FIRST ISRAEL FUND INC, N-30D, 2000-05-31

FIRST ISRAEL FUND INC
N-30D, 2000-05-31

Previous: ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II, N-4, 2000-05-31

Next: PHOENIX HEATHCARE CORP, SC 13D, 2000-05-31

<PAGE>

The First Israel
Fund, Inc.
.........................
SEMI-ANNUAL REPORT
MARCH 31, 2000

[PHOTO]
<PAGE>

CONTENTS
------------------------------------------------------------------------------
Letter to Shareholders ...................................................1

Portfolio Summary ........................................................5

Schedule of Investments ..................................................6

Statement of Assets and Liabilities ......................................9

Statement of Operations .................................................10

Statement of Changes in Net Assets ......................................11

Statement of Cash Flows .................................................12

Financial Highlights ....................................................13

Notes to Financial Statements ...........................................14

Results of Annual Meeting of Shareholders ...............................20

Description of InvestLink-SM- Program ...................................21

Recent Developments .....................................................24

PICTURED ON THE COVER IS THE BAHAI TEMPLE LOCATED IN ISRAEL'S THIRD LARGEST
CITY, HAIFA.
--------------------------------------------------------------------------------

<PAGE>
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
May 5, 2000

DEAR SHAREHOLDER:

I am writing to report on the activities of The First Israel Fund, Inc. (the
"Fund") for the six months ended March 31, 2000.

At March 31, 2000, total net assets of the Fund were approximately $89.5
million. The Fund's investments in securities listed and trading on the Tel
Aviv Stock Exchange ("TASE") were $59.5 million, with another $14.0 million
in the Israeli and Israel-related companies listed and trading in the United
States. Combined, these totaled $73.5 million, as compared to approximately
$66.7 million on September 30, 1999. The Fund also held investments valued at
approximately $14.0 million in unlisted securities, as compared to
approximately $8.9 million on September 30, 1999. In percentage terms, at
March 31, 2000, 82.17% of the Fund's net assets were invested in Israeli and
Israel-related companies, listed and trading on the TASE and in the United
States, and 15.68% in unlisted securities.

The Fund successfully completed its initial public offering on October 22, 1992
and began operations with a net asset value ("NAV") of $13.74 per share. At
March 31, 2000, NAV per share was $21.01 (net of dividends and distributions
paid of $1.87 per share), as compared to $17.18 at September 30, 1999. The
Fund's common stock closed on the New York Stock Exchange ("NYSE") on March 31,
2000 at $16.813 per share, representing a discount of 20.0% to the Fund's NAV.

According to its charter, the Fund's investment objective is long-term capital
appreciation via investment primarily in equity securities of Israeli companies.
These securities may be listed on the TASE or elsewhere, notably the NYSE and
NASDAQ. Up to 30% of the Fund's total assets may be invested in illiquid
securities, including securities of private equity funds that invest primarily
in the emerging markets.

PERFORMANCE: MUTED BY RISK AVOIDANCE

The Fund underperformed the broad Israeli equity market during the period,
returning 36.2%, compared to 62.8% for the benchmark Morgan Stanley Capital
International Israel Index (the "Index").*

While I am certainly disappointed at this underperformance, the choice before
me was to pursue excessive returns by embracing what I felt to be excessive
risks, or try to achieve acceptable returns by taking more rational,
acceptable risks. I chose the latter.

The excessive risks to which I refer are illustrated by two major events that
took place over the past six months.

One was a significant restructuring of the Index benchmark to include a much
heavier weighting in NASDAQ-listed technology stocks. Within this
restructuring, moreover, one such stock was weighted much more heavily than
others. While NASDAQ-listed Israeli companies did quite well until the global
sell-off that began in February 2000, I felt that several had become
significantly overvalued. As such, I elected not to expose the Fund's
investors to the potentially severe market risk of a major NASDAQ correction.

------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
------------------------------------------------------------------------------

Alternatively, I invested a portion of the portfolio in privately held,
venture-funded Israeli technology companies. As I have often noted, the ability
to participate early on in the growth of these companies is one of the major
advantages of the closed-end fund structure, one that has benefited our
investors since the Fund's inception. Because these are non-public investments,
furthermore, they are not exposed to the whims--or the extremes--of the general
investing public, which tends to greatly reduce market risk.

The other major event that impacted comparative returns in recent months was
the outperformance of the shares of a single Internet-related company, which
is a component of most broad Israeli equity indices. Speculative fervor drove
this stock to levels difficult to justify, even when viewed beside other
rapidly rising Internet names. Our analysis indicates that this one stock
accounted for three-quarters of the Israeli market's first-quarter return.

The Fund did not share in this appreciation because I considered the stock to
be hugely overvalued and, as a result, chose not to buy it. It is worth
noting in this context, incidentally, that the price of the stock has halved
in recent weeks. Looking ahead, I intend to adhere to the strategy that has
driven the Fund's performance over time, one that I will not abandon in order
to chase after the latest speculative high-flyer.

THE ISRAELI ECONOMY: SEVERAL STEPS FORWARD

Israel continues to benefit from an improving domestic economy and renewed
interest in emerging markets by the global investment community.

In early 2000, positive developments on the domestic front included:

- Inflation came in below expectations, falling 0.5% in February alone to an
annualized rate of 1.6%.

- The shekel was strong, appreciating about 4% against the dollar.

- Interest rates continued to decline under new Central Bank Governor David
Klein, falling around 80 basis points and bringing base rates down to an
annualized rate of 10.4%. With real interest rates in the 7.5% region and the
shekel surprisingly strong, there should be room for additional rate cuts
later this year.

- The peace process between Israel and its Palestinian and Syrian neighbors
moved ahead, albeit fitfully, which was favorable for the eventual
realization of the long-anticipated economic "peace dividend."

- Local mutual funds continued to gain from revived popular confidence in the
nation's near-term prospects, as over $2 billion in local assets flowed in.

In all, it appears that Israel is setting in place the pieces needed for a
lasting economic revival, one that should accrue to the benefit of investors
in the months and years to come.

------------------------------------------------------------------------------
2

<PAGE>

LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------

PORTFOLIO STRUCTURE: STRESSING UNAPPRECIATED VALUES

TOP 10 HOLDINGS, BY ISSUER*

<TABLE>
<CAPTION>
% OF
HOLDING SECTOR NET ASSETS
------- ------ ----------
<S> <C> <C>
1. Teva Pharma. Pharmaceuticals 6.5
2. Bezeq Telecommunications 5.9
3. Koor Industries Conglomerates 5.7
4. Bank Leumi Banking 5.0
5. Israel Chemicals Chemicals 4.4
6. Bank Hapoalim Banking 4.2
7. ECI Telecom. Telecommunications 4.1
8. IDB Holding Conglomerates 3.4
9. Polaris Fund II Inv. & Holding Cos. 3.3
10. Harel Insurance Insurance 2.6
---
Total 45.1
----
----
</TABLE>
-----------
* Company names and sector are abbreviations of those found in the chart on
page 5.

