<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
THE FIRST ISRAEL FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MICHAEL A. PIGNATARO
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
Capital stock, par value $.001 per share
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.
ONE CITICORP CENTER
153 EAST 53RD STREET
57TH FLOOR
NEW YORK, NEW YORK 10022
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, FEBRUARY 9, 1999
-----------------
TO THE SHAREHOLDERS OF
THE FIRST ISRAEL FUND, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The First
Israel Fund, Inc. (the "Fund") will be held in the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, 33rd Floor, New York, New York
10022, on Tuesday, February 9, 1999 commencing at 2:00 p.m., for the following
purposes:
(1) To elect three (3) directors of the Fund.
(2) To ratify the selection of PricewaterhouseCoopers LLP as independent
public accountants for the Fund for the fiscal year ending September
30, 1999.
(3) To approve or reject the shareholder proposal recommending that the
Fund be converted into an open-end investment company.
(4) To consider and act upon such other matters as may properly come
before the meeting or any adjournment thereof.
The close of business on December 21, 1998 has been fixed as the record date
for the determination of the shareholders entitled to notice of, and to vote at,
the meeting.
This notice and related proxy material are first being mailed on or about
December 30, 1998.
By order of the Board of Directors,
/s/ Michael A. Pignataro
MICHAEL A. PIGNATARO
SECRETARY
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AND VOTED AT THE MEETING. ACCORDINGLY, PLEASE DATE,
SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT YOUR PROXY CARD BE RETURNED
PROMPTLY IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION.
Dated: December 30, 1998
New York, New York
<PAGE>
THE FIRST ISRAEL FUND, INC.
ONE CITICORP CENTER
153 EAST 53RD STREET
57TH FLOOR
NEW YORK, NEW YORK 10022
-------------------
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, FEBRUARY 9, 1999
-----------------
This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors (the "Board") of The First Israel Fund, Inc.
(the "Fund") for use at the Annual Meeting of Shareholders to be held at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, 33rd
Floor, New York, New York 10022 on Tuesday, February 9, 1999 commencing at 2:00
p.m. and at any adjournment thereof (collectively, the "Meeting"). A Notice of
Annual Meeting of Shareholders and a proxy card (the "Proxy") accompany this
Proxy Statement. Proxy solicitations will be made primarily by mail, but
solicitations may also be made by telephone, telegraph or personal interviews
conducted by officers or employees of the Fund, BEA Associates ("BEA"), the
investment adviser to the Fund, Bear Stearns Funds Management Inc., the
administrator of the Fund (the "Administrator") or MacKenzie Partners Inc,
("MacKenzie"), a proxy solicitation firm that has been retained by the Fund and
which will receive a fee not to exceed $10,000 and will be reimbursed for its
reasonable out of pocket expenses. All costs of solicitation, including (a)
printing and mailing of this Proxy Statement and accompanying material, (b) the
reimbursement of brokerage firms and others for their expenses in forwarding
solicitation material to the beneficial owners of the Fund's shares, (c) payment
of MacKenzie for its services in soliciting Proxies and (d) supplementary
solicitations to submit Proxies, will be borne by the Fund. This Proxy Statement
is expected to be mailed to shareholders on or about December 30, 1998.
The principal executive office of BEA is One Citicorp Center, 153 East 53rd
Street, 57th Floor, New York, New York 10022. The principal executive office of
the Administrator is 245 Park Avenue, 15th Floor, New York, New York 10167.
The Fund's Annual Report containing audited financial statements for the
fiscal year ended September 30, 1998 has been previously furnished to all
shareholders of the Fund. It is not to be regarded as proxy soliciting material.
If the enclosed Proxy is properly executed and returned in time to be voted
at the Meeting, the shares represented thereby will be voted in accordance with
the instructions marked on the Proxy. If no instructions are marked on the
Proxy, the Proxy will be voted FOR the election of the nominees for Directors,
FOR the ratification of PricewaterhouseCoopers LLP as independent public
accountants for the fiscal year ending September 30, 1999, AGAINST the
shareholder proposal recommending that the Fund be converted into an open-end
investment company and, in accordance with the judgment of the persons named in
the Proxy on any other matters that may properly come before the Meeting and
that are deemed appropriate. Any shareholder giving a Proxy has the right to
attend the Meeting to vote his or her shares in person (thereby revoking any
prior Proxy) and also the right to revoke the Proxy at any time by written
notice received by the Fund prior to the time it is voted.
