<PAGE>
(R)
The First Australia
Fund, Inc.
- - -------------------------------------------------------------------
Semi-Annual Report
April 30, 1995
Highlights
-------------------------------------------
- Corporate earnings growth of 16%
anticipated for 1995.
- Outlook positive for Australian mining
companies.
- Australian equity market begins to recover
from significant correction.
<PAGE>
LETTER TO SHAREHOLDERS
June 8, 1995
Dear Shareholder,
We are pleased to present the report for The First Australia Fund, Inc. for
the six months ended April 30, 1995, prepared by the Investment Manager,
EquitiLink International Management Limited. An overview of the Australian
economy and financial markets is also included.
In the latest quarter, the Net Asset Value (NAV) of the Fund increased by
2.4%. In share price terms, over the quarter the Fund returned 4.5%. This
reflects a recovery in international financial markets and the emergence of the
Australian stock market from a significant twelve month correction. The extent
of the correction during 1994 and early 1995 is illustrated by the Fund's
performance over the six months to April 30, 1995. Over this period, the NAV
declined by 8.8%, while the share price eased by 2.8% assuming reinvestment of
dividends and distributions.
Through most of 1994 and early 1995 the Australian stock market was hampered
by rising interest rates. As 1995 unfolds, the prospects for markets are
improving; interest rate momentum appears to have peaked and inflation remains
modest. Expected corporate earnings growth of 16% in 1995 and 13% in 1996 should
support the Australian market which is trading on a P/E of approximately 12.5
for 1995 and 11.0 for 1996 (June year end). The Australian equity market is
expected to continue the more recent trend of stronger performance through 1995.
A semi-annual distribution of US$1.04 per share was paid in January 1995.
This distribution consisted of US10.3 cents per share from ordinary income,
payable in cash, and a US93.7 cents per share stock dividend (representing
US39.9 cents per share of short-term capital gains and US53.8 cents per share
of
long-term capital gains). This distribution reflected the Investment Manager's
decision to realize part of the capital gains which were achieved in the
Australian stock market prior to February 1994.
Today, the Board of Directors declared a semi-annual distribution of US12
cents paid out of net investment income.
Dividend Reinvestment and Cash Purchase Plan
If you have not yet done so, we invite you to consider joining the Fund's
Dividend Reinvestment and Cash Purchase Plan to automatically reinvest your
dividends in shares of the Fund's common stock. It is an attractive and cost
effective method of increasing one's investment in the Fund. If the market price
equals or exceeds the NAV on the payment date, participants in the Plan will
receive new shares issued by the Fund at a discount of up to 5% from the market
price. If the market price is less than the NAV on the payment date,
participants will receive shares purchased at market price.
A brochure containing information and an authorization form can be obtained
by contacting State Street Bank and Trust Company, PO Box 8200, Boston, MA
02266-2200, or by telephone at 1-800-451-6788.
If you wish to participate and your shares are held in your own name, simply
complete and mail the enrollment form in the back of the brochure or call State
Street Bank and Trust Company at the toll-free number and enroll by telephone.
If your shares are held in the name of a brokerage firm, bank or other nominee,
you should instruct your nominee to participate on your behalf. If your nominee
is unable to participate on your behalf, you should request it to re-register
your shares in your own name which will enable you to participate in the Plan.
Advantages of participation in the Plan include:
1
<PAGE>
<PAGE>
- Lower costs--You will build holdings in the Fund automatically, at
reduced or no brokerage cost.
- Convenience--You will receive a detailed account statement from State
Street Bank, your Plan Agent, showing total dividends and distributions,
date of investment, shares acquired and price per share, as well as the
total shares of record held by you and by the Plan Agent for you.
- Safety--As long as you participate in the Plan, State Street Bank, as
your Plan Agent, will hold the shares it has acquired for you in
safekeeping, in non-certificated form. This convenience provides added
protection against loss, theft or inadvertent destruction of
certificates.