[CHART]

SECTOR ALLOCATION
(% of net assets)
<TABLE>
<S> <C>
Banking 10.36
Chemicals 5.60
Conglomerates 12.12
Financial Services 3.02
Food & Beverages 5.57
Industrial Technology 2.90
Insurance 4.15
Inv. & Holding Cos. 7.75
Mortgage Banking 6.20
Pharmaceuticals 8.84
Telecom. 10.40
Venture Capital 8.96
Cash & Other Assets 2.15
Other* 11.98
</TABLE>
-----------
* Other includes sectors below 2.00% of net assets.

Over the coming months, I expect to see further improvements in Israel's
economy and, by extension, its equity market. Accordingly, my strategy in the
Fund is as follows:

- I generally continue to favor the securities of good-quality,
domestically-oriented companies. In this regard, I particularly like the
financial services sector (E.G., mortgage banks, which should do well in the
current environment of declining interest rates).

- I am maintaining a meaningful allocation to the nation's large conglomerates,
which offer the opportunity to buy a broad range of high-growth businesses in
one package. The market is not presently focused on these issues, which are
unreasonably cheap and offer good-to-excellent upside potential.

- I am investing in some of the telecommunications-related names that have been
ignored by investors who are chasing bigger, headline-grabbing
telecommunications names instead.

- I continue to commit a portion of the Fund's assets to private equities.
Lately, this asset class has attracted the attention of global investors
looking to get in on the ground floor with new Israeli technology concerns.
Private equities represent a rich vein of opportunity that most other
investment funds cannot access.

OUTLOOK: CAUTIOUS, BUT HOPEFUL

This is an exceedingly delicate time for Israel. While there is every reason
to expect the nation's economic recovery to continue, much hinges on external
events beyond its control. I am particularly concerned with the recent
performance of NASDAQ, on which many of Israel's major technology-related
companies are listed.

------------------------------------------------------------------------------
3

<PAGE>

LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------

As we saw over the first quarter of this year, the technology-heavy NASDAQ
can be extraordinarily volatile--both on the upside and downside--with wide
(and wild) swings becoming the norm.

Given that the technology sector has helped to power Israel's stock market in
recent months, any major dislocation in NASDAQ could deal a hard blow to the
confidence of investors in Israeli equities. It doesn't help matters that
recent changes to the benchmark effectively make NASDAQ a proxy for the
Israeli equity market.

I am monitoring this situation closely. Overall, I believe that my
conservative investment posture is what is needed to help shield our
investors from the worst of negative developments, while enabling them to
benefit from ongoing improvements in Israel's economic condition.

Respectfully,

/s/ Richard W. Watt

Richard W. Watt
President and Chief Investment Officer**

FROM CREDIT SUISSE ASSET MANAGEMENT, LLC:

We wish to remind shareholders whose shares are registered in their own name
that they automatically participate in the Fund's dividend reinvestment
program known as the Investlink-SM- Program (the "Program"). The Program 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 the Fund's
Transfer Agent for details about participating in the Program. The Program is
described on pages 21 through 23 of this report.

-------------------------------------------------------------------------------
* The Morgan Stanley Capital International Israel Index is an unmanaged index
(with no defined investment objective) of Israeli equities that includes
reinvestment of dividends, and is the exclusive property of Morgan Stanley
Capital International Inc.

** Richard W. Watt, who is a Managing Director of Credit Suisse Asset
Management, LLC ("CSAM"), is primarily responsible for management of the
Fund's assets. He joined CSAM on August 2, 1995. Mr. Watt was formerly
associated with Gartmore Investment Limited in London, where he was head of
emerging markets investments and research. Before joining Gartmore Investment
Limited in 1992, Mr. Watt was a Director of Kleinwort Benson International
Investments in London, where he was responsible for research, analysis and
trading of equities in Latin America and other regions. Mr. Watt is
President, Chief Investment Officer and a Director of the Fund. He also is
President, Chief Investment Officer and a Director of The Brazilian Equity
Fund, Inc., The Chile Fund, Inc., The Emerging Markets Infrastructure Fund,
Inc., The Emerging Markets Telecommunications Fund, Inc., The Latin America
Equity Fund, Inc. and The Latin America Investment Fund, Inc. Effective
November 9, 1999, Mr. Watt no longer serves as Chief Investment Officer to
The Brazilian Equity Fund, Inc., The Latin America Equity Fund, Inc. and The
Latin America Investment Fund, Inc.

-------------------------------------------------------------------------------
4

<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

PORTFOLIO SUMMARY - AS OF MARCH 31, 2000 (UNAUDITED)
-------------------------------------------------------------------------------

SECTOR ALLOCATION
-------------------------------------------------------------------------------
[GRAPH]

AS A PERCENT OF NET ASSETS
<TABLE>
<CAPTION>
3/31/00 9/30/99
<S> <C> <C>
Banking 10.36 9.11
Building Products 1.47 2.13
Chemicals 5.60 4.93
Conglomerates 12.13 19.95
Electronics/Electrical Equipment 1.87 2.47
Financial Services 3.02 3.25
Food & Beverages 5.56 6.59
Industrial Technology 2.90 2.59
Insurance 4.15 3.80
Investment & Holding Companies 7.75 5.54
Mortgage Banking 6.20 7.69
Pharmaceuticals 8.84 7.18
Telecommunications 10.40 8.96
Venture Capital 8.96 6.27
Other 8.64 8.12
Cash & Other Assets 2.15 1.42
</TABLE>

TOP 10 HOLDINGS, BY ISSUER
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percent of
Holding Sector Net Assets
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
1. Teva Pharmaceutical Industries Ltd. Pharmaceuticals 6.5
---------------------------------------------------------------------------------------------------------------------------
2. Bezeq Israeli Telecommunication Corporation Ltd. Telecommunications 5.9
---------------------------------------------------------------------------------------------------------------------------
3. Koor Industries Ltd. Conglomerates 5.7
---------------------------------------------------------------------------------------------------------------------------
4. Bank Leumi Le-Israel Ltd. Banking 5.0
---------------------------------------------------------------------------------------------------------------------------
5. Israel Chemicals Ltd. Chemicals 4.4
---------------------------------------------------------------------------------------------------------------------------
6. Bank Hapoalim Ltd. Banking 4.2
---------------------------------------------------------------------------------------------------------------------------
7. ECI Telecom Ltd. Telecommunications 4.1
---------------------------------------------------------------------------------------------------------------------------
8. IDB Holding Corporation Ltd. Conglomerates 3.4
---------------------------------------------------------------------------------------------------------------------------
9. Polaris Fund II LLC Investment &
Holding Companies 3.3
---------------------------------------------------------------------------------------------------------------------------
10. Harel Insurance Investments Ltd. Insurance 2.6
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

-------------------------------------------------------------------------------
5
<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

SCHEDULE OF INVESTMENTS - MARCH 31, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
-------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-97.85%
ISRAEL-95.74
-------------------------------------------------------
AEROSPACE/DEFENSE EQUIPMENT-1.24%
-------------------------------------------------------
Elbit Systems Ltd. ............ 72,913 $ 1,105,790
-----------

