<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
November 20, 1995
DEAR SHAREHOLDERS:
We are pleased to report on the activities of The First Israel Fund, Inc. (the
"Fund") for the fiscal year ended September 30, 1995.
At September 30, 1995, the total net assets of the Fund were $66,150,335 and the
net asset value ("NAV") per share was $13.20, as compared to $11.74 at September
30, 1994. The Fund's common stock closed on the New York Stock Exchange on
September 30, 1995 at $12.00 per share, representing a discount of 9.09% to the
Fund's September 30, 1995 NAV. At September 30, 1995, investments in securities
listed and trading on the Tel Aviv Stock Exchange ("TASE") and the Israeli and
Israeli-related companies listed and trading in the United States totaled
approximately $52.7 million, as compared to $48.7 million on September 30, 1994.
The Fund also held investments totaling approximately $9.2 million in unlisted
securities of Israeli and Israeli-related companies, as compared to $6.7 million
on September 30, 1994. The balance of approximately $4.3 million has been
invested primarily in short-term obligations, as compared to $5.3 million at
September 30, 1994. At September 30, 1995, 93.5% of the Fund's portfolio was
invested in listed and unlisted Israeli and Israeli-related equity and debt
securities, and 6.5% in short-term obligations.
For the fiscal year ended September 30, 1995, the TASE Index increased by 1.2%
in U.S. dollar terms. During the same period, the Fund's NAV increased by 12.4%.
Since the inception of the Fund on October 29, 1992, the TASE Index has declined
by 13.3%, while the Fund's NAV has declined by 0.8%.
POLITICAL DEVELOPMENTS
During the past year, Israeli politics have been dominated by the Middle East
peace process. While the agreement establishing peaceful relations with Jordan
has been nearly universally celebrated in Israel, relations with the
Palestinians have been the cause of increasingly bitter disputes. Throughout
1995, and particularly in the wake of the completion of the "Oslo II" agreement,
the peace debate has increasingly seemed to bring out elemental conflicts
between vastly differing conceptions of the relationship between the Jewish
people and the land of Israel.
Just as this Annual Report was being prepared, Israel's deep inner conflicts
burst dramatically into the view of the world with the tragic and shocking
assassination of Prime Minister Yitzhak Rabin. While the effect of this act on
Israeli political culture has and will be profound, we believe that the
long-term impact on the peace process is unlikely to be great. During the very
difficult two years since the surprising announcement of the first Oslo
agreement, the great success of the Rabin government was -- in spite of Hamas
terrorism and rhetoric from Israel's extreme right -- to permanently alter the
terms in which peace is discussed. It is our view that the peace process has
come sufficiently far -- treaties with Egypt and Jordan, increasingly warm but
still informal relations with a variety of Arab nations in North Africa and the
Gulf, recognition of the PLO, and the beginnings of limited autonomy within the
West Bank -- that it is very unlikely to be reversed. While the form in which
the process moves forward remains the key area of difference between the
1
<PAGE>
THE FIRST ISRAEL FUND, INC.
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Labor and Likud parties, we believe that it would be very difficult for Likud to
reverse course if it should win the election in October of next year. In the
meantime, Shimon Peres -- who is in many ways the true architect of this peace
- -- has pledged to aggressively pursue a continuation of the process, and to
attempt a renewal of negotiations with the Syrians.
Meanwhile, progress in the peace process has arguably done more to cement
Israel's improving position within the world political and economic community
than any other factor. In addition to forging trade and technical ties -- mostly
informal in nature, in light of the general absence of diplomatic relations --
with moderate Arab countries, progress has been most striking in the development
of trade relations with countries outside of the region. The collapse of the
secondary and tertiary boycotts of Israel removed what had been a significant
impediment to Israeli attempts to build export markets. The past year has seen
particular movement in the Pacific Rim and Southeast Asian markets: Israeli
companies are now trading on a substantial scale with Japan, China, India,
Indonesia, Singapore and Korea. There has also been particular progress in
Eastern European markets. In total, Israeli exports rose by 11% in 1994, with
half of this increase going to markets outside of the U.S. and European Union.
The attendance at the Rabin funeral of heads of state from throughout the world
provided sad if welcome evidence of Israel's new standing among the world's
nations.
Domestically, government policies that strongly favor deregulation and economic
liberalization have helped to make Israel one of the more attractive emerging
markets in the world. All major political parties, along with the majority of
public opinion, continue to favor privatization policies. While privatizations
slowed down in 1994, due to weakness in the secondary market, action on this
front has begun to pick up in early 1995, and it appears that the program may
again pick up momentum.
ECONOMIC DEVELOPMENTS
The Israeli economy has shown consistently strong growth throughout the first
half of the 1990s, averaging 5.7% per year since 1990. Growth last year was
particularly strong, rising to 6.5% from a level of 3.4% in 1993. This economic
growth has been reasonably well balanced, driven by both increasing exports and
by expanding local demand, particularly for consumer durables. It is estimated
that GDP growth in 1995 will moderate to a level of approximately 6.5%, with
similar growth forecast for next year. It should be noted that this 1995
economic performance is somewhat stronger than we had expected. During 1995, The
Bank of Israel's prime lending rate (the rate it charges commercial banks) was
reduced five times, from 17% to 13.2%. Since September, the interest rate was
increased twice by 50 basis points each time.
The recent surge in private consumption is largely a result of the massive
immigration into Israel during the past several years: approximately 600,000
Jews from the former Soviet Union have come to Israel since 1990 (effectively a
13% increase in Israel's population). The size of this immigration flow is
unprecedented in Israel's history, and it has had profound social and economic
effects. The most striking change brought by the Russians has been in the
education level of the Israeli labor force. Since this immigration began, the
number of doctors in Israel has doubled, and the number of engineers has
increased by 150%. Starting from an already high level (on a par with the major
developed markets), Israel now has one of the best educated workforces in the
world. On a per capita basis, Israel now has nearly double the number of
scientists and engineers as in the United States or Japan, and three or four
times the number in the major European
2
<PAGE>
THE FIRST ISRAEL FUND, INC.