1
<PAGE>
A quorum of shareholders is constituted by the presence in person or by
proxy of the holders of a majority of the outstanding shares of the Fund
entitled to vote at the Meeting. For purposes of determining the presence of a
quorum for transacting business at the Meeting, abstentions and broker
"non-votes" (that is, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be treated as shares
that are present but which have not been voted.
Approval of Proposal 1 requires that each nominee receive the affirmative
vote of a plurality of votes cast in person or by proxy at the Meeting for his
respective Class. Proposal 2 and Proposal 3 require the affirmative vote of a
majority of the votes cast on each proposal at the Meeting in person or by
proxy. Because abstentions and broker non-votes on a proposal are not treated as
shares voted, any abstentions and broker non-votes would have no impact on
Proposals 1, 2 or 3.
The Fund has one class of shares of capital stock, par value $0.001 per
share (the "Shares"). On the record date, December 21, 1998, there were
5,012,295 Shares issued and outstanding. Each Share is entitled to one vote at
the Meeting, and fractional Shares are entitled to proportionate shares of one
vote.
In order that your Shares may be represented at the Meeting, you are
requested to:
--indicate your instructions on the Proxy;
--date and sign the Proxy;
--mail the Proxy promptly in the enclosed envelope;
-- allow sufficient time for the Proxy to be received on or before 2:00 p.m.
on February 9, 1999.
PROPOSAL 1: ELECTION OF DIRECTORS
The first proposal to be submitted at the Meeting will be the election of
three (3) directors of the Fund, Messrs. Jonathan W. Lubell and Steven N.
Rappaport to serve as Class II Directors until the 2002 Annual Meeting of the
Fund and Mr. Richard W. Watt to serve as a Class I Director until the 2001
Annual Meeting of the Fund, each to hold office until his successor is elected
and qualified. In order to be elected pursuant to Proposal 1, each nominee will
need the affirmative vote of a plurality of the votes cast in person or by proxy
at the Meeting for his respective Class.
The Fund's Articles of Incorporation classifies the Board of Directors into
three classes, as nearly equal in number as possible. Each year the term of
office of one class will expire and the successor or successors elected to such
class generally serve for a three-year term. The current classes of directors
are as indicated below:
<TABLE>
<S> <C>
Class I Director: Class II Directors:
George W. Landau Jonathan W. Lubell
Steven N. Rappaport
Richard W. Watt
Class III Directors:
Dr. Enrique R. Arzac
Peter A. Gordon
William W. Priest, Jr.
</TABLE>
2
<PAGE>
Each of the nominees currently serve as a director of the Fund and each
nominee has indicated an intention to continue to serve if elected and has
consented to being named in this Proxy Statement. As a result of the resignation
of two Class I Directors in 1997, the size of the Board of Directors was reduced
from nine members to seven members. Richard W. Watt, who is currently a Class II
Director, has agreed to stand for re-election at this year's Annual Meeting as a
Class I Director in order to maintain as even a distribution of directors as
possible among the three classes as specified in the Fund's Articles of
Incorporation. Each nominee who is deemed an "interested person" of the Fund, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"), is
indicated by an asterisk. Messrs. Priest and Watt are interested persons of the
Fund by virtue of their positions as directors and/or officers of BEA.
The following table sets forth certain information regarding the nominees
for election to the Board of the Fund, directors whose terms of office continue
beyond the 1999 annual meeting, and the officers and directors of the Fund as a
group. Each of the nominees, directors and officers of the Fund has sole voting
and investment power with respect to the Shares shown. Each nominee, each
director and the officers and directors of the Fund as a group owns less than
one percent of the outstanding Shares of the Fund.