BANKING-10.36%
-------------------------------------------------------
Bank Hapoalim Ltd. ............ 1,172,858 3,735,644
Bank Leumi Le-Israel Ltd. ..... 1,949,800 4,515,674
United Mizrahi Bank Ltd. ...... 325,972 1,019,576
-----------
9,270,894
-----------

BUILDING PRODUCTS-1.47%
-------------------------------------------------------
Industrial Buildings
Corporation Ltd. ............. 276,896 430,280
Property & Building
Corporation Ltd. ............. 8,525 887,369
-----------
1,317,649
-----------

CHEMICALS-5.60%
-------------------------------------------------------
Dead Sea Bromine Ltd. ......... 157,846 1,049,529
Israel Chemicals Ltd. ......... 3,211,202 3,958,425
-----------
5,007,954
-----------

COMPUTER SOFTWARE-1.22%
-------------------------------------------------------
Formula Systems (1985) Ltd.+... 12,043 746,764
Tecnomatix Technologies Ltd.+.. 8,000 347,000
-----------
1,093,764
-----------

CONGLOMERATES-12.12%

Clal (Israel) Ltd. ............ 19,780 825,070
Discount Investment
Corporation .................. 6,000 334,695
Elco Holdings Ltd. ............ 2,431 21,615
IDB Development
Corporation Ltd. ............. 36,000 1,507,023
IDB Holding Corporation Ltd. .. 87,245 3,074,295
Koor Industries Ltd. .......... 54,666 5,077,801
-----------
10,840,499
-----------

ELECTRONICS/ELECTRICAL EQUIPMENT-1.87%
-------------------------------------------------------
Elco Industries Ltd. .......... 39,270 $ 344,233
Electra Consumer Products Ltd. 60,658 690,325
Electra (Israel) Ltd. ......... 8,642 634,871
-----------
1,669,429
-----------

ENERGY SERVICES-0.91%
-------------------------------------------------------
Delek Group Ltd. .............. 14,635 816,376
-----------

FINANCIAL SERVICES-3.02%
-------------------------------------------------------
F.I.B.I. Holdings Ltd. ........ 212,960 1,988,744
Gachelet Investments Ltd. ..... 9,819 714,002
-----------
2,702,746
-----------

FOOD & BEVERAGES-5.57%
-------------------------------------------------------
Elite Industries Ltd. ......... 120,570 1,204,041
Jaf-Ora Ltd. .................. 405,208 1,067,611
Mayanot Eden Ltd. ............. 90,610 861,965
Osem Investment Ltd. .......... 91,641 607,045
Supersol Ltd. ................. 369,828 1,238,716
-----------
4,979,378
-----------

FOOD - RETAIL-1.34%
-------------------------------------------------------
Blue Square-Israel Ltd. ADR ... 120,900 1,201,444
-----------

INDUSTRIAL TECHNOLOGY-2.90%
-------------------------------------------------------
Cubital, Ltd.*+ ............... 329,278 0
Orbotech Ltd.+ ................ 13,625 1,158,125
Scitex Corporation Ltd.+ ...... 92,500 1,439,531
-----------
2,597,656
-----------

INFORMATION TECHNOLOGY-0.44%
-------------------------------------------------------
Formula Ventures L.P.x++#...... 420,000 391,648
-----------

INSURANCE-4.15%
-------------------------------------------------------
Clal Insurance Enterprise
Holdings Ltd. ................ 76,300 1,375,665
Harel Insurance
Investments Ltd. ............. 30,629 2,341,616
-----------
3,717,281
-----------

-------------------------------------------------------------------------------
6

<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

SCHEDULE OF INVESTMENTS - MARCH 31, 2000 (UNAUDITED)(CONTINUED)
-------------------------------------------------------------------------------
<CAPTION>
No. of Value
Description Shares/Units (Note A)
<S> <C> <C>
-------------------------------------------------------
INVESTMENT & HOLDING COMPANIES-5.64%
-------------------------------------------------------
Makhteshim-Agan
Industries Ltd.+ ............. 880,991 $ 1,704,676
Oren Semiconductor , Inc.,
Series K*+ ................... 29,951 65,892
Oren Semiconductor, Inc.,
Series L*+ ................... 30,843 67,855
Oren Semiconductor, Inc.,
Series O, Units*+(1) ......... 46,035 101,277
Polaris Fund II LLCx++# ....... 750,000 2,909,746
The Renaissance Fund LDCx+ .... 60 197,911
-----------
5,047,357
-----------

METAL PRODUCTS-0.73%
-------------------------------------------------------
Caniel-Israel Can
Company Ltd.+ ................ 5,122 40,817
Klil Industries Ltd.,(Shares 5) 18,654 306,125
Ofer Development &
Investments Ltd.+ ............ 68,640 307,509
-----------
654,451
-----------

MORTGAGE BANKING-6.20%
-------------------------------------------------------
Discount Mortgage Bank Ltd. ... 12,908 1,018,985
Israel Discount Bank Ltd.+ .... 1,390,467 1,835,211
Mishkan-Hapoalim Mortgage
Bank Ltd.+ ................... 5,892 1,147,411
Tefahot Israel Mortgage Bank Ltd. 2,303 1,548,486
-----------
5,550,093
-----------

PHARMACEUTICALS-8.84%
-------------------------------------------------------
Agis Industries (1983) Ltd. ... 201,716 1,697,878
Peptor Ltd.*+ ................. 56,000 392,000
Teva Pharmaceutical
Industries Ltd. ADR .......... 156,020 5,821,496
-----------
7,911,374
-----------

REAL ESTATE & CONSTRUCTION-1.12%
-------------------------------------------------------
Azorim Investment Development &
Construction Company Ltd. .... 98,130 1,004,369
-----------

TELECOMMUNICATIONS-10.40%
-------------------------------------------------------
Bezeq Israeli Telecommunication
Corporation Ltd. ............. 969,401 $ 5,238,570
ECI Telecom Ltd. .............. 117,526 3,687,378
Geotek Communications, Inc.+ .. 18,595 521
Geotek Communications,
Inc., Convertible Preferred
Series M, 8.50%*+ ............ 100 0
Geotek Communications,
Inc., Convertible
Preferred Series N*+(2) ...... 595 0
Nexus Telecommunication
Systems Ltd.+ ................ 68,933 318,815
Terayon Communication
Systems, Inc.+ ............... 312 63,960
-----------
9,309,244
-----------

TEXTILES-0.58%
-------------------------------------------------------
Macpell Industries Ltd.+ ...... 116,079 516,857
-----------

TRADING COMPANIES-0.40%
-------------------------------------------------------
Rapac Electronics Ltd. ........ 34,806 355,378
-----------