Toll Free Information
Information on The First Australia Fund, Inc. is available on a recorded
message from a toll-free number in the United States. The message includes
weekly updates of share price, NAV, and details of recent distributions and
announcements by the Directors. The number is 1-800-323-9995 (outside New York)
and is toll-free for calls made from within the United States.
Yours sincerely,
Sir Roden Cutler Brian M. Sherman
Chairman President
REPORT BY THE INVESTMENT MANAGER
NAV Performance
The Fund's Net Asset Value (NAV) increased by 2.4% over the quarter ended
April 30, 1995. Over the past six months, NAV declined by 8.8% assuming
reinvestment of dividends and distributions.
Distribution
Today, the Board of Directors declared a semi-annual distribution of US12
cents paid out of net investment income. A semi-annual distribution of US$1.04
per share was paid in January 1995. This distribution consisted of US10.3 cents
per share from ordinary income, payable in cash, and a US93.7 cents per share
stock dividend (representing US39.9 cents per share of short-term capital gains
and US53.8 cents per share of long-term capital gains). This distribution
reflected the Investment Manager's decision to realize part of the capital gains
which were achieved in the Australian stock market prior to February 1994.
Share Price Performance
In share price terms, the Fund returned 4.5% over the quarter, and -2.8% over
the past six months, assuming reinvestment of dividends and distributions.
2
<PAGE>
<PAGE>
Quality of the Portfolio
The quality of the portfolio remains high, with 57.4% of the stocks by value
being included in the Australian Stock Exchange's Fifty Leaders Index and the
remainder in selected growth stocks. The Fund's strategy focuses on individual
stock characteristics rather than market sector themes.
Portfolio Composition
The following chart summarizes the composition of the Fund's portfolio,
expressed as a percentage of total investments. A high equity exposure has been
maintained throughout the April quarter. Resource stocks which comprise some 33%
of the Australian Stock Exchange's All Ordinaries Index, continue to be
substantially overweighted in the portfolio.
[CHART TO COME]
Selected Equity Holdings
The following notes highlight the Fund's top ten holdings at April 30, 1995.
Broken Hill Proprietary Company Limited (BHP) 12.7% of total assets
BHP is Australia's largest corporation and one of the world's largest
resource companies. It has a broad spread of high quality assets, financial
strength and growth potential from new projects. Group sales exceed A$17 billion
from three main operating divisions: steel, petroleum and minerals. BHP has a
number of new projects which are likely to contribute to strong growth. The
company provides excellent leverage to Asia-Pacific growth through its extensive
exports to, and operations within, the region.
News Corporation Limited 7.8% of total assets
News Corporation is the most geographically diverse media/entertainment group
in the world. Divisions cover newspapers, magazines, printing, book publishing,
movie production and satellite, cable and free-to-air television. News recently
agreed with MCI to create a worldwide joint venture to develop network
infrastructures covering telephone, information and entertainment services.
National Australia Bank Limited 7.3% of total assets
NAB is Australia's largest bank, as measured by both total assets and
profits. It combines superior management, balance sheet strength and a cost of
funds advantage. NAB's offshore operations in New Zealand and the United Kingdom
promise solid future profit growth. The Bank's recent offer for Michigan
National Bank should provide further strategic diversification through entry
into the U.S. market.
3
<PAGE>
<PAGE>
Western Mining Corporation Holdings Limited 3.4% of total assets
Western Mining Corporation is a world class diversified mining company with
interests in nickel, alumina, aluminium, copper and uranium, oil and gas, and
gold. The company has embarked on its most significant expansion phase since the
late 1960s. Capital expenditure on planned and potential developments through
to
2000 totals A$5 billion. The expansion of its alumina interests by acquiring a
40% stake in Alcoa's world-wide bauxite and alumina business should prove
strategically opportune at this point in the metals cycle.
Fletcher Challenge Limited 3.3% of total assets
Fletcher Challenge is New Zealand's second largest corporation, with
activities also in Australia, Canada, Brazil and Chile, providing exposure to
pulp, paper, wood products, oil and gas and building materials. It is listed on
the Australian Stock Exchange.