<TABLE>
<CAPTION>
SHARES MEMBERSHIP ON BOARDS
BENEFICIALLY LENGTH OF SERVICE AS OF OTHER REGISTERED
OWNED ON CURRENT PRINCIPAL OCCUPATION AND DIRECTOR AND TIME OF INVESTMENT COMPANIES
DECEMBER 21, PRINCIPAL EMPLOYMENT DURING THE MEMBERSHIP ON BOARD AND PUBLICLY HELD
NAME (AGE) 1998 PAST FIVE YEARS OF THE FUND COMPANIES
- ----------------------------------- ------------ --------------------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Dr. Enrique R. Arzac (57).......... 200 Professor of Finance and Since 1996; current Director of nine
Columbia University Economics, Graduate School of term ends at the 2000 other BEA-advised
Graduate School of Business, Columbia University annual meeting. investment companies;
Business (1971-present). Director of The Adams
New York, NY 10027 Express Company;
Director of Pe-
troleum and Resources
Corporation.
Peter A. Gordon (56)............... 0 Currently retired; General Since 1994; current Director of five
284 Coopers Neck Lane Partner of Ethos Capital term ends at the 2000 other BEA-advised
P.O. Box 1327 Management Inc. (1992-1995); annual meeting. investment companies;
Southampton, NY 11968 Managing Director of Salomon Director of TCS Fund;
Brothers Inc (1982-1992). Director of the Mills
Corporation.
George W. Landau (78).............. 1,000 Senior Advisor, The Latin Since 1995; current Director of six other
2 Grove Isle Drive #1609 American Group, the Coca-Cola term ends at the 2001 BEA-advised
Coconut Grove, FL 33133 Corporation (1988-present); annual meeting. investment companies;
President of the Americas Society Director of Emigrant
and Council of the Americas Savings Bank;
(1985-1993); United States Director of GAM Funds
Ambassador to Venezuela (USA), Inc.
(1982-1985); United States
Ambassador to Chile (1977-1982)
and United States Ambassador to
Paraguay (1972-1977).
Jonathan W. Lubell (68)............ 0 Partner in the law firm of Since inception; Director of one other
750 Lexington Ave. Morrison Cohen Singer & Weinstein current term ends at BEA-advised
New York, NY 10022 (1989-present). the 1999 annual investment company.
meeting.
William W. Priest, Jr.* (56)....... 1,000 Chairman -- Management Committee, Since 1997; current Director of ten other
153 East 53rd Street Chief Executive Officer and term ends at the 2000 BEA-advised
New York, NY 10022 Executive Director of BEA annual meeting. investment companies.
(1990-present); Director of TIG
Holdings, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SHARES MEMBERSHIP ON BOARDS
BENEFICIALLY LENGTH OF SERVICE AS OF OTHER REGISTERED
OWNED ON CURRENT PRINCIPAL OCCUPATION AND DIRECTOR AND TIME OF INVESTMENT COMPANIES
DECEMBER 21, PRINCIPAL EMPLOYMENT DURING THE MEMBERSHIP ON BOARD AND PUBLICLY HELD
NAME (AGE) 1998 PAST FIVE YEARS OF THE FUND COMPANIES
- ----------------------------------- ------------ --------------------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Steven N. Rappaport (49)........... 2,000 President of Loanet, Inc. Since inception;
153 East 53rd Street (1997-present); Executive Vice current term ends at
New York, NY 10022 President of Loanet, Inc. the 1999 annual
(1994-present); Director, meeting.
President, North American
Operations, and former Executive
Vice President (1992-1993) of
Worldwide Operations of Metallurg
Inc. (metal alloy company);
Executive Vice President,
Telerate, Inc. (1987-1992);
Partner, in the law firm of
Hartman & Craven until 1987.
Richard W. Watt* (40).............. 1,760 Managing Director of BEA (1996- Since 1997; current Director of seven
153 East 53rd Street present); Senior Vice President term ends at the 1999 other BEA-advised
New York, NY 10022 of BEA (1995-1996); Head of annual meeting. investment companies.
Emerging Markets Investments and
Research at Gartmore Investment
Limited (1992-1995); Director of
Kleinwort Benson International
Investment (1987-1992).