VENTURE CAPITAL-8.96%
-------------------------------------------------------
ABS GE Capital
Giza Fund, L.P.x+# ........... 812,963 1,543,992
Advent Israel (Bermuda) L.P.x+ 1,682,293 2,105,224
Concord Ventures II Fund L.P.x+# 240,000 240,000
Giza GE Venture Fund III L.P.x+# 250,000 240,970
K.T. Concord Venture Fund
L.P.x+# ...................... 850,000 1,211,271
SVE Star Ventures
Enterprises No. II*+ ......... 5 2,235,738
Walden-Israel Ventures, L.Px. x 500,000 436,424
-----------
8,013,619
-----------

WOOD & PAPER PRODUCTS-0.66%
-------------------------------------------------------
American Israeli Paper Mills Ltd. 9,001 587,260
-----------
Total Israel (Cost $58,968,911) ........... 85,662,510
-----------

-------------------------------------------------------------------------------
7

<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

TOTAL INVESTMENTS-97.85%
(Cost $60,636,475) (Notes A,D) 87,554,125

CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES-2.15% ......... 1,923,353
-----------
NET ASSETS-100.00% $89,477,478
===========
</TABLE>
-------------------------------------------------------
* Not readily marketable security.
x Restricted security, not readily marketable (See Note F).
+ Security is non-income producing.
# As of March 31, 2000, the Fund committed to investing an additional
$436,721, $842,261, $580,000, $150,000, $1,760,000, $250,000 and
$1,000,000 of capital in ABS GE Capital Giza Fund, L.P., Emerging
Markets Ventures I L.P., Formula Ventures L.P., K.T. Concord Venture
Fund L.P., Concord Ventures Fund II L.P., Polaris Fund II LLC and
Giza GE Venture Fund III L.P., respectively.
(1) With an additional 46,035 warrants attached, expiring 12/31/49, with no
market value.
(2) With an additional 595 warrants attached, expiring 06/20/01, with no
market value.
ADR American Depositary Receipts.

-------------------------------------------------------------------------------
8 See accompanying notes to financial statements.

<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES - MARCH 31, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

ASSETS
--------------------------------------------------------------------------
<S> <C>
Investments, at value (Cost $60,636,475) (Note A)............................................. $87,554,125
Cash (Note A) ................................................................................ 2,083,699
Receivable for dividends ..................................................................... 367,620
Prepaid expenses ............................................................................. 21,310
-----------
Total Assets ................................................................................. 90,026,754
-----------
LIABILITIES
--------------------------------------------------------------------------
Payables:
Investment advisory fee (Note B) ........................................................... 261,243
Administration fees (Note B) ............................................................... 13,065
Other accrued expenses ..................................................................... 274,968
-----------
Total Liabilities ............................................................................ 549,276
-----------
NET ASSETS (applicable to 4,259,295 shares of common stock outstanding) (Note C) ............. $89,477,478
===========

NET ASSET VALUE PER SHARE ($89,477,478 DIVIDED BY 4,259,295) ................................. $21.01
===========

NET ASSETS CONSIST OF
--------------------------------------------------------------------------
Capital stock, $0.001 par value; 4,259,295 shares issued and outstanding
(100,000,000 shares authorized) ............................................................. $ 4,259
Paid-in capital .............................................................................. 56,344,872
Distribution in excess of net investment income .............................................. (2,394,423)
Accumulated net realized gain on investments and foreign currency related transactions ....... 8,605,537
Net unrealized appreciation in value of investments and translation of other
assets and liabilities denominated in foreign currency ...................................... 26,917,233
-----------
Net assets applicable to shares outstanding .................................................. $89,477,478
===========
</TABLE>

-------------------------------------------------------------------------------
See accompanying notes to financial statements. 9

<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

INVESTMENT INCOME
--------------------------------------------------------------------------
<S> <C>
Income (Note A):
Dividends ................................................................................. $ 1,663,838
Interest .................................................................................. 73,805
Less: Foreign taxes withheld .............................................................. (413,471)
-----------
Total Investment Income ................................................................... 1,324,172
-----------

Expenses:
Investment advisory fees (Note B) ......................................................... 603,920
Audit and legal fees ...................................................................... 108,265
Custodian fees ............................................................................ 103,263
Printing .................................................................................. 62,662
Administration fees (Note B) .............................................................. 55,747
Accounting fees ........................................................................... 50,960
Consulting fees ........................................................................... 48,690
Transfer agent fees ....................................................................... 27,049
Directors' fees ........................................................................... 25,314
NYSE listing fees ......................................................................... 8,107
Insurance ................................................................................. 4,604
Other ..................................................................................... 27,241
Israeli capital gains tax (Note A) ........................................................ 29,054
-----------
Total Expenses ............................................................................ 1,154,876
Less: Fee waivers (Note B) ................................................................ (107,266)
-----------
Net Expenses ............................................................................ 1,047,610
-----------
Net Investment Income ..................................................................... 276,562
-----------

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
--------------------------------------------------------------------------
Net realized gain/(loss) from:
Investments ............................................................................... 8,708,524
Foreign currency related transactions ..................................................... (78,449)
Net change in unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currency ............................. 15,495,392
-----------
Net realized and unrealized gain on investments and foreign currency related transactions .... 24,125,467
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................................... $24,402,029
===========
</TABLE>

-------------------------------------------------------------------------------
10 See accompanying notes to financial statements.

<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months For the Fiscal
Ended March 31, 2000 Year Ended
(unaudited) September 30, 1999
-------------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
--------------------------------------------------------------------
Operations:
Net investment income/(loss) ..................................................... $ 276,562 $ (94,515)
Net realized gain on investments and foreign currency
related transactions ............................................................ 8,630,075 4,585,962
Net change in unrealized appreciation/(depreciation) in value of investments
and translation of other assets and liabilities denominated in foreign currency . 15,495,392 11,510,531
----------- -----------
Net increase in net assets resulting from operations ........................... 24,402,029 16,001,978
----------- -----------

Dividends and distributions to shareholders:
Net investment income ............................................................ (1,799,488) (1,105,935)
Net realized gain on investments ................................................. (6,407,933) (5,958,298)
----------- -----------
Total dividends and distributions to shareholders .............................. (8,207,421) (7,064,233)
----------- -----------
Capital share transactions:
Cost of 204,100 and 548,900 shares repurchased, respectively (Note G) ............ (3,400,538) (7,627,236)
----------- -----------
Total increase in net assets ................................................... 12,794,070 1,310,509
----------- -----------

NET ASSETS
--------------------------------------------------------------------
Beginning of period ................................................................ 76,683,408 75,372,899
----------- -----------
End of period ...................................................................... $89,477,478 $76,683,408
=========== ===========
</TABLE>

-------------------------------------------------------------------------------
See accompanying notes to financial statements. 11

<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

STATEMENT OF CASH FLOWS - FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

<S> <C> <C>
INCREASE/(DECREASE) IN CASH FROM
------------------------------------------------------------------------------------
Operating Activities
Investment income received ....................................................... $ 1,043,426
Operating expenses paid .......................................................... ( 979,487)
------------
Net increase in cash from operating activities ..................................... $ 63,939