Brambles Industries Limited 3.2% of total assets
Brambles is a diversified transport group involved in pallet pool management,
equipment hire, waste disposal and security operations. The Company has
diversified into Europe and North America from its dominant position in the
Australian market. In 1994, 37% of pre-tax earnings arose from activities in
Europe.
Savage Resources Limited 3.1% of total assets
Savage is a strongly growing resource company with a 49% interest in a major
copper/gold project in Queensland. The project is likely to develop into a
large, low cost open-cut mine in 1997, with the potential to become a premier
base metal producer. In addition, Savage has an expanding coal operation in the
Hunter Valley region of Australia's east coast. The company has a strong balance
sheet. The purchase of the Tennessee (USA) zinc assets of Union Miniere in 1994
appears to be paying off. Stronger zinc prices together with operational
improvements have led to a turnaround in profits.
Woodside Petroleum Limited 2.9% of total assets
Woodside is a major participant and operator of the giant North West Shelf
Gas Project--Australia's largest energy resource development. The gas project
consists primarily of a domestic gas operation supplying natural gas to Western
Australia, a liquefied natural gas (LNG) operation supplying Japan, and the
production of condensate. LNG production is expected to increase to seven
million tonnes per year in 1995. New oil and condensate projects will also boost
petroleum production this year.
Northern Broken Hill Peko Limited 2.6% of total assets
North is a diversified resource company with interests in iron-ore, gold,
uranium, copper and woodchips. Earnings growth should be boosted by the new
Kanowna Belle and North Parkes mines together with the likely development of
Lake Cowal and Alumbrera projects. The company is highly leveraged to a recovery
in the Japanese economy, with 60% of sales revenue coming from Japan.
Westpac Banking Corp. 2.3% of total assets
Westpac is Australia's second largest bank in terms of profits. The bank
holds some 19% of all Australian banking assets and 19% of housing loans in
Australia. Westpac reorganized its corporate structure over the past three years
and has concentrated its activities on Australian retail banking. The bank's
balance sheet is now very strong.
4
<PAGE>
<PAGE>
REVIEW AND OUTLOOK FOR THE AUSTRALIAN
FINANCIAL MARKETS
Economy
Economic activity in Australia peaked in the second half of 1994. Monetary
policy tightening has had a significant effect on consumer and business
confidence. Housing sector indicators and consumption spending are softening.
Employment growth has been very strong, but leading indicators, such as overtime
and job advertisements, point to a slowdown over the course of the next few
months. Business expectation surveys are also softer. Price pressures remain
well contained, with underlying inflation at an annual rate of 1.9% and headline
inflation of 3.9%.
Stock Market
The Australian equity market emerged from the 1994 correction with a stronger
performance in the April 1995 quarter. Corporate earnings have generally been
ahead of expectations. With inflation in check and a tighter domestic fiscal
policy, interest rates are at, or close to their peak for this cycle. These
conditions should enable the equity market to continue to strengthen. In most
cases, profitability is being driven by strong sales volumes rather than by
gross margin expansion. Real unit labor costs have been kept well under control.
The Fund retains a high exposure to resource stocks, in order to benefit
from the expected earnings growth from expanding production and firmer commodity
prices. Strong world economic growth, which characterized 1994, has slowed
somewhat into 1995, enabling a relaxation of tight monetary conditions. Looking
ahead, such action should see continuing increases in demand for industrial raw
materials, particularly in Asia. With supply not growing as fast, these
conditions should be positive for Australian mining companies.
Currency
Stronger commodity prices underpinned the Australian dollar in February and
the early part of March. However, concerns over the size of the Australian
current account deficit saw the currency weaken in April. Over the six months
to
the end of April, the Australian dollar depreciated by 2% against the U.S.
dollar, trading at US$0.7275, at the end of the period. On the date of this
report it was trading at US$0.7208.