All directors and officers
(11 persons, including the
foregoing) as a group............. 6,160 -- -- --
</TABLE>
During the fiscal year ended September 30, 1998, each director who is not a
director, officer, partner, co-partner or employee of BEA, the Administrator, or
any affiliate thereof, was entitled to receive an annual fee of $5,000 and $500
for each meeting of the Board attended by him and was reimbursed for expenses
incurred in connection with his attendance at the Board meetings. The aggregate
remuneration accrued to directors by the Fund during fiscal 1998 was $39,500,
all of which has already been paid. During the fiscal year ended September 30,
1998, the Board convened seven times. Each director attended at least seventy-
five percent of the aggregate number of meetings of the Board. Each director,
other than Mr. Lubell, attended at least seventy-five percent of the aggregate
number of meetings of any committee on which they served.
Messrs. Arzac, Rappaport, Gordon, Landau and Lubell constitute the Fund's
Audit Committee, which is composed of directors who are not interested persons
of the Fund as defined by the 1940 Act. The Audit Committee advises the full
Board with respect to accounting, auditing and financial matters affecting the
Fund. There is also a Valuation Committee composed of Messrs. Gordon, Landau and
Watt which reviews prices of illiquid or restricted securities. The entire Board
performs the functions of a nominating committee. The Fund does not have a
compensation committee.
Section 16(a) of the Securities Exchange Act of 1934 and Section 30(f) of
the 1940 Act require the Fund's officers and directors, officers and directors
of the investment adviser, affiliated persons of the investment adviser and
persons who beneficially own more than ten percent of the Fund's Shares to file
reports of ownership with the Securities and Exchange Commission (the "SEC"),
the New York Stock Exchange and the Fund. Based solely upon its review of the
copies of such forms received by it and written representations from such
persons, the Fund believes that, during the fiscal year ended September 30,
1998, all filing requirements applicable to such persons were complied with.
4
<PAGE>
The following table shows certain information about the officers of the Fund
other than Messrs. Priest and Watt, who are described above. Mr. Priest has been
Chairman of the Board of the Fund since February, 1997. Mr. Watt has been
President and Chief Investment Officer of the Fund since January, 1997. Mr.
Pignataro has been Chief Financial Officer and Secretary of the Fund since the
Fund commenced operations in October, 1992. Mr. Liebes has been Senior Vice
President of the Fund and Mr. Del Guercio has been Vice President of the Fund
since August, 1997. Mr. Wildeman has been the Investment Officer of the Fund
since February, 1998. Each officer of the Fund will hold office until a
successor has been elected by the Board. All officers of the Fund are employees
of and are compensated by BEA.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED ON DECEMBER POSITION WITH CURRENT PRINCIPAL OCCUPATION AND PRINCIPAL
NAME AGE 21, 1998 FUND EMPLOYMENT DURING THE PAST FIVE YEARS
- -------------------------- --- ----------------- --------------- -----------------------------------------------
<S> <C> <C> <C> <C>
Hal Liebes................ 34 0 Senior Vice Senior Vice President and General Counsel of
153 East 53rd Street President BEA (1995-present); Chief Compliance Officer,
New York, NY 10022 CS First Boston Investment Management Cor-
poration (1994-1995) Staff Attorney, Division
of Enforcement, U.S. Securities and Exchange
Commission (1991-1994); Associate, Morgan,
Lewis & Bockius (1989-1991).
Rocco A. Del Guercio...... 35 0 Vice President Administrative Officer for BEA-advised invest-
153 East 53rd Street ment companies (1996-present); Assistant Trea-
New York, NY 10022 surer, Bankers Trust Corp. -- Fund Administra-
tion (1994-1996); Mutual Fund Accounting Su-
pervisor, Dreyfus Corporation (1987-1994).
Michael A. Pignataro...... 39 0 Chief Financial Vice President of BEA (1995-present); Assistant
153 East 53rd Street Officer and Vice President and Chief Administrative Officer
New York, NY 10022 Secretary for Investment Companies of BEA (1989-1995).