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countries. Clearly, this gives Israel an edge not only in its region and among
the emerging markets, but versus the major developed markets as well. This
advantage is further increased by the availability to Israeli high technology
companies of substantial R&D support from the government.
It should be noted that rising private consumption has come to some extent at
the expense of private savings, which has been lower than expected despite
relatively high interest rates. This reflects not only the effect of
immigration, but also a cultural evolution, in which Israelis are becoming more
interested in raising their living standards to developed world standards. It is
for this reason that durable goods sales have been so strong in the past year or
so.
The inflation picture, meanwhile, has been a relatively positive one. In 1994,
inflation exceeded 14%, far outstripping government projections of 8% for that
year. During 1995, the core inflation rate has moderated to approximately 10%,
and consumer prices have been rising at an even slower rate. The progress from
last year to this can be largely attributed to a relaxation of produce prices --
1994's was a very poor harvest season -- and of housing costs. The consistently
tight monetary policy pursued by Israel's central bank has been quite
constructive in this regard. We anticipate that inflation will continue to
decline into 1996, the consensus estimate is that inflation for 1996 will be 8%
to 10%, although progress might be slowed as the central bank comes under
political pressure to ease in the run-up to the October elections.
Fiscal discipline was observed under Rabin's leadership, and a conservative
fiscal policy should remain in effect under the Peres government. Fiscal
restraint is Israel's primary weapon for control of its expanding current
account deficit, and there is a general political consensus on the importance of
continuing this policy. Again, however, election years tend to be difficult
periods for controlling government spending, so there may be some degree of
relaxation during 1996.
In general, despite a year of national self-examination and political
instability, we remain highly confident of the health of Israel's political
structure and economy. The benefits of peace continue to make themselves felt
(and are an increasingly strong argument for continuing to pursue the peace
process); the economy continues to show strong GDP growth was improving
inflation, and the basic elements of a constructive economic policy have
virtually universal popular and political support. We believe that this makes
for a highly positive investment environment for the next several years.
MARKET DEVELOPMENTS AND THE PORTFOLIO
On September 30, 1995, there were 648 companies listed on the TASE, with total
market capitalization of $37.1 billion. Average daily trading volume was $42
million for the fiscal year ended September 30, 1995.
The Israeli stock market has displayed continued volatility throughout the past
year, reaching a low point in early March before an interest rate cut sparked a
significant bounce. This rally continued throughout the summer, before entering
a two month correction phase in early September. At the time of writing, it
appears that the TASE may have once again turned upward.
The fundamental environment remains positive. Earnings growth continues to be
strong, and the market is currently valued at 14 to 15 times estimated 1995
earnings and 13 to 14 times projected 1996 earnings. These are attractive
valuations for an economy with the growth prospects of Israel's, particularly in
light of the
3
<PAGE>
THE FIRST ISRAEL FUND, INC.
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rapidly expanding global markets for Israeli companies' products. In many ways,
Israel combines the best elements of emerging markets (high growth; low level of
foreign investment) and of developed markets (highly educated workforce; good
infrastructure; strict accounting standards, etc.). We believe this market is
poised for strong returns throughout the remainder of the 1990s.
We wish to remind shareholders whose shares are registered in their own names
that they automatically participate in the Fund's dividend reinvestment program.
The automatic Dividend Reinvestment Plan (the "Plan") can be of value to
shareholders in maintaining their proportional ownership interest in the Fund in
an easy and convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Fund also offers shareholders a voluntary Cash
Purchase Plan. The Plan and the Cash Purchase Plan are described on pages 20 and
21 of this report.
We appreciate your interest in the Fund, and would be pleased to respond to your
questions or comments.
Respectfully,
[SIG]
Emilio Bassini
President
Chief Investment Officer*
- ------------------------
* Emilio Bassini, who is a member of the Executive Committee of BEA Associates
and holds the offices of Chief Financial Officer and Executive Director of BEA
Associates, is primarily responsible for management of the Fund's assets. He has
served in such capacity since the commencement of the Fund's operations. Mr.
Bassini joined BEA Associates (formerly Basic Appraisals, Inc. and BEA
Associates, Inc.) in 1984. Mr. Bassini is a Director, Chairman of the Board,
President and Chief Investment Officer of the Fund and is also a Director,
Chairman of the Board, President and Chief Investment Officer of The Chile Fund,
Inc., The Emerging Markets Infrastructure Fund, Inc., The Emerging Markets
Telecommunications Fund, Inc., The Latin America Equity Fund, Inc., The Latin
America Investment Fund, Inc. and The Portugal Fund, Inc. He is the President
and Secretary of The Indonesia Fund, Inc. and Director, Chairman of the Board,
President and Investment Officer of The Brazilian Equity Fund, Inc.
4
<PAGE>
THE FIRST ISRAEL FUND, INC.
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PORTFOLIO SUMMARY
AS OF SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BASIC MATERIALS 7.34%
<S> <C>
Conglomerates 4.77%
Consumer, Cyclical 1.97%
Consumer, Non-Cyclical 10.01%
Energy Services 2.01%
Financial 20.53%
Industrial 2.45%
Investment & Holding Companies 3.44%
Medical Equipment 2.41%
Technology 22.61%
Telecommunications 12.62%
Venture Capital 3.30%
Cash & Cash Equivalents 6.54%
100.00%
</TABLE>
THIS CHART REPRESENTS THE SECTOR ALLOCATION OF TOTAL NET ASSETS OF THE FUND.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