Investing Activities
Purchases of long-term portfolio investments ..................................... (6,284,587)
Proceeds from disposition and maturity of long-term portfolio investments ........ 18,471,867
------------
Net increase in cash from investing activities ..................................... 12,187,280

Financing Activities
Cash paid for shares repurchased .................................................. (3,400,538)
Cash dividends and distributions paid ............................................. (8,207,421)
------------
Net decrease in cash from financing activities ..................................... (11,607,959)
-------------
Net increase in cash ............................................................... 643,260
Cash at beginning of period ........................................................ 1,440,439
-------------
Cash at end of period (Note A) ..................................................... $ 2,083,699
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET INCREASE IN CASH FROM OPERATING ACTIVITIES
------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ............................... $ 24,402,029
Adjustments:
Increase in dividends and interest receivable .................................... $ (280,746)
Increase in accrued expenses ..................................................... 71,748
Increase in prepaid expenses ..................................................... (3,625)
Net realized and unrealized gain on investments and foreign currency
related transactions ............................................................ (24,125,467)
------------
Total adjustments .................................................................. (24,338,090)
-------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES...................................... $ 63,939
=============
</TABLE>

-------------------------------------------------------------------------------
12 See accompanying notes to financial statements.
<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 Period
For the Six October 29,
Months Ended 1992*
March 31, through
2000 For the Fiscal Years Ended September 30, September 30,
(unaudited) 1999 1998 1997 1996 1995 1994 1993
------------- ------- ------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
--------------------------------------------
Net asset value, beginning of period ...... $17.18 $15.04 $18.41 $13.10 $13.20 $11.74 $15.83 $13.74**
-------- ------- ------- ------- ------- ------- ------- -------
Net investment income/(loss) .............. 0.06+ (0.02)+ 0.07 0.35 (0.09) (0.10) (0.28) (0.07)
Net realized and unrealized gain/(loss) on
investments and foreign currency
related transactions .................... 5.49 3.21 (2.97) 6.20 (0.01) 1.56 (3.27) 2.16
-------- ------- ------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets
resulting from operations ............... 5.55 3.19 (2.90) 6.55 (0.10) 1.46 (3.55) 2.09
-------- ------- ------- ------- ------- ------- ------- -------
Dividends and distributions to shareholders:
Net investment income ................... (0.41) (0.21) -- -- -- -- -- --
Net realized gain on investments and
foreign currency related transactions . (1.46) (1.20) (0.47) (1.24) -- -- (0.43) --
In excess of net realized gains ......... -- -- -- -- -- -- (0.11) --
-------- ------- ------- ------- ------- ------- ------- -------
Total dividends and distributions
to shareholders ......................... (1.87) (1.41) (0.47) (1.24) -- -- (0.54) --
-------- ------- ------- ------- ------- ------- ------- -------
Anti-dilutive impact due to capital
shares repurchased ...................... 0.15 0.36 -- -- -- -- -- --
-------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ............ $21.01 $17.18 $15.04 $18.41 $13.10 $13.20 $11.74 $15.83
======== ======= ======= ======= ======= ======= ======= =======
Market value, end of period ............... $16.813 $14.000 $11.813 $14.938 $11.250 $12.000 $13.250 $17.375
======== ======= ======= ======= ======= ======= ======= =======
Total investment return (a) ............... 33.70% 32.61% (18.05) 44.36% (6.25)% (9.43)% (21.26)% 24.58%
======== ======= ======= ======= ======= ======= ======= =======

RATIOS/SUPPLEMENTAL DATA
-------------------------------------------
Net assets, end of period (000 omitted) ... $89,477 $76,683 $75,373 $92,298 $65,649 $66,150 $58,855 $79,274
Ratio of expenses to average net assets (c) 2.43%(b) 2.05% 2.06% 2.26% 2.23% 2.57% 2.64% 2.41%(b)
Ratio of expenses to average net assets,
excluding fee waivers ................... 2.68%(b) 2.30% 2.31% 2.30% -- -- -- --
Ratio of net investment income/(loss)
to average net assets ................... 0.64%(b) (0.12)% 0.42% 2.20% (0.68)% (0.91)% (2.08)% (0.50)%(b)
Portfolio turnover rate ................... 7.58% 18.65% 29.11% 16.98% 21.68% 22.17% 17.07% 34.80%
</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.
+ Based on average shares outstanding.
(a) Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of dividends and
distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment program. Total investment return does not reflect brokerage
commissions or initial underwriting discounts and has not been annualized.
(b) Annualized.
(c) Ratios reflect actual expenses incurred by the Fund. Amounts are net of fee
waivers.

--------------------------------------------------------------------------------
See accompanying notes to financial statements. 13
<PAGE>
--------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
The First Israel Fund, Inc. (the "Fund") was incorporated in Maryland on March
6, 1990 and commenced investment operations on October 29, 1992. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company. Significant
accounting policies are as follows:

MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States requires
management to make certain estimates and assumptions that may affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.

PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All 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 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. Short-term investments
having a maturity of 60 days or less are valued on the basis of amortized cost.
The Board of Directors has established general guidelines for calculating fair
value of not readily marketable securities. At March 31, 2000, the Fund held
15.68% of its net assets in securities valued in good faith by the Board of
Directors with an aggregate cost of $10,259,737 and fair value of $14,031,563.
The net asset value per share of the Fund is calculated on each business day,
with the exception of those days on which the New York Stock Exchange is closed.

CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. At March 31, 2000, the interest
rate was 5.375% which resets on a daily basis. Amounts on deposit are generally
available on the same business day.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments 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 U.S. federal income and excise taxes.

Pursuant to a ruling the Fund received from the Israeli tax authorities, the
Fund, subject to certain conditions, will not be subject to Israeli tax on
capital gains derived from the sale of securities listed on the Tel Aviv Stock
Exchange ("TASE"). Gains derived from 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

--------------------------------------------------------------------------------
14

<PAGE>
--------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
--------------------------------------------------------------------------------
appreciation on unlisted Israeli debt obligations. At March 31, 2000, the Fund
had no deferred Israeli capital gains taxes on unlisted Israeli debt
obligations.

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

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

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

The Fund does not isolate that portion of gains and losses in 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 U.S. federal
income tax reporting purposes.

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

Net realized foreign exchange losses represent foreign exchange gains and losses
from sales and maturities of debt securities, transactions in foreign currency
and 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.

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

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

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

Investments in Israel may involve certain considerations and risks not typically
associated with investments in the U.S., including the possibility of future
political and economic developments and the level of Israeli governmental
supervision and regulation of its securities markets. The Israeli securities
markets are substantially smaller, less liquid and more volatile

-------------------------------------------------------------------------------
15

<PAGE>
-------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
-------------------------------------------------------------------------------
than the major securities markets in the United States. Consequently,
acquisition and disposition of securities by the Fund may be inhibited.