Sam C. Wildeman........... 26 200 Investment Of- Research Analyst and Portfolio Manager, BEA
153 East 53rd Street ficer (1996-present); Research Analyst, Lehman
New York, NY 10022 Brothers Inc. (1994-1996); Full time student,
Carnegie Mellon University (1991-1994).
</TABLE>
The following table shows certain compensation information for the directors
of the Fund for the fiscal year ended September 30, 1998. None of the Fund's
executive officers or directors who are also officers or directors of BEA
received any compensation from the Fund for such period. The Fund has no bonus,
profit sharing, pension or retirement plans.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------
(3)
PENSION OR (4) (5)
RETIREMENT ESTIMATED TOTAL TOTAL NUMBER OF
(2) BENEFITS ANNUAL COMPENSATION FROM BOARDS OF BEA-
AGGREGATE ACCRUED AS BENEFITS FUND AND FUND ADVISED
(1) COMPENSATION PART OF FUND UPON COMPLEX PAID TO INVESTMENT
NAME OF DIRECTOR FROM FUND EXPENSES RETIREMENT DIRECTORS COMPANIES SERVED
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dr. Enrique R.
Arzac............... $ 8,000 N/A N/A $ 92,500 10
Peter A. Gordon...... $ 8,000 N/A N/A $ 51,500 6
George W. Landau..... $ 8,000 N/A N/A $ 59,000 7
Jonathan W. Lubell... $ 7,500 N/A N/A $ 14,500 2
Steven N.
Rappaport........... $ 8,000 N/A N/A $ 8,000 1
</TABLE>
5
<PAGE>
THE BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" THE NOMINEES FOR DIRECTORS.
PROPOSAL 2: RATIFICATION OR REJECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The second proposal to be submitted at the Meeting will be the ratification
or rejection of the selection by the Board of PricewaterhouseCoopers LLP as
independent public accountants for the Fund for the present fiscal year ending
September 30, 1999. This proposal will require for approval the affirmative vote
of a majority of the votes cast at the Meeting in person or by proxy. At a
meeting held on November 10, 1998, the Board, including those directors who are
not "interested persons" of the Fund, approved the selection of
PricewaterhouseCoopers LLP for the fiscal year ending September 30, 1999.
PricewaterhouseCoopers LLP (as successor to Coopers & Lybrand L.L.P.) has been
the Fund's independent public accountants since the Fund commenced operations in
October 1992, and has informed the Fund that it has no material direct or
indirect financial interest in the Fund. Effective July 1, 1998, with the
completion of the merger between Coopers & Lybrand L.L.P. and Price Waterhouse
LLP, the newly formed PricewaterhouseCoopers LLP began acting as the Fund's
independent public accountants. A representative of PricewaterhouseCoopers LLP
will be present at the Meeting and will have the opportunity to make a statement
if the representative so desires and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE FUND.
PROPOSAL 3: SHAREHOLDER PROPOSAL
The Fund has received the following proposal and supporting statement from
Opportunity Partners L.P. which advised the Fund that, at the time it submitted
its proposal to the Fund, it had owned shares of the Fund with a market value of
at least $2,000 continuously for the preceding year. The Fund will provide the
address of Opportunity Partners L.P. to any person who so requests such
information orally or in writing, promptly upon the receipt of any oral or
written request therefor, to BEA at 153 East 53rd Street, 57th Floor, New York,
New York 10022, telephone number 1-800-293-1232. The Board and the Fund accept
no responsibility for the accuracy of either the proposal or Opportunity
Partners L.P.'s supporting statement. Approval of this shareholder proposal
requires the affirmative vote of a majority of the votes cast in person or by
proxy with respect to the proposal. However, in the event that this shareholder
proposal is approved and a majority of the Board of Directors vote to proceed
with converting the Fund to an open-end company, it will be necessary to call
another meeting of shareholders at which, shareholders will be asked to vote to
amend the Articles of Incorporation of the Fund to make the Common Stock of the
Fund a "redeemable security" as defined in the 1940 Act. Approval of that
proposal would require the affirmative vote of 75% of the Shares of the Fund
entitled to be voted on the matter. For the reasons set forth in detail in the
Opposing Statement of the Board of Directors, which follows Opportunity Partners
L.P.'s Supporting Statement, the Board, including the "non-interested
directors," recommends a vote AGAINST this shareholder proposal. The text of the
shareholder proposal and supporting statement is as follows:
Resolved: "It is recommended that the Fund be converted from a closed-end to
an open-end investment company."