OF
HOLDING SECTOR NET ASSETS
<C> <S> <C> <C>
- ----------------------------------------------------------------------------
1. Geotek Communications, Inc.
- ----------------------------------------------------------------------------
2. Teva Pharmaceutical Industries Ltd.
- ----------------------------------------------------------------------------
3. Koor Industries, Ltd.
- ----------------------------------------------------------------------------
4. ECI Telecom Ltd.
- ----------------------------------------------------------------------------
5. Bank Hapoalim Ltd.
- ----------------------------------------------------------------------------
6. Scitex Corp. Ltd.
- ----------------------------------------------------------------------------
7. Bezeq, Israel Telecommunications Corp. Ltd.
- ----------------------------------------------------------------------------
8. Bank Leumi of Israel Ltd.
- ----------------------------------------------------------------------------
9. IDB Holdings Ltd.
- ----------------------------------------------------------------------------
10. DSP Group Inc.
- ----------------------------------------------------------------------------
<CAPTION>
- ---------
1. Telecommunications 5.33
- ---------
2. Pharmaceuticals 5.14
- ---------
3. Conglomerates 4.31
- ---------
4. Telecommunications 4.29
- ---------
5. Banking 3.42
- ---------
6. Industrial Technology 3.23
- ---------
7. Telecommunications 2.70
- ---------
8. Banking 2.55
- ---------
9. Banking 2.36
- ---------
10. Semiconductor & Related Technology 2.21
- ---------
</TABLE>
5
<PAGE>
THE FIRST ISRAEL FUND, INC.
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SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ----------- -------------------------------- ----------
<C> <S> <C>
EQUITY OR EQUITY-LINKED SECURITIES-93.46%
BASIC MATERIALS-7.34%
CHEMICALS-1.79%
21,901 Dead Sea Bromine Ltd.......... $ 160,215
65,178 Dead Sea Works Ltd............ 178,769
42,000 Makhteshim Chemical Works 255,202
Ltd..........................
54,073 Sano Brunos Enterprises Ltd. 254,221
(Shares 1)#..................
75,357 Sano Brunos Enterprises Ltd. 333,054
(Shares 5)#..................
----------
1,181,461
----------
METAL PRODUCTS-3.93%
73,640 Cvalim-The Electric Wire & 468,702
Cable Co. of Israel Ltd......
105,210 Caniel-Israel Can Co. Ltd..... 1,177,492
36,250 Klil Industries Ltd. (Shares 296,679
1)...........................
57,018 Klil Industries Ltd. (Shares 454,264
5)...........................
73,827 Nechushtan Ltd................ 202,744
----------
2,599,881
----------
WOOD & PAPER PRODUCTS-1.62%
19,263 American Israel Paper Mills 1,073,612
Ltd..........................
----------
4,854,954
TOTAL BASIC MATERIALS...........
----------
CONGLOMERATES-4.77%
19,780 Clal (Israel) Industries, 519,830
Ltd..........................
18,762 Koor Industries, Ltd.......... 1,770,095
<CAPTION>
PAR (000)
- -----------
<C> <S> <C>
NIS 600 Koor Industries, Ltd., 216,169
Convertible Note, 1.75%,
01/31/97.....................
600 Koor Industries, Ltd., 216,169
Convertible Note, 1.75%,
01/31/98.....................
600 Koor Industries, Ltd., 216,168
Convertible Note, 1.75%,
01/31/99.....................
600 Koor Industries, Ltd., 216,168
Convertible Note, 1.75%,
01/31/00.....................
----------
3,154,599
TOTAL CONGLOMERATES.............
----------
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ----------- -------------------------------- ----------
<C> <S> <C>
CONSUMER, CYCLICAL-1.97%
TEXTILES-1.97%
13,538 Fibrotec F.M.S. Ltd.#......... $ 55,374
86,881 Lodzia Rotex Textile Ltd.#.... 330,017
309,171 Polgat Industries Ltd.#....... 267,621
60,000 Zikit Textile Dyeing Works 653,179
Ltd..........................
----------
1,306,191
TOTAL CONSUMER, CYCLICAL........
----------
CONSUMER, NON-CYCLICAL-10.01%
TRADING COMPANIES-1.50%
34,806 Rapac Electronics Ltd......... 216,335
36,273 Super-Sol Ltd. B (Shares 778,915
.01).........................
----------
995,250
----------
FOOD & BEVERAGES-2.69%
140,742 Elite Industries Ltd.......... 611,527
62,620 Israel Cold Storage & Supply 408,129
Ltd. (Shares 5)..............
71,060 Mei-Eden Ltd.................. 345,423
8,213 Shemen Industries Ltd.#....... 415,430
----------
1,780,509
----------
PHARMACEUTICALS-5.82%
64,210 Taro Pharmaceutical Industries 445,457
Ltd. ADR#@...................
94,200 Teva Pharmaceutical Industries 3,402,975
Ltd. ADR@....................
----------
3,848,432
----------
6,624,191
TOTAL CONSUMER, NON-CYCLICAL....
----------
ENERGY SERVICES-2.01%
16,773 Delek-The Israel Fuel Co. 494,721
Ltd..........................
299,660 Granite Hacarmel Investments 476,054
Ltd..........................
72 Paz Oil Co. Ltd.*............. 360,329
----------
1,331,104
TOTAL ENERGY SERVICES...........
----------
FINANCIAL-20.53%
BANKING-9.97%
1,315,800 Bank Hapoalim Ltd............. 2,264,539
1,146,170 Bank Leumi of Israel Ltd...... 1,688,577
7,148 FIBI Holdings Ltd............. 1,078,036
436,224 IDB Holdings Ltd.............. 1,562,227
----------
6,593,379
----------
DIVERSIFIED FINANCIAL-0.22%
72,468 Nesuah Trading and Investment 148,828
in Securities Ltd............
----------
</TABLE>
6
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
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SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ----------- -------------------------------- ----------
<C> <S> <C>
INSURANCE-2.07%
145,330 Clal Insurance Enterprises $ 725,195
Holding Ltd..................
114,483 Harel Hamishmar Investments, 643,164
Ltd. (Shares 5)..............
----------
1,368,359
----------
MORTGAGE BANKING-2.69%
7,898 Israel Development & Mortgage 517,757
Bank Ltd.#...................
5,788 Mishkan Hapoalim Mortgage Bank 593,418
Ltd.#........................
1,186 Tefahot Israel Mortgage Bank 667,206
Ltd.#........................