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

In addition, the Board of Directors has approved to remove the limitation set
forth in the Fund's prospectus requiring that the portion of the Fund's
investments not invested in Israeli securities be invested in securities of
companies that are substantially involved in or with Israel ("Israeli-Related
Securities").

NOTE B. AGREEMENTS
--------------------------------------------------------------------------------
Credit Suisse Asset Management, LLC ("CSAM") serves as the Fund's investment
adviser with respect to all investments. As compensation for its advisory
services, CSAM receives from the Fund an annual fee, calculated weekly 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 Fund's average weekly net assets invested in unlisted
Israeli securities. The aggregate fee may not exceed an annual rate of 1.40% of
the Fund's average weekly net assets. CSAM has agreed to waive the advisory fee
previously payable to the Fund's investment sub-adviser. For the six months
ended March 31, 2000, CSAM earned $603,920 for advisory services, of which CSAM
waived $107,266. CSAM also provides certain administrative services to the Fund
and is reimbursed by the Fund for costs incurred on behalf of the Fund (up to
$20,000 per annum). For the six months ended March 31, 2000, CSAM was reimbursed
$8,265 for administrative services rendered to the Fund.

Analyst Exchange and Trading Services, Ltd. ("Analyst I.M.S.") serves as the
Fund's investment sub-adviser. Analyst I.M.S. is paid a fee, out of the advisory
fee payable to CSAM, computed weekly and paid quarterly at an annual rate of
0.30% of the Fund's average weekly net assets. In addition, CSAM pays Analyst
I.M.S., out of its advisory fee, a reimbursement for any Israeli Value Added
taxes (currently 17%) and $25,000 annually to cover expenses incurred in the
execution of sub-advisory services. For the six months ended March 31, 2000,
Analyst I.M.S. earned $164,028 for sub-advisory services.

--------------------------------------------------------------------------------
16

<PAGE>
--------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
--------------------------------------------------------------------------------
Analyst I.M.S. has certain commercial arrangements with banks and brokers in
Israel from which they receive a portion of the commission on trades executed in
Israel. For the six months ended March 31, 2000, such commissions amounted to
approximately $4,800.

Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's administrator.
The Fund pays BSFM a monthly fee that is computed weekly at an annual rate of
0.11% of the Fund's average weekly net assets. For the six months ended March
31, 2000, BSFM earned $47,482 for administrative services.

NOTE C. CAPITAL STOCK
--------------------------------------------------------------------------------
The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001, par value. Of the 4,259,295 shares outstanding at March 31, 2000, CSAM
owned 7,169 shares.

NOTE D. INVESTMENT IN SECURITIES
--------------------------------------------------------------------------------
For U.S. federal income tax purposes, the cost of securities owned at March 31,
2000 was $60,654,800. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currency) of
$26,899,325, was composed of gross appreciation of $32,299,033, for those
investments having an excess of value over cost and gross depreciation of
$5,399,708, for those investments having an excess of cost over value.

For the six months ended March 31, 2000, purchases and sales of securities,
other than short-term investments, were $6,296,001 and $16,313,019,
respectively.

NOTE E. CREDIT FACILITY
--------------------------------------------------------------------------------
Effective December 15, 1999, the Fund, together with other funds advised by
CSAM, established a $250 million committed, unsecured, line of credit facility
("Credit Facility") with Deutsche Bank AG as administrative agent, State Street
Bank and Trust Company as operations agent, Bank of Nova Scotia as syndication
agent as well as certain other lenders, for temporary and emergency purposes.
Under the terms of the Credit Facility, the Funds with access to the Credit
Facility pay an aggregate commitment fee at the rate of 0.075% per annum on the
average daily balance of the Credit Facility that is undisbursed and uncanceled
during the preceding quarter allocated among the participating funds in such
manner as is determined by the governing Boards of the various funds. In
addition, the participating funds will pay interest on borrowing at the Federal
Funds rate plus 0.50%. At March 31, 2000 and during the six months ended March
31, 2000, the Fund had no borrowings under the Credit Facility.
--------------------------------------------------------------------------------
17

<PAGE>
--------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
--------------------------------------------------------------------------------
NOTE F. 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 appropriate indications of value. The table
below shows the number of units/shares held, the acquisition dates, aggregate
cost, fair value as of March 31, 2000, per unit/share value of such securities
and percent of net assets which the securities comprise.

NUMBER FAIR PERCENT
OF UNITS/ VALUE AT VALUE PER OF NET
SECURITY SHARES ACQUISITION DATES COST 03/31/2000 UNIT/SHARE ASSETS
-------- --------- --------------------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
ABS GE Capital Giza Fund, L.P. ...... 662,963 02/03/98 - 08/02/99 $ 470,851 $1,259,110 $1.90 1.41
ABS GE Capital Giza Fund, L.P. ...... 150,000 11/17/99 150,000 284,882 1.90 0.32
Advent Israel (Bermuda) L.P. ........ 1,682,293 06/16/93 - 01/16/98 1,570,596 2,105,224 1.25 2.35
Concord Ventures II Fund L.P. ....... 240,000 3/29/00 244,076 240,000 1.00 0.27
Emerging Markets Ventures I L.P. .... 1,067,844 01/22/98 - 08/24/99 1,111,505 1,256,981 1.18 1.40
Emerging Markets Ventures I L.P. .... 183,217 10/01/99 183,217 215,669 1.18 0.24
Emerging Markets Ventures I L.P. .... 172,407 12/21/99 189,325 202,943 1.18 0.23
Emerging Markets Ventures I L.P. .... 183,517 03/24/00 183,517 216,022 1.18 0.24
Formula Ventures L.P. ............... 350,000 08/06/99 363,580 326,373 0.93 0.37
Formula Ventures L.P. ............... 70,000 03/23/00 70,000 65,275 0.93 0.07
Giza GE Venture Fund III L.P. ....... 50,000 1/31/00 50,000 48,194 0.96 0.05
Giza GE Venture Fund III L.P. ....... 75,000 3/24/00 75,000 72,291 0.96 0.08
Giza GE Venture Fund III L.P. ....... 125,000 3/23/00 125,000 120,485 0.96 0.14
K.T. Concord Venture Fund L.P. ...... 650,000 12/08/97-08/25/99 598,974 926,266 1.43 1.03
K.T. Concord Venture Fund L.P. ...... 150,000 10/12/99 146,366 213,754 1.43 0.24
K.T. Concord Venture Fund L.P. ...... 50,000 02/28/00 48,789 71,251 1.43 0.08
Polaris Fund II LLC ................. 625,000 10/31/96-06/09/99 548,397 2,424,788 3.88 2.71
Polaris Fund II LLC ................. 125,000 10/15/99 117,308 484,958 3.88 0.54
The Renaissance Fund LDC ............ 60 03/30/94-03/21/97 377,329 197,911 3,298.52 0.22
Walden-Israel Ventures, L.P. ........ 500,000 09/28/93-05/16/97 414,801 436,424 0.87 0.49
</TABLE>
The Fund may incur certain costs in connection with the disposition of the above
securities.