6
<PAGE>
SUPPORTING STATEMENT
"Our fund has traded at a big discount to NAV for a long time. On September
25, 1998, the Fund's discount was greater than 23%. That's almost $18 million of
shareholders assets unavailable to shareholders. Adding insult to injury, BEA
Associates, the Fund's investment advisor, "earns" fees on that $18 million even
though shareholders can't realize it.
The time has come to take action to reduce the discount and increase the
value of our shares. We recommend that the Fund be converted to an open-end
fund. This action will do several things:
1) Eliminate the discount to NAV.
2) Increase the value of our investment.
3) Allow those shareholders wishing to exit to do so at full value, ANY TIME
THEY WISH.
4) Lower the Fund's expense ratio over time by increasing its asset base.
Undoubtedly, the board of directors and BEA will oppose our proposal. They
will provide you with a litany of reasons on why the Fund should remain
closed-end. Please take all their reasons with a large grain of salt. Just keep
two things in mind:
1) Some of the so-called independent directors serve on the boards of several
other investment funds managed by BEA. For this "service" they collect
thousands of dollars per year. These directors were selected by BEA. They
are supposed to be looking out for shareholders but we think their loyalties
are with BEA.
2) BEA wants to keep the fund closed because it likes captive assets and the
fees that go with them. If the Fund open-ends, shareholders may redeem some
shares at NAV, which would adversely affect BEA's management fees.
As a shareholder, it is our opinion that any theoretical advantage of
remaining closed is far outweighed by the disadvantage of a big discount.
In addition, we believe that a vast market may exist for an open-end
investment company investing in Israel. The closed-end structure limits the
ability of the Fund to raise capital. With an open-end format, the Fund can be
actively marketed and assets under management increased. This would reduce the
expense ratio over time for all shareholders and mitigate any short-term
increase in the expense ratio caused by redemptions.
Management has not taken any meaningful action to narrow the discount. We,
the shareholders must decide what is in our own best interests. A vote for
open-ending is a vote for increasing the value of our shares."
OPPOSING STATEMENT OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE PROPOSAL DESCRIBED ABOVE AND
STRONGLY URGES ALL SHAREHOLDERS TO VOTE AGAINST THE PROPOSAL FOR THE REASONS
NOTED BELOW.
On November 10, 1998, the Board unanimously resolved to recommend that you
vote AGAINST this Proposal.
7
<PAGE>
The Board of Directors monitors the Fund's market discount and analyze
available remedial actions on an on-going basis, including at their quarterly
Board meetings, and held a meeting on April 2, 1998 for the specific purpose of
addressing this issue. The Board and the non-interested Directors have discussed
at length, both internally and with industry analysts and others, possible
approaches to the market discount issue, including the conversion to open-end
status.
While the Board and the non-interested Directors recognize the importance of
protecting the value of the shareholders' interest in the Fund, they do not
believe that the actions suggested by Opportunity Partners L.P. are appropriate
at this time. Based on analysis which they have already performed, the Directors
and the non-interested Directors believe for the reasons stated below that the
benefits to shareholders of the closed-end status of the Fund currently continue
to outweigh the advantages which an open-ended structure would procure.
Market discounts occur when the market value of a publicly traded closed-end
fund share is less than its underlying net asset value. Shares of the Fund, like
shares of many other closed-end funds, have been trading at significant market
discounts for quite some time. Because the discount is a market-wide and
cyclical phenomenon, driven largely by market forces, there are limits to what
can be done, although certain actions are often presented as potential remedies
to market discount. The market discount in the closed-end country fund industry
is influenced to a large extent by general economic conditions affecting the
underlying investments and reflects the general volatility of emerging markets.