----------
1,778,381
----------
REAL ESTATE &
CONSTRUCTION-5.58%
395 Africa Israel Investments Ltd. 572,855
(Shares 0.1)#................
550 Africa Israel Investments Ltd. 694,558
(Shares 1.0)#................
2,500 Azorim Investment Development 32,206
& Construction Ltd...........
41,625 C Holdings Ltd.#.............. 175,493
78,973 Dankner Investments Ltd.#..... 391,126
568,200 Industrial Buildings Corp. 752,225
Ltd..........................
174,251 Kardan Investments Ltd. 200,520
(Shares 5)#..................
13,089 Property & Building Corp. 871,741
Ltd..........................
----------
3,690,724
----------
13,579,671
TOTAL FINANCIAL.................
----------
INDUSTRIAL-2.45%
BUILDING PRODUCTS-1.85%
9,000 Ackerstein Ltd. (Shares 1)#... 38,525
77,120 Ackerstein Ltd. (Shares 5)#... 310,480
114,000 Wolfman Industries Ltd. 265,080
(Shares 5)#..................
182,302 Ytong Ltd..................... 613,263
----------
1,227,348
----------
TRANSPORTATION SERVICES-0.60%
160,400 Maman Cargo Terminal & 396,385
Handling Ltd.................
----------
1,623,733
TOTAL INDUSTRIAL................
----------
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ----------- -------------------------------- ----------
<C> <S> <C>
INVESTMENT & HOLDING
COMPANIES-3.44%
92,500 Ampal American Israel#@....... $ 531,875
92,500 Ampal American Israel, 46,250
Warrants (expiring
02/28/99)#@..................
10,617 Arad Investment & Industrial 151,766
Development Ltd.#............
5,900 Elco Holdings Ltd............. 264,908
125,173 Israel Land Development 367,968
Ltd..........................
20,400 PEC Israel Economic Corp. 510,000
Ltd.#........................
40 The Renaissance Fund*#,##..... 399,566
----------
2,272,333
TOTAL INVESTMENT & HOLDING
COMPANIES......................
----------
MEDICAL EQUIPMENT-2.41%
281,000 Elscint Ltd. ADR#@............ 737,625
81,000 Laser Industries, Ltd. ADR#@.. 810,000
38,000 Medis E Ltd.#@................ 47,500
----------
1,595,125
TOTAL MEDICAL EQUIPMENT.........
----------
TECHNOLOGY-22.61%
COMPUTER NETWORKING-2.57%
32,700 IIS Intelligent Information 91,969
Systems Ltd.#@...............
2,500 Ornet Data Comm. Tech. 708,550
Ltd.*#.......................
<CAPTION>
PAR (000)
- -----------
<C> <S> <C>
U.S.$ 175 Ornet Data Comm. Tech. Ltd., 175,000
Convertible Note,
03/31/96*#...................
61 Ornet Data Comm. Tech. Ltd., 61,200
Convertible Note,
07/20/96*#...................
<CAPTION>
NO. OF
SHARES
- -----------
<C> <S> <C>
769 Scorpio Communications 664,969
Inc.*#.......................
----------
1,701,688
----------
COMPUTER SOFTWARE-2.29%
69,000 Sapiens International Corp. 155,250
NV#@.........................
105,800 Tecnomatix Technologies, 1,362,175
Ltd.#@.......................
----------
1,517,425
----------
ELECTRONICS/ELECTRICAL
EQUIPMENT-2.19%
55,300 Lannet Data Communications 1,444,712
Ltd.#@.......................
----------
</TABLE>
7
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ----------- -------------------------------- ----------
<C> <S> <C>
DIVERSIFIED TECHNOLOGY-6.10%
3,404 Clal Electronic Industries $ 410,389
Ltd.#........................
50,000 Comverse Technology, Inc.#@... 1,087,500
7,257 Elbit Ltd..................... 531,829
17,500 Electra Ltd................... 516,998
18,658 Electra Consumers Products 261,892
Ltd..........................
28,154 Electronics Line Ltd.#........ 72,921
19,007 Elron Electronic Industries 734,105
Ltd..........................
87,942 Rada Electronic Industries, 417,725
Ltd. ADR#....................
----------
4,033,359
----------
INDUSTRIAL TECHNOLOGY-4.11%
267,857 Cubital, Ltd.*#............... 0
45,000 Orbotech, Ltd.#@.............. 579,375
113,300 Scitex Corp. Ltd.@............ 2,138,538
----------
2,717,913
----------
SEMICONDUCTOR &
RELATED TECHNOLOGY-5.35%
91,607 DSP Group Inc.#@+++........... 1,463,422
70,042 M-Systems Flash Disk Pioneers 196,118
Ltd.*#@......................
35,021 M-Systems Flash Disk Pioneers 32,377
Ltd., Warrants
(expiring 6/30/98)*#@........
177,345 Oshap Technologies#@.......... 554,203
93,572 P.C.B. Ltd.................... 209,639
308,432 Zoran Corp. Series L*#........ 155,071
299,514 Zoran Corp. Series K*#........ 898,542
219,135 Zoran Corp. Series K, Warrants 21,914
(expiring 07/31/98)*#........
75,000 Zoran Corp., Warrants 7,500
(expiring 07/31/96)*#........
----------
3,538,786
----------
14,953,883
TOTAL TECHNOLOGY................
----------
TELECOMMUNICATIONS-12.62%
578,365 Bezeq, Israel 1,784,629
Telecommunications Corp.
Ltd..........................
126,800 ECI Telecom Ltd.@............. 2,837,150
100 Geotek Communications, Inc. 1,068,767
Convertible Preferred Series
M, 8.50%*+++.................
269,600 Geotek Communications, 2,460,100
Inc.#@.......................
23,700 Teledata Communications 195,525
Inc.#@.......................
----------
8,346,171
TOTAL TELECOMMUNICATIONS........
----------
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ----------- -------------------------------- ----------
<C> <S> <C>
VENTURE CAPITAL-3.30%
650,000 Advent Israel Bermuda, $ 650,000
Ltd.*#,##+++.................