Fixed Income
Increasing evidence that economic growth is moderating and that monetary
policy is on hold, encouraged Australian ten-year Government bonds to move lower
over the past three months. Yields have declined from around 10.4% at the end
of
January to 9.7% at the end of April. As evidence mounts in the period ahead that
economic growth is continuing at a slower pace, we expect continuing firm bond
market conditions. Indeed, the market made further gains in May with the Federal
Government announcing a projected Budget surplus for fiscal 1996.
EquitiLink International Management Limited
5
<PAGE>
<PAGE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA FUND, INC.
Portfolio of Investments
April 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
- - ---------------------------------------------------------
Value
Shares Description (US$)
- - ---------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--94.9%
Common Stocks and Equivalents--94.2%
Diversified Industries--17.0%
1,810,031 AAPC, Limited................ $ 961,263
100,000 Ausmelt Limited*............. 254,625
2,391,033 Australian National
Industries Limited......... 2,504,847
4,867,000 Black Hill Minerals
Limited*................... 35,407
557,400 Black Hill Minerals Limited,
8% Redeemable Convertible
Cumulative Preferred
Stock...................... 10,138
519,050 Brambles Industries
Limited.................... 5,120,378
1,111,580 CSR Limited.................. 3,558,169
545,195 Eltin Limited................ 1,130,394
1,972,300 Fletcher Challenge Limited... 5,294,592
475,000 Keycorp Limited.............. 1,174,913
2,000,000 Mallina Holdings Limited*.... 363,750
1,200,000 Multistack International
Limited.................... 942,840
1,031,000 QNI Limited.................. 1,387,598
1,000,000 River House Limited*......... 80,025
600,000# River House Limited*
Warrants expiring Oct. '97
@ A$1.00................... 6,984
2,003,300 Shomega Limited.............. 2,098,658
445,012 Simsmetal Limited............ 2,162,626
------------
27,087,207
------------
Natural Resources--42.6%
1,417,143 Broken Hill Proprietary
Company Limited............ 20,619,437
1,104,500 Burmine Limited.............. 2,290,043
2,574,500 Coplex Resources N.L.*....... 280,942
514,900# Coplex Resources N.L.*
Warrants expiring July '95
@ A$0.65................... 1,873
1,040,000 Cumnock Coal Limited*........ 756,600
250,000# Cumnock Coal Limited*
Warrants expiring Mar. '96
@ A$2.20................... 3,638
5,996,000 Dome Resources NL Limited*... 872,418
1,025,555 Energy Development Limited... 1,492,183
6,653,027 Equatorial Mining NL
Limited*................... $ 1,161,619
485,410 Forrestania Gold Limited..... 882,840
137,000 Freeport-McMoRan Copper &
Gold Inc................... 2,910,292
275,740 Mayne Nickless Limited....... 1,301,900
1,675,800 Nord Pacific Limited*........ 1,024,082
1,710,322 Northern Broken Hill Peko
Limited.................... 4,155,827
3,980,500 Oil Search Limited........... 2,866,857
2,237,900 Pancontinental Mining
Limited*................... 2,995,654
2,852,000 Pasminco Limited*............ 3,070,749
1,372,900 Placer Pacific Limited....... 3,415,845
2,101,188 QCT Resources Limited........ 2,094,202
7,772,768 Savage Resources Limited*.... 5,089,222
1,275,530 Union Gold Mining Limited*... 510,372
961,250 Western Mining Corporation
Holdings Limited........... 5,440,628
1,146,000 Woodside Petroleum Limited... 4,685,480
------------
67,922,703
------------
Property Related--2.8%
4,000,000 Citistate Corporation*....... 1,629,601
4,000,000 Northern Hotel Unit Trust
Limited(D)................. 2,910,001
------------
4,539,602
------------
Services--31.8%
786,771 Australian Gas Light
Limited.................... 2,575,693
3,000,000 Australian Topmaking Services
Limited*................... 1,396,800
2,250,000 Bellara Medical Product
Limited*................... 229,163
1,436,400 Environmental Recovery
Service
Limited.................... 553,840
627,308 F. H. Faulding Co. Limited... 3,012,020
479,105 Guiness Peat Group Limited
(New)*..................... 153,362