Converting the Fund into an "open-end fund," commonly known as a mutual
fund, whether through a conversion of the Fund itself or by way of a merger of
the Fund into another open-end fund, would permit shareholders to redeem Shares
at net asset value upon request. Although open-ending the Fund would undoubtedly
eliminate the discount, the Board and the non-interested Directors believe that
the shareholders derive many benefits from the Fund's closed-end structure. This
structure allows BEA to concentrate on managing a stable pool of assets, without
the need to keep assets in low-yielding cash instruments or to liquidate assets,
sometimes at inopportune times, to meet redemption requests. The closed-end
structure also allows the investment managers to buy more illiquid holdings,
such as private equities, which can benefit Fund performance. The closed-end
structure is entirely consistent with the Fund's investment objective of
long-term capital appreciation and affords the opportunity to engage in private
equity investing to a greater extent than would be legally or practically
permissible in an open-end format. Moreover, up to 30% of the Fund's total
assets may be invested in illiquid equity securities, including securities of
private equity funds that invest primarily in the emerging markets. Private
equity investments may offer attractive opportunities to acquire at favorable
prices and on favorable terms securities that may benefit from the economic
restructuring in the emerging markets. The closed-end structure thus enables
shareholders to gain access to securities which are not represented in the
public markets, with the potential for higher returns.
Open-ending the Fund also would require the Board to consider whether and
how to spend the Fund's money to market the Fund's Shares, which would affect
the Fund's performance. If the Board decides not to spend the Fund's money on
marketing the Shares, redemptions could shrink the Fund's asset base to the
point where its expense ratio increases, simply because fixed expenses are
spread across a smaller asset base. For now, the Board and the non-interested
Directors continue to be guided by the principles upon which the Fund was
established, and which caused investors to buy the Fund in the first place.
Open-ending the Fund would fundamentally change its character in ways that the
Board and the non-interested Directors do not believe are in the best interests
of the shareholders at this time.
8
<PAGE>
Although the Board and the non-interested Directors will continue to assess
the merits of open-ending the Fund, there are some less drastic steps that the
Fund can take, and has taken, to reduce the discount. The Fund has made a
greater effort to increase the Fund's visibility in the investment community. In
this regard, the Fund's portfolio managers have been meeting with analysts and
institutional investors to ensure that the investment community has access to
important information about the Fund and its investments. The Fund is now also
publishing net asset values daily (instead of weekly) to give all shareholders
current and immediate valuation information. Daily net asset values are
available by calling the Fund at 1-800-293-1232 or by visiting the BEA Funds'
Website (www.beafunds.com). Management of BEA is expanding the Website to
include reasonably current portfolio information on-line. Finally, in October
1998, the Board approved a repurchase program by which the Fund will repurchase
its shares in the open market. The Fund may purchase up to 15% of its
outstanding common stock in this manner. The repurchase program is intended both
to provide additional liquidity to those shareholders that elect to sell their
shares and to enhance the net asset value of the Shares held by those
shareholders that maintain their investment. We believe these steps are likely
to increase potential investor demand generally for Shares of the Fund. Also, as
of December 18, 1998, the market discount of the Fund had declined to below 21%.
As summarized above, the Board and the non-interested Directors are working
in cooperation with BEA towards enhancing shareholder value and will continue to
study other steps towards reducing the discount. The Board and the
non-interested Directors do not believe that open-ending the Fund is in the
interest of the shareholders at this time and therefore urge shareholders to
vote AGAINST the shareholder proposal.
THE BOARD, INCLUDING THE NON-INTERESTED DIRECTORS, RECOMMENDS THAT THE
SHAREHOLDERS VOTE "AGAINST" THE SHAREHOLDER PROPOSAL.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING;
SHAREHOLDER PROPOSALS
The Board is not aware of any other matters that will come before the
Meeting. Should any other matter properly come before the Meeting, it is the
intention of the persons named in the accompanying Proxy to vote the Proxy in
accordance with their judgment on such matters.
Notice is hereby given that for a shareholder proposal to be considered for
inclusion in the Fund's proxy material relating to its 2000 Annual Meeting of
Shareholders, the shareholder proposal must be received by the Fund no later
than September 1, 1999.