5 Star Venture Enterprises 1,000,000
II*#.........................
830,480 Teuza Muganot Ltd.#........... 284,730
250,000 Walden Israel Ventures, 250,000
L.P.*#,##....................
----------
2,184,730
TOTAL VENTURE CAPITAL...........
----------
61,826,685
TOTAL EQUITY OR EQUITY-LINKED
SECURITIES
(Cost $62,875,218).............
----------
</TABLE>
<TABLE>
<CAPTION>
PAR (000)
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENTS-6.82%
CONVERTIBLE DEBENTURE-0.33%
NIS 600 Koor Industries, Ltd., 216,169
1.75%, 01/31/96*..........
-----------
GRAND CAYMAN-3.49%
U.S.$2,305 Brown Brothers Harriman & 2,305,000
Co., Call Account,
4.75%++...................
-----------
U.S. GOVERNMENT OBLIGATION-3.00%
2,000 United States Treasury 1,986,776
Bill, 5.42%,** 11/16/95...
-----------
4,507,945
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,507,632)...........
-----------
66,334,630
TOTAL INVESTMENTS
(Cost $67,382,850)
(Notes A,D)-100.28%.........
(184,295)
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS-(0.28)%....
-----------
$66,150,335
NET ASSETS-100.00%...........
-----------
-----------
</TABLE>
- ------------------------------
* Not readily marketable security.
** Effective yield on the date of purchase.
# Security is non-income producing.
## As of September 30, 1995, the Fund committed to investing additional
capital in Advent Israel Bermuda, Ltd.--$350,000; The Renaissance
Fund--$200,832 and Walden Israel Ventures, L.P.--$250,000.
+ SEC Rule 144A security. Such securities are traded only among "qualified
institutional buyers".
++ Variable rate account. Rates reset on a daily basis; amounts available
generally on the same business day.
+++ Restricted Securities (See Note E).
@ Securities are traded on a U.S. stock exchange.
ADR American Depositary Receipts.
U.S.$ United States dollars.
NIS New Israeli shekel.
See accompanying notes to financial statements.
8
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $67,382,850) (Note A) $66,334,630
Cash 13,157
Receivables:
Note 86,657
Interest 11,865
Dividend 51,490
Prepaid expenses 4,080
Unamortized organizational costs (Note A) 146,220
-----------
Total Assets 66,648,099
-----------
LIABILITIES:
Payables:
Advisory fee (Note B) 233,226
Administration fee (Note B) 14,453
Other accrued expenses 250,085
-----------
Total Liabilities 497,764
-----------
NET ASSETS (applicable to 5,012,295 shares of common stock outstanding)
(Note C) $66,150,335
-----------
-----------
NET ASSET VALUE PER SHARE ($66,150,335 DIVIDED BY 5,012,295) $13.20
Net assets consist of:
Capital stock, $0.001 par value; 5,012,295 shares issued and outstanding
(100,000,000 shares authorized) $ 5,012
Paid-in capital 67,477,122
Distributions in excess of net realized gain on investments (285,713)
Net unrealized depreciation in value of investments and translation of
other
assets and liabilities denominated in foreign currencies (1,046,086)
-----------
Net assets applicable to shares outstanding $66,150,335
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income (Note A):
Dividends $ 784,725
Interest 293,748
Less: Foreign taxes withheld (124,864)
----------
Total Investment Income 953,609
----------
Expenses:
Investment advisory fees (Note B) 798,799
Custodian fees (Note B) 164,500
Administration fees (Note B) 87,557
Audit fees 72,999
Accounting fees 65,001
Amortization of organizational costs 63,539
Printing 60,001
Directors' fees (Note B) 57,000
Transfer agent fees 43,339
Legal fees 28,500
NYSE listing fee 12,828
Other 19,999
----------
Total Expenses 1,474,062
----------
Net Investment Loss (520,453)
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS:
Net realized gain/(loss) from:
Investments 1,669,722
Foreign currency related transactions (14,581)
Net change in unrealized depreciation in value of investments and
translation
of other assets and liabilities denominated in foreign currencies 6,160,580
----------
Net realized and unrealized gain on investments and foreign currency
related transactions 7,815,721
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,295,268
----------
----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER
30,
-----------------------------
1995 1994
------------- --------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment loss $ (520,453) $ (1,392,768)
Net realized gain/(loss) on investments and foreign currency related
transactions 1,655,141 (524,711)
Net change in unrealized appreciation/(depreciation) in value of investments
and translation of other assets and liabilities denominated in foreign
currencies 6,160,580 (15,881,692)
------------- --------------
Net increase/(decrease) in net assets resulting from operations 7,295,268 (17,799,171)
------------- --------------
Distributions to shareholders:
From net realized gains on investments and foreign currency related
transactions ($0.43 per share) -- (2,136,010)
In excess of net realized gains ($0.11 per share) -- (567,861)
------------- --------------
-- (2,703,871)
------------- --------------
Capital share transactions (Note C):
Proceeds from 5,126 shares issued in reinvestment of dividends -- 84,470
------------- --------------
Net increase in assets resulting from capital share transactions -- 84,470
------------- --------------
Total increase/(decrease) in net assets 7,295,268 (20,418,572)
NET ASSETS:
Beginning of year 58,855,067 79,273,639
------------- --------------
End of year $ 66,150,335 $ 58,855,067
------------- --------------
------------- --------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
INCREASE/(DECREASE) IN CASH FROM OPERATING ACTIVITIES:
Investment income received $ 920,654
Operating expenses paid (1,392,567)
------------
Net decrease in cash from operating activities $ (471,913)
INVESTING ACTIVITIES:
Purchases of long-term investments (12,349,997)
Proceeds from disposition of short-term investments, net 997,068
Proceeds from disposition of long-term portfolio investments 11,892,934
------------
Net increase in cash from investing activities 540,005
-----------
Net increase in cash 68,092
Due to custodian at beginning of year (54,935)
-----------
Cash at end of year $ 13,157
-----------
-----------
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM OPERATIONS TO
NET DECREASE IN CASH FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 7,295,268
ADJUSTMENTS:
Increase in dividend and interest receivable $ (32,955)
Decrease in accrued expenses 22,036
Increase in prepaid expenses 59,459
Net realized and unrealized gain on investments and foreign
currency related transactions (7,815,721)
------------
TOTAL ADJUSTMENTS (7,767,181)
-----------
NET DECREASE IN CASH FROM OPERATING ACTIVITIES: $ (471,913)
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
12
<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 YEAR ENDED FOR THE PERIOD
SEPTEMBER 30, OCTOBER 29, 1992*
-------------------------- THROUGH
1995 1994 SEPTEMBER 30, 1993
------------ ------------ ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.74 $ 15.83 $ 13.74**
------------ ------------ -------
Net investment loss (0.10) (0.28) (0.07)