--------------------------------------------------------------------------------
18

<PAGE>
--------------------------------------------------------------------------------
THE FIRST ISRAEL FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
--------------------------------------------------------------------------------
NOTE G. SHARE REPURCHASE PROGRAM
--------------------------------------------------------------------------------
On October 21, 1998, the Fund announced that its Board of Directors has
authorized the repurchase by the Fund of up to 15% of the Fund's outstanding
common stock, for purposes of enhancing shareholder value. The Fund's Board has
authorized management of the Fund to repurchase such shares in open market
transactions at prevailing market prices from time to time and in a manner
consistent with the Fund continuing to seek to achieve its investment
objectives. The Board's actions were taken in light of the significant discounts
at which the Fund's shares were trading. It 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. The repurchase program is subject to review by the
Board of Directors of the Fund. From October 21, 1998 through September 30,
1999, the Fund repurchased 548,900 of its shares for a total cost of $7,627,236
at a weighted average discount of 18.29% from net asset value. Through September
30, 1999, the discount of individual repurchases ranged from 15.15% - 22.30%.
For the six months ended March 31, 2000, the Fund repurchased 204,100 of its
shares for a total cost of $3,400,538 at a weighted average discount of 15.96%
from net asset value. The discount of individual repurchases ranged from 12.51%
- 19.36%.

--------------------------------------------------------------------------------
19

<PAGE>

RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
-------------------------------------------------------------------------------

On January 27, 2000, the Annual Meeting of Shareholders of The First Israel
Fund, Inc. (the "Fund") was held and the following matters were voted upon:

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

<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
---------------- --------- -------- ---------
<S> <C> <C> <C>
Dr. Enrique R. Arzac 2,272,485 27,670 2,118,040
William W. Priest 2,271,957 28,198 2,118,040
</TABLE>

In addition to the directors re-elected at the meeting, George W. Landau,
Jonathan W. Lubell, Steven N. Rappaport and Richard W. Watt continue to
serve as directors of the Fund.

(2) To ratify the selection of PricewaterhouseCoopers LLP as independent
public accountants for the fiscal year ending September 30, 2000.

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--------- --------- -------- ---------
<S> <C> <C> <C>
2,257,869 28,351 15,936 2,116,039
</TABLE>

-------------------------------------------------------------------------------
20

<PAGE>

DESCRIPTION OF INVESTLINK-SM-* PROGRAM (UNAUDITED)
-------------------------------------------------------------------------------

The InvestLink-SM- Program is sponsored and administered by BankBoston, N.A.,
not by The First Israel Fund, Inc. (the "Fund"). BankBoston, N.A. will act as
program administrator (the "Program Administrator") of the InvestLink-SM-
Program (the "Program"). The purpose of the Program is to provide interested
investors with a simple and convenient way to invest funds and reinvest
dividends in shares of the Fund's common stock ("Shares") at prevailing
prices, with reduced brokerage commissions and fees.

An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction
will begin on the next day on which funds are invested. If a participant
selects the dividend reinvestment option, automatic investment of dividends
generally will begin with the next dividend payable after the Program
Administrator receives his enrollment form. Once in the Program, a person
will remain a participant until he terminates his participation or sells all
Shares held in his Program account, or his account is terminated by the
Program Administrator. A participant may change his investment options at any
time by requesting a new enrollment form and returning it to the Program
Administrator.

A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an
initial service charge which will be deducted from their initial cash
deposit. All optional cash deposit investments will be subject to a service
charge. Sales processed through the Program will have a service fee deducted
from the net proceeds, after brokerage commissions. In addition to the
transaction charges outlined above, participants will be assessed per share
processing fees (which include brokerage commissions.) Participants will not
be charged any fee for reinvesting dividends.

The number of Shares to be purchased for a participant depends on the amount
of his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of Company Common Stock in the open market. Such purchases will be
made by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be
allocated to participants as of the settlement date, which is usually three
business days from the the purchase date. In all cases, transaction
processing will occur within 30 days of the receipt of funds, except where
temporary curtailment or suspension of purchases is necessary to comply with
applicable provisions of the Federal Securities laws, or when unusual market
conditions make prudent investment impracticable. In the event the Program
Administrator is unable to purchase Shares within 30 days of the receipt of
funds, such funds will be returned to the participants.

The average price of all Shares purchased by the Program Administrator with
all funds received during the time period from two business days preceding
any investment date up to the second business day preceding the next
investment date shall be the price per share allocable to a participant in
connection with the Shares purchased for his account with his funds or
dividends received by the Program Administrator during such time period. The
average price of all Shares sold by the Program Administrator pursuant to
sell orders received during such time period shall be the price per share
allocable to a participant in connection with the Shares sold for his account
pursuant to his sell orders received by the Program Administrator during such
time period.

BankBoston, N.A., as Program Administrator, administers the Program for
participants, keeps records, sends statements of account to participants and
performs other duties relating to the Program. Each participant in the
Program will receive a statement of his account following each purchase of
Shares. The

-------------------------------------------------------------------------------
21

<PAGE>
DESCRIPTION OF INVESTLINK-SM-* PROGRAM (UNAUDITED) (CONTINUED)
-------------------------------------------------------------------------------

statements will also show the amount of dividends credited to such
participant's account (if applicable), as well as the fees paid by the
participant. In addition, each participant will receive copies of the Fund's
annual and semi-annual reports to shareholders, proxy statements and, if
applicable, dividend income information for tax reporting purposes.

If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date
on the basis of full and fractional Shares held in his account, and for all
other Shares of the Fund registered in his name. The Program Administrator
will send checks to the participants for the amounts of their dividends that
are not to be automatically reinvested at no cost to the participants.

Shares of the Fund purchased under the Program will be registered in the name
of the accounts of the respective participants. Unless requested, the Fund
will not issue to participants certificates for Shares of the Fund purchased
under the Program. The Program Administrator will hold the Shares in
book-entry form until a Program participant chooses to withdraw his Shares or
terminate his participation in the Program. The number of Shares purchased
for a participant's account under the Program will be shown on his statement
of account. This feature protects against loss, theft or destruction of stock
certificates.

A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a
participant's request, the Program Administrator will issue to such
participant certificates for the whole Shares of the Fund so withdrawn or, if
requested by the participant, sell the Shares for him and send him the
proceeds, less applicable brokerage commissions, fees, and transfer taxes, if
any. If a participant withdraws all full and fractional Shares in his Program
account, his participation in the Program will be terminated by the Program
Administrator. In no case will certificates for fractional Shares be issued.
The Program Administrator will convert any fractional Shares held by a
participant at the time of his withdrawal to cash.

Participation in any rights offering, dividend distribution or stock split
will be based upon both the Shares of the Fund registered in participants'
names and the Shares (including fractional Shares) credited to participants'
Program accounts. Any stock dividend or Shares resulting from stock splits
with respect to Shares of the Fund, both full and fractional, which
participants hold in their Program accounts and with respect to all Shares
registered in their names will be automatically credited to their accounts.