The shareholder proposal, including any accompanying supporting statement,
may not exceed 500 words. A shareholder desiring to submit a proposal must be a
record or beneficial owner of Shares with a market value of $2,000, or 1% of the
Fund's Shares entitled to be voted on at the meeting and must have held such
Shares for at least one year. Further, the shareholder must continue to hold
such Shares through the date on which the meeting is held. Documentary support
regarding the foregoing must be provided along with the proposal. There are
additional requirements regarding proposals of shareholders, and a shareholder
contemplating submission of a proposal is referred to Rule 14a-8 promulgated
under the Securities Exchange Act of 1934.
Pursuant to the Bylaws of the Fund, at any annual meeting of the
shareholders, only such business will be conducted as has been properly brought
before the annual meeting.
9
<PAGE>
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO HAVE
THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is information with respect to persons who, to the knowledge
of the management of the Fund, owned beneficially more than 5% of the Fund's
outstanding shares as of December 21, 1998. The information is based on publicly
available Schedule 13D and 13G disclosures filed with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF OF PERCENT
TITLE OR CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------------ -------------------------------------------- ------------------------------- ---------
<S> <C> <C> <C>
Common Stock............ City of London Investment Group PLC Has sole power to vote and 10.66%
10 Eastcheap dispose of 534,360 shares.
London EC3M ILX
England
</TABLE>
REPORTS TO SHAREHOLDERS
The Fund sends unaudited semi-annual and audited annual reports to its
shareholders, including a list of investments held. THE FUND WILL FURNISH,
WITHOUT CHARGE, A COPY OF ITS MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, UPON
REQUEST TO THE FUND AT ONE CITICORP CENTER, 153 EAST 53RD STREET, NEW YORK, NEW
YORK 10022, TELEPHONE (1-800-293-1232). THESE REQUESTS WILL BE HONORED WITHIN
THREE BUSINESS DAYS OF RECEIPT.
10
<PAGE>
THE FIRST ISRAEL FUND, INC.
3917-PS-98
<PAGE>
PROXY
THE FIRST ISRAEL FUND, INC.
ONE CITICORP CENTER
153 EAST 53RD STREET, 57TH FLOOR
NEW YORK, NY 10022
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS.
The undersigned hereby appoints
Messrs. Michael A. Pignataro and Rocco A.
Del Guercio as Proxies, each with the power
to appoint his substitute, and hereby
authorizes them to represent and to vote, as
designated on the reverse side and in
accordance with their judgement on such
other matters as may properly come before
the meeting or any adjournments thereof, all
shares of The First Israel Fund, Inc. (the
"Fund") that the undersigned is entitled to
vote at the annual meeting of shareholders
on Tuesday, February 9, 1999, and at any
adjournments thereof.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IN PROPOSAL 1,
"FOR" PROPOSAL 2 AND "AGAINST" PROPOSAL 3.
PROPOSAL 1--ELECTION OF THE FOLLOWING NOMINEES AS DIRECTORS:
Nominee for Class I: Richard W. Watt (two-year term)
FOR WITHHELD
NOMINEE / / / / FROM NOMINEE
/ /
-----------------------------------------
FOR PERSON NOTED ABOVE
Nominees for Class II: Jonathan W. Lubell (three-year term)
Steven H. Rappaport, Jr. (three-year term)
WITHHELD
FOR ALL FROM ALL
NOMINEES / / / / NOMINEES
/ /
-----------------------------------------
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
<TABLE>
<S> <C> <C> <C>
PROPOSAL 2--TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT FOR AGAINST ABSTAIN
PUBLIC ACCOUNTANTS OF THE FUND FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1999: / / / / / /
PROPOSAL 3--TO APPROVE OR REJECT THE SHAREHOLDER PROPOSAL RECOMMENDING FOR AGAINST ABSTAIN
THAT THE FUND BE CONVERTED INTO AN OPEN-END INVESTMENT COMPANY. / / / / / /
</TABLE>
<PAGE>
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND
AGAINST PROPOSAL 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
<TABLE>
<S> <C> <C> <C>
Signature:______________________ Date:___________ Signature:______________________ Date:___________
</TABLE>