Net realized and unrealized gain/(loss) on investments and foreign
currency related transactions 1.56 (3.27) 2.16
------------ ------------ -------
Net increase/(decrease) in net assets from operations 1.46 (3.55) 2.09
Distributions to shareholders:
From net realized gains on investments and foreign currency
related transactions -- (0.43) --
In excess of net realized gains -- (0.11) --
------------ ------------ -------
Total distributions to shareholders -- (0.54) --
------------ ------------ -------
Net asset value, end of period $ 13.20 $ 11.74 $ 15.83
------------ ------------ -------
------------ ------------ -------
Market value, end of period $ 12.00 $ 13.25 $ 17.38
------------ ------------ -------
------------ ------------ -------
Total investment return+ (9.43)% (21.26)% 24.58%
------------ ------------ -------
------------ ------------ -------
RATIO/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 66,150 $ 58,855 $ 79,274
Ratio of expenses to average net assets 2.57% 2.64% 2.41%***
Ratio of net investment loss to average net assets (0.91)% (2.08)% (0.50)%***
Portfolio turnover 22.17% 17.07% 34.80%++
Average commission rate per share $ 0.01
</TABLE>
- ------------------------
* Commencement of investment operations.
** Initial public offering price of $15.00 per share less underwriting discount
of $1.05 per share and offering expenses of $0.21 per share.
*** Annualized.
+ Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of
distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions or initial underwriting discounts and has not been annualized.
++ Not annualized.
See accompanying notes to financial statements.
13
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE A. 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. Significant
accounting policies are as follows:
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities for which market quotations are
readily available are valued at the last sales price or lacking any sales, at
the closing price last quoted for the securities (but if bid and asked
quotations are available, at the mean between the current bid and the asked
prices). Securities that are traded over-the-counter are valued at the mean
between the current bid and the asked prices. All other securities and assets
are valued at fair value as determined in good faith by the Board of Directors.
At September 30, 1995, board valued securities represented 10.05% of net assets
with of an aggregate cost of $6,571,191 and market value of $6,649,903.
Short-term investments having a maturity of 60 days or less are valued on the
basis of amortized cost. The net asset value per share of the Fund is calculated
weekly and at the end of each month and any other times determined by the Board
of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investment sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal 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 which will be sufficient to
relieve it from all or substantially all federal income and excise taxes.
In accordance with U.S. federal tax regulations, the Fund has elected to defer
$10,672 of realized foreign currency losses arising after October 31, 1994. Such
losses are treated for tax purposes as arising on October 1, 1995.
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 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. Dividends derived from
listed or approved securities are subject to 15% withholding tax, while
dividends from unlisted unapproved securities are subject to a 25% withholding
tax. Interest on debt obligations (whether listed or not) is subject to
withholding tax of 25% to 35%. The Fund records deferred Israeli Capital gains
taxes on the net unrealized appreciation on unlisted Israeli investments. At
September 30, 1995, there were no deferred Israeli capital gains taxes recorded
by the Fund.
FOREIGN CURRENCY TRANSLATION: 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
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the rate of exchange prevailing on the respective dates of such
transactions.
14
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
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. However, the Fund does isolate the
effect of fluctuations in foreign exchange rates when determining the gain or
loss upon the sale or maturity of foreign currency denominated debt obligations
pursuant to U.S. federal income tax regulations, with such amount categorized as
foreign exchange gain or loss for both financial reporting and income tax
reporting purposes.
Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation/depreciation on investments, foreign currency holdings,
and other assets and liabilities denominated in foreign currencies.
Net realized foreign exchange losses of $14,581 represent foreign exchange gains
and losses from sales and maturities of debt securities, holdings of foreign
currencies, transactions in forward foreign currency contracts, exchange gains
or losses realized between the trade date and settlement dates 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.
The Fund reports certain foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for U.S. federal income tax purposes.
DISTRIBUTIONS OF INCOME AND GAINS: The Fund intends to distribute at least
annually to its shareholders substantially all its investment company taxable
income. The Board of Directors of the Fund will determine annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses (including any capital loss carryovers). 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 from net investment income or net realized foreign currency related
transactions may differ from their ultimate characterization for federal income
tax purposes due to generally accepted accounting principles/tax differences in
the character of income and expense recognition.
OTHER: Costs incurred by the Fund in connection with its organization are being
amortized on a straight-line basis over a five-year period beginning at the
commencement of operations of the Fund.
Investments in Israeli securities involve certain factors that are not normally
associated with investments in U.S. securities. 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.
NOTE B. BEA Associates ("BEA") serves as the Fund's investment adviser. As
compensation for its advisory services, BEA receives from the Fund an annual
fee, calculated monthly and paid quarterly, equal to 1.30% of the Fund's average
weekly net assets invested in listed securities (including securities traded
over-the-counter in the United States) and 2.00% of the amount invested in
unlisted Israeli securities. For the period ended September 30, 1995, the fee
amounted to $798,799. BEA Associates also provides certain
15
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
administration services to the Fund and is reimbursed by the Fund for costs they
incur on behalf of the Fund (up to $20,000 per annum). For the fiscal year ended
September 30, 1995, BEA Associates was reimbursed $3,461 for administration
services rendered to the Fund.
