that the
Sub-Advisory Agreement Rate for Analyst was fair and equitable based on other
considerations, including the performance of the Fund as sub-advised by Analyst.
The Board also considered that sub-advisory fees are paid to Analyst by CSAM and
not the Fund, and that the Board had separately determined that the Advisory
Agreement Rate for the Fund was fair and equitable.
OTHER BENEFITS TO CSAM AND THE SUB-ADVISERS
The Board received and considered information regarding potential "fall-out" or
ancillary benefits received by CSAM and its affiliates, including CSAM U.K., and
the Sub-Advisers as a result of their relationship with the Fund. Such benefits
could include, among others, benefits directly attributable to the relationship
of CSAM and the Sub-Advisers with the Fund (such as soft-dollar credits) and
benefits potentially derived from an increase in the business of CSAM and the
Sub-Advisers as a result of their relationship with the Fund (such as the
ability to market to shareholders other financial products offered by CSAM and
its affiliates or the Sub-Advisers and their affiliates).
The Board also considered the effectiveness of practices of CSAM and CSAM U.K.
in achieving the best execution of portfolio transactions, whether and to what
extent soft dollar credits are sought and how any such credits are utilized, any
benefits that may be realized by using an affiliated broker, the extent to which
efforts are made to recapture transaction costs, and the controls applicable to
brokerage allocation procedures. The Board also reviewed the policies of CSAM
U.K. regarding the allocation of portfolio investment opportunities among the
Fund and its other clients.
OTHER FACTORS AND BROADER REVIEW
As discussed above, the Board reviews detailed materials received from CSAM and
the Sub-Advisers annually as part of the re-approval process under Section 15(c)
of the 1940 Act. The Board also regularly reviews and assesses the quality of
the services that the Fund receives throughout the year. In this regard, the
Board reviews reports of CSAM and the Sub-Advisers at least in each of its
quarterly meetings, which include, among other things, a detailed portfolio
review and detailed fund performance reports, and confers with the chief
investment officer and managers of the Fund at least quarterly with respect to
the portfolio management of the Fund.
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 unanimously re-approved
the Advisory Agreements.
28
<Page>
PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
Information regarding how The First Israel Fund, Inc. (the "Fund")
voted proxies related to its portfolio securities during the 12-month period
ended June 30, 2004 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.csam.com/us
- On the website of the Securities and Exchange Commission,
http://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 http://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
1-800-SEC-0330.
29
<Page>
OTHER FUNDS MANAGED BY CREDIT SUISSE ASSET MANAGEMENT, LLC
Credit Suisse Capital Appreciation Fund
Credit Suisse Cash Reserve Fund
Credit Suisse Commodity Return Strategy Fund
Credit Suisse Emerging Markets Fund
Credit Suisse Fixed Income 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 Japan Equity Fund
Credit Suisse Large Cap Value Fund
Credit Suisse Mid-Cap Growth Fund
Credit Suisse New York Municipal Fund
Credit Suisse Select Equity Fund
Credit Suisse Short Duration Bond Fund
Credit Suisse Small Cap Growth Fund
Credit Suisse Small Cap Value 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. For up-to-date
performance, please look in the mutual fund section of your newspaper under
Credit Suisse.
Credit Suisse Asset Management Securities, Inc., Distributor.
30
<Page>
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
The Fund--The First Israel Fund, Inc.--is a closed-end, non-diversified
management investment company whose shares trade on the New York Stock Exchange,
Inc. Its investment objective is long-term capital appreciation through
investments primarily in equity securities of Israeli companies. Credit Suisse
Asset Management, LLC (New York), the Fund's investment adviser, is part of
Credit Suisse Asset Management ("CSAM"), the institutional and mutual-fund
asset-management arm of Credit Suisse First Boston. As of March 31, 2005, CSAM
managed over $25 billion in the U.S. and, together with its global affiliates,
managed assets of over $335 billion in 16 countries.
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily) under the
designation "Frst Israel" and THE WALL STREET JOURNAL (daily), and BARRON'S
(each Monday) under the designation "FstIsrael." The Fund's New York Stock
Exchange, Inc. trading symbol is ISL. Weekly comparative net asset value (NAV)
and market price information about The First Israel Fund, Inc.'s shares are
published each Sunday in THE NEW YORK TIMES and each Monday in THE WALL STREET
JOURNAL and BARRON'S, as well as other newspapers, in a table called "Closed-End
Funds."
THE CSAM GROUP OF FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.csam.com/us.
CLOSED-END FUNDS
SINGLE COUNTRY
The Chile Fund, Inc. (CH)
The Indonesia Fund, Inc. (IF)
MULTIPLE COUNTRY
The Emerging Markets Telecommunications Fund, Inc. (ETF)
The Latin America Equity Fund, Inc. (LAQ)
FIXED INCOME
Credit Suisse Asset Management Income Fund, Inc. (CIK)
Credit Suisse High Yield Bond Fund (DHY)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that The First Israel Fund, Inc. may from time
to time purchase shares of its capital stock in the open market.
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DIRECTORS AND CORPORATE OFFICERS
Enrique R. Arzac Lead Director
James J. Cattano Director
Phillip Goldstein Director
George W. Landau Director
Steven N. Rappaport Director
Michael E. Kenneally Chairman of the Board of
Directors, Chief Executive
Officer and President
Neil Gregson Chief Investment Officer
J. Kevin Gao Senior Vice President
Ajay Mehra Chief Legal Officer
Emidio Morizio Chief Compliance Officer
Michael A. Pignataro Chief Financial Officer and
Secretary
Robert M. Rizza Treasurer
INVESTMENT ADVISER
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, NY 10017
INVESTMENT SUB-ADVISER
Credit Suisse Asset Management Limited
Beaufort House
15 St. Botolph Street
London EC3A 7JJ, England
INVESTMENT SUB-ADVISER
Analyst Exchange and Trading Services Ltd.
46 Rothschild Boulevard
Tel Aviv, 66883 Israel
ADMINISTRATOR
Bear Stearns Funds Management Inc.
383 Madison Avenue
New York, NY 10179
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
SHAREHOLDER SERVICING AGENT
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers LLP
Two Commerce Square
Philadelphia, PA 19103
LEGAL COUNSEL
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund without examination by
independent registered public accountants who do not express an opinion thereon.
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.
[ISL LISTED NYSE (R) LOGO]
3917-SA-05
<Page>
[ISL LISTED NYSE (R) LOGO]
3917-SA-05
<Page>
ITEM 2. CODE OF ETHICS.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
This item is inapplicable to a semi-annual report on Form N-CSR.
<Page>
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
This item is inapplicable to a semi-annual report on Form N-CSR.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
This item is inapplicable to a semi-annual report on Form N-CSR.
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.
This item is inapplicable to a semi-annual report on Form N-CSR.
<Page>
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Form N-CSR disclosure requirement is not yet effective with respect to the
registrant.
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 February 9, 2005.
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) Not applicable.
(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.
<Page>
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/ Michael E. Kenneally
------------------------
Name: Michael E. Kenneally
Title: Chief Executive Officer
Date: June 1, 2005
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/ Michael E. Kenneally
------------------------
Name: Michael E. Kenneally
Title: Chief Executive Officer
Date: June 1, 2005
/s/ Michael A. Pignataro
------------------------
Name: Michael A. Pignataro
Title: Chief Financial Officer
Date: June 1, 2005