4,791,050 Guinness Peat Group
Limited*................... 2,091,294
1,624,742 Hydromet Corporation
Limited.................... 1,442,040
1,369,146 National Australia Bank
Limited.................... 11,853,043
1,792,081 News Corporation Limited..... 8,708,979
896,040 News Corporation Limited
Limited Voting Preferred
Stock...................... 3,956,847
9,437,800 Pact Resources NL Limited*... 892,580
1,250,000 Pioneer International
Limited.................... 3,037,313
680,800 Polartechnics Limited*....... 792,451
879,100 Seven Network Limited........ 2,142,477
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------
Value
Shares Description (US$)
- - ---------------------------------------------------------
<C> <S> <C>
Services--(cont'd)
2,607 Southern Cross Broadcasting
Limited.................... $ 6,828
2,305,000 Spectrum Network Systems
Limited*................... 1,073,208
703,493 St. George Bank Limited...... 3,121,927
1,000,000 Westpac Banking Corp......... 3,695,701
------------
50,735,566
------------
Total common stocks and
equivalents
(cost $144,953,349).......... 150,285,078
------------
Principal
Amount
(000) Corporate Bond--0.7%
- - ----------
Australia Topmaking Services
Limited
A$ 2,500 7.15%, 12/31/99
(cost $1,915,122)............ 1,200,375
------------
Total long-term investments
(cost US$146,868,471)........ 151,485,453
------------
SHORT-TERM INVESTMENT--0.2%
Repurchase Agreement--0.2%
US$ 304 Repurchase Agreement, State
Street Bank & Trust
Company, 4.00% dated
4/28/95, due 5/1/95 in the
amount of $304,101 (cost
$304,000; collateralized by
$320,000 U.S. Treasury
Note, 5.125% due 6/30/98;
value including accrued
interest-US$319,580)....... 304,000
------------
Total Investments--95.1%
(cost US$147,172,471; Note
3)......................... 151,789,453
Other assets in excess of
liabilities--4.9%............ 7,809,236
------------
Net Assets--100%............. $159,598,689
------------
------------
</TABLE>
- - ------------------
<TABLE>
<C> <S>
# Expressed in number of shares into which position
can be
exercised or converted.
* Non-income producing security.
(D) Fair valued security.
</TABLE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA FUND, INC.
Statement of Assets and Liabilities
April 30, 1995
(Unaudited)
- - ----------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (cost
$147,172,471)........................ $151,789,453
Foreign currency, at value (cost
$10,553,151)......................... 10,426,881
Cash................................... 210
Dividends and interest receivable...... 730,524
Other assets........................... 20,314
------------
Total assets....................... 162,967,382
------------
Liabilities
Payable for investments purchased...... 3,079,676
Accrued expenses and other
liabilities.......................... 174,332
Investment management fee payable...... 108,578
Administration fee payable............. 6,107
------------
Total liabilities.................. 3,368,693
------------
Net Assets $159,598,689
------------
------------
Net assets were comprised of:
Common stock, $.01 par value......... $ 167,432
Paid-in capital in excess of par..... 149,213,631
------------
149,381,063
Undistributed net investment
income............................... 1,343,239
Accumulated net realized gains on
investments.......................... 2,096,638
Net unrealized appreciation on
investments.......................... 3,575,329
Accumulated net realized and
unrealized foreign exchange
gains.............................. 3,202,420
------------
Net assets........................... $159,598,689
------------
------------
Net asset value per share:
($159,598,689 / 16,743,156 shares of
common stock issued and
outstanding)......................... $9.53
------------
------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
7
<PAGE>
<PAGE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA FUND, INC.
Statement of Operations
Six months ended April 30, 1995
(Unaudited)
- - ----------------------------------------------------------
<TABLE>
<S> <C>
Net Investment Income
Income