Analyst I.M.S. and GIZA serve as the Fund's investment sub-advisers. Pursuant to
the sub-advisory agreement, BEA pays Analyst I.M.S. and GIZA out of its
quarterly fee each an amount equal to 0.20% of the Fund's average weekly net
assets. In addition, BEA pays Analyst I.M.S. and GIZA, out of its advisory fee
reimbursement for any Israeli Value Added taxes (currently 17%) and $12,500 to
each annually to cover expenses incurred in the provision of sub-advisory
services.
For the fiscal year ended September 30, 1995, the fees earned by Analyst I.M.S.
and GIZA amounted to $144,294 and $156,473, respectively.
Through August 9, 1995, Prudential Mutual Fund Management, Inc. ("PMF") served
as the Fund's administrator. The Fund paid PMF a fee that was computed weekly
and payable monthly at an annual rate of 0.15% of the Fund's average weekly net
assets. For the period October 1, 1994 through August 9, 1995, PMF earned
$73,888 for administrative services.
Effective August 10, 1995, 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 period August 10, 1995 through September 30, 1995, BSFM earned $10,208 for
administrative services.
Through September 4, 1995, PNC Bank, N.A. served as the Fund's transfer agent
and registrar. Effective September 5, 1995, The First National Bank of Boston
became the Fund's transfer agent and registrar.
The Fund pays each of its Directors who is not a director, officer or employee
of BEA Associates, Analyst I.M.S., GIZA, BSFM or any other affiliate thereof an
annual fee of $5,000 plus $500 for each Board of Directors meeting attended. In
addition, the Fund will reimburse these Directors for travel and out-of-pocket
expenses incurred in connection with Board of Directors meetings.
Brown Brothers Harriman & Co., Boston, Massachusetts, serves as the Fund's
accounting agent and custodian of the Fund's assets.
NOTE C. The authorized capital stock of the Fund is 100,000,000 shares of common
stock, $0.001 par value. Of the 5,012,295 shares outstanding at September 30,
1995, BEA Associates owned 7,169 shares.
NOTE D. For U.S. federal income tax purposes, the cost of securities owned at
September 30, 1995 was $67,657,086. Accordingly, the net unrealized depreciation
of investments (including investments denominated in foreign currencies) of
$1,322,456, was composed of gross appreciation of $9,494,544 for those
investments having an excess of value over cost and gross depreciation of
$10,817,000 for those investments having an excess of cost over value.
For the fiscal year ended September 30, 1995, total purchases and sales of
securities, other than short-term obligations, aggregated $12,176,247 and
$11,862,604, respectively.
NOTE E. RESTRICTED SECURITIES: Certain of the Fund's investments are restricted
as to resale and are valued at the direction of the Fund's Board of Directors in
good faith, at fair value, after taking into consideration
16
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
available indications of value. The table below shows the number of shares held,
the acquisition date, value as of September 30, 1995, percentage of net assets
which the securities comprise, aggregate cost and unit value of the securities.
<TABLE>
<CAPTION>
NUMBER OF ACQUISITION 9/30/95 PERCENTAGE OF VALUE PER
SECURITY SHARES DATE FAIR VALUE NET ASSETS COST SHARE
- -------------------------------------- ----------- ----------- ---------- --------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Walden Israel Ventures................ 125,000 10/1/93 $ 125,000 0.19% $ 125,000 $ 1.00
Walden Israel Ventures................ 125,000 5/27/95 125,000 0.19% 125,000 1.00
Advent Israel Bermuda, Ltd............ 650,000 6/18/93 650,000 0.98% 650,000 1.00
</TABLE>
NOTE F. The Fund, along with 15 other U.S. regulated investment companies for
which BEA serves as investment adviser, has a credit agreement with The First
National Bank of Boston. The agreement provides that each fund is permitted to
borrow an amount equal to the lesser of $50,000,000 or 25% of the net assets of
the fund. However, at no time shall the aggregate outstanding principal amount
of all loans to any of the 16 funds exceed $50,000,000. The line of credit will
bear interest at (i) the greater of the bank's prime rate or the Federal Funds
Effective Rate plus 0.50% or (ii) the Adjusted Eurodollar Rate plus 1.50%. The
Fund had no amounts outstanding under the line of credit agreement at September
30, 1995.
NOTE G. Quarterly Results of Operations (unaudited):
<TABLE>
<CAPTION>
NET GAIN/(LOSS)
ON INVESTMENTS AND NET INCREASE/
(DECREASE)
FOREIGN CURRENCY IN NET ASSETS
INVESTMENT NET INVESTMENT DENOMINATED RESULTING MARKET
INCOME/(LOSS) INCOME/(LOSS) TRANSACTIONS FROM OPERATIONS PRICE
-------------------- -------------------- -------------------- -------------------- ON NYSE
TOTAL TOTAL TOTAL TOTAL ---------
QUARTER ENDED (000) PER SHARE (000) PER SHARE (000) PER SHARE (000) PER SHARE HIGH
- --------------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1994................ $ 308 $ 0.06 $ (104) $ (0.02) $ (5,008) $ (1.00) $ (5,112) $ (1.02) $ 13.750
March 31, 1995................... 113 0.02 (275) (0.05) 1,262 0.25 987 0.20 11.375
June 30, 1995.................... 241 0.05 (169) (0.03) 6,740 1.35 6,571 1.32 12.875
September 30, 1995............... 292 0.06 27 0.00 4,822 0.96 4,849 0.96 12.625
--------- --------- --------- --------- --------- --------- --------- ---------
Totals........................... $ 954 $ 0.19 $ (521) $ (0.10) $ 7,816 $ 1.56 $ 7,295 $ 1.46
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
December 31, 1993................ $ 353 $ 0.07 $ (121) $ (0.02) $ 4,559 $ 0.92 $ 4,438 $ 0.90 $ 17.375
March 31, 1994................... (12) (0.00) (482) (0.10) (14,622) (2.92) (15,104) (3.02) 20.250
June 30, 1994.................... 199 0.03 (195) (0.04) (15,361) (3.08) (15,556) (3.12) 17.250
September 30, 1994............... (110) (0.02) (595) (0.12) 9,018 1.81 8,423 1.69 14.875
--------- --------- --------- --------- --------- --------- --------- ---------
Totals........................... $ 430 $ 0.08 $ (1,393) $ (0.28) $ (16,406) $ (3.27) $ (17,799) $ (3.55)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
QUARTER ENDED LOW
- --------------------------------- ---------
<S> <C>
December 31, 1994................ $ 9.500
March 31, 1995................... 9.000
June 30, 1995.................... 10.375
September 30, 1995............... 11.500
Totals...........................