All Shares of the Fund (including any fractional share) credited to his
account under the Program will be voted as the participant directs. The
participants will be sent the proxy materials for the annual meetings of
shareholders. When a participant returns an executed proxy, all of such
Shares will be voted as indicated. A participant may also elect to vote his
Shares in person at the Shareholders' meeting.

A participant will receive tax information annually for his personal records
and to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.

The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However,
the Program Administrator will be liable for loss or damage due to error
caused by its negligence, bad faith or willful misconduct. Shares held in
custody by the Program Administrator are not subject to protection under the
Securities Investors Protection Act of 1970.

-------------------------------------------------------------------------------
22

<PAGE>
DESCRIPTION OF INVESTLINK-SM-* PROGRAM (UNAUDITED) (CONTINUED)
-------------------------------------------------------------------------------

The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.

While the Program Administrator hopes to continue the Program indefinitely,
the Program Administrator reserves the right to suspend or terminate the
Program at any time. It also reserves the right to make modifications to
the Program. Participants will be notified of any such suspension,
termination or modification in accordance with the terms and conditions
of the Program. The Program Administrator also reserves the right to
terminate any participant's participation in the Program at any time. Any
question of interpretation arising under the Program will be determined in
good faith by the Program Administrator and any such good faith determination
will be final.

Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or
bank account deductions must be at least $100.00, up to a maximum of
$100,000.00 annually. An interested investor may join the Program by reading
the Program description, completing and signing the enrollment form and
returning it to the Program Administrator. The enrollment form and
information relating to the Program (including the terms and conditions) may
be obtained by calling the Program Administrator at one of the following
telephone numbers: First Time Investors--(800) 969-3321; Current
Shareholders--(800) 730-6001. All correspondence regarding the Program should
be directed to: BankBoston, N.A., InvestLink Program, P.O. Box 8040, Boston,
MA 02266-8040.

-----------------------------------------------------------------------
* InvestLink is a service mark of Boston EquiServe Limited Partnership.

-------------------------------------------------------------------------------
23

<PAGE>

RECENT DEVELOPMENTS (UNAUDITED)
-------------------------------------------------------------------------------

Recently, the Securities and Exchange Commission (the "SEC") amended Rule
14a-4(c) under the Securities Exchange Act of 1934, as amended (the "1934
Act") which governs the Fund's use of discretionary proxy voting authority
with respect to shareholder proposals that are not being included in the
Fund's proxy solicitation material pursuant to Rule 14a-8 of the 1934 Act. In
light of these amendments, the Fund's Board of Directors reviewed the By-laws
of the Fund and made the following material changes: 1) the percentage of
ownership needed for stockholders to request a special meeting has been
increased from 25% to a majority of the outstanding capital stock of the Fund
entitled to vote at such meeting; 2) the advance notice requirements
applicable to stockholder proposals at annual meetings and for nominations by
stockholders for election to the Board of Directors have been revised to
reflect changes in Rule 14a-4(c); 3) the Board's ultimate authority
concerning the reimbursement of the expenses of solicitating proxies for the
election of Directors has been clarified; and 4) the power to amend the
By-laws is reserved to the Board of Directors. The Fund's By-laws are on file
with the SEC and are accessible through the SEC web site (www.sec.gov) or may
be obtained from the Secretary of the Fund upon request.

-------------------------------------------------------------------------------
24

<PAGE>

SUMMARY OF GENERAL INFORMATION (UNAUDITED)
-------------------------------------------------------------------------------

The FundThe First Israel Fund, Inc.is a closed-end, non-diversified
management investment company whose shares trade on the New York Stock
Exchange. Its investment objective is long-term capital appreciation through
investments primarily in equity securities of Israeli companies. The Fund is
managed and advised by Credit Suisse Asset Management, LLC ("CSAM"). CSAM is
a diversified asset manager, handling equity, balanced, fixed income,
international and derivative based accounts. Portfolios include international
and emerging market investments, common stocks, taxable and non-taxable
bonds, options, futures and venture capital. CSAM manages money for corporate
pension and profit-sharing funds, public pension funds, union funds,
endowments and other charitable institutions and private individuals. As of
March 31, 2000, CSAM-Americas managed approximately $74.0 billion in assets.

SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------

The market price is published in: THE NEW YORK TIMES (daily) under the
designation "FtIsrl" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "FstIsrael". The Fund's New York Stock Exchange
trading symbol is ISL. Weekly comparative net asset value (NAV) and market
price information about The First Israel Fund, Inc.'s shares are published
each Sunday in THE NEW YORK TIMES and each Monday in THE WALL STREET JOURNAL
and BARRON'S, as well as other newspapers, in a table called "Closed-End
Funds."

THE CSAM GROUP OF FUNDS
--------------------------------------------------------------------------------

LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.cefsource.com.

CLOSED-END FUNDS

SINGLE COUNTRY
The Brazilian Equity Fund, Inc. (BZL)
The Chile Fund, Inc. (CH)
The Indonesia Fund, Inc. (IF)
The Portugal Fund, Inc. (PGF)

MULTIPLE COUNTRY
The Emerging Markets Infrastructure Fund, Inc. (EMG)
The Emerging Markets Telecommunications Fund, Inc. (ETF)
The Latin America Equity Fund, Inc. (LAQ)
The Latin America Investment Fund, Inc. (LAM)

FIXED INCOME
Credit Suisse Asset Management Income Fund, Inc. (CIK)
Credit Suisse Asset Management Strategic Global Income Fund, Inc. (CGF)

-------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that The First Israel Fund, Inc. may from
time to time purchase shares of its capital stock in the open market.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

DIRECTORS AND CORPORATE OFFICERS
--------------------------------------------------------

Dr. Enrique R. Arzac Director

George W. Landau Director

Jonathan W. Lubell Director

Steven N. Rappaport Director

William W. Priest, Jr. Chairman of the Board of
Directors

Richard W. Watt President, Chief Investment
Officer and Director

Hal Liebes Senior Vice President

Michael A. Pignataro Chief Financial Officer and
Secretary

Rocco A. Del Guercio Vice President

Robert M. Rizza Treasurer

INVESTMENT ADVISER
--------------------------------------------------------

Credit Suisse Asset Management, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022

ADMINISTRATOR
--------------------------------------------------------

Bear Stearns Funds Management Inc.
575 Lexington Avenue
New York, NY 10022

CUSTODIAN
--------------------------------------------------------

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

SHAREHOLDER SERVICING AGENT
--------------------------------------------------------

BankBoston, N.A.
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105

INDEPENDENT ACCOUNTANTS
--------------------------------------------------------

PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103

LEGAL COUNSEL
--------------------------------------------------------

Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036

This report, including the financial statements
herein, is sent to the shareholders of the Fund for
their information. The financial information
included herein is taken from the records of the
Fund without examination by independent accountants
who do not express an opinion thereon. It is not a
prospectus, circular or representation intended for
use in the purchase or sale of shares of the Fund or
of any securities mentioned in this report. [LOGO]
--------------------------------------------------------------------------------
3917-SAR-00