December 31, 1993................ $ 14.625
March 31, 1994................... 14.875
June 30, 1994.................... 12.000
September 30, 1994............... 11.000
Totals...........................
</TABLE>
17
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The First Israel Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
First Israel Fund, Inc. (the "Fund"), including the schedule of investments, as
of September 30, 1995, and the related statement of operations and cash flows
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held by the
custodians as of September 30, 1995. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund, as of September 30, 1995, the results of its operations and cash flows for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
November 10, 1995
18
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS
(UNAUDITED)
On January 10, 1995, the annual meeting of shareholders for The First Israel
Fund, Inc. (the "Fund") was held and the following matters were voted upon:
(1) To re-elect three directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
- ----------------------------------- ---------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
Zeev Holtzman...................... 3,451,682 -- 41,266 1,519,347
George Landau...................... 3,451,820 -- 41,128 1,519,347
Daniel Sigg........................ 3,450,072 -- 42,876 1,519,347
</TABLE>
In addition to the directors elected at the meeting, Emilio Bassini, Peter
Gordon, Jonathan Lubell and Steven Rappaport, continue to serve as directors of
the Fund.
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the Fund for the fiscal year ending September 30, 1995.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
---------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
3,446,043 24,442 22,463 1,519,347
</TABLE>
19
<PAGE>
THE FIRST ISRAEL FUND, INC.
- --------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND'S DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to The First Israel Fund, Inc. (the "Fund") Dividend Reinvestment and
Cash Purchase Plan (the "Plan"), each shareholder will be deemed to have
elected, unless The First National Bank of Boston, the Fund's transfer agent, as
the Plan Agent (the "Plan Agent"), is otherwise instructed by the shareholder in
writing, to have all distributions, net of any applicable U.S. withholding tax,
automatically reinvested in additional shares of the Fund. Shareholders who do
not participate in the Plan will receive all dividends and distributions in
cash, net of any applicable U.S. withholding tax, paid in dollars by check
mailed directly to the shareholder by the Plan Agent, as dividend-paying agent.
Shareholders who do not wish to have dividends and distributions automatically
reinvested should notify the Plan Agent for the Fund at the address set forth
below. Dividends and distributions with respect to shares registered in the name
of a broker-dealer or other nominee (i.e., in "street name") will be reinvested
under the Plan unless such service is not provided by the broker or nominee, or
the shareholder elects to receive dividends and distributions in cash. A
shareholder whose shares are held by a broker or nominee that does not provide a
dividend reinvestment program may be required to have his shares registered in
his own name to participate in the Plan. Investors who owns shares of the Fund's
Common Stock registered in street name should contact the broker or nominee for
details concerning participation in the Plan.
Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Fund and (b) certain capital gains earned by the
Fund that are derived from securities of certain foreign issuers are subject to
taxes payable by the Fund at the time amounts are remitted. Such taxes, if any,
will by borne by the Fund and allocated to all shareholders in proportion to
their interests in the Fund.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Board of Directors of the Fund declares an income dividend or a capital
gains distribution payable either in the Fund's common stock or in cash, as
shareholders may have elected, nonparticipants in the Plan will receive cash and
participants in the Plan will receive common stock to be issued by the Fund. If
the market price per share on the valuation date equals or exceeds net asset
value per share on that date, the Fund will issue new shares to participants
valued at net asset value or, if the net asset value is less than 95% of the
market price on the valuation date, then valued at 95% of the market price. If
net asset value per share on the valuation date exceeds the market price per
share on that date, participants in the Plan will receive shares of stock from
the Fund valued at the market price.
The valuation date is the dividend or distribution payment date or, if that date
is not a New York Stock Exchange trading day, the next preceding trading day. If
the Fund should declare an income dividend or capital gains distribution payable
only in cash the Plan Agent will, as agent for the participants, buy Fund shares
in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts on, or shortly after, the payment date.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
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THE FIRST ISRAEL FUND, INC.
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In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the name and held for
the account of beneficial owners who are to participate in the Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either stock or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a Result of dividends or capital gains
distributions payable either in stock or in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
or capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan Agent will be purchasing stock for all participants in block
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase of the Fund's common stock on his own behalf.
The receipt of dividends and distributions in stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends or distributions.
The Fund and the Plan Agent reserve the right to terminate the Plan as applied
to any dividend or distribution paid subsequent to notice of the termination
sent to the members of the Plan at the record date for dividends or
distributions. The Plan also may be amended by the Fund or the Plan Agent, but
(except when necessary or appropriate to comply with applicable law, rules or
policies of a regulatory authority) only by at least 30 days' written notice to
members of the Plan. All correspondence concerning the Plan should be directed
to the Plan Agent, The First National Bank of Boston, Investor Relations
Department, P.O. Box 644, Mail Stop 45-02-09, Boston, Massachusetts 02102-0644
or by telephone at 1-800-730-6001.
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INVESTMENT ADVISER
THE FIRST ISRAEL FUND, INC.
BEA Associates
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New York, New York
INVESTMENT SUB-ADVISERS
Analyst I.M.S.
Tel Aviv, Israel
GIZA
Tel Aviv, Israel
ADMINISTRATOR
Bear Stearns Funds Management Inc.
New York, New York
[LOGO]
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
THE FIRST ISRAEL FUND, INC.
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a
ANNUAL REPORT
prospectus, circular or representation intended for use in the
SEPTEMBER 30, 1995
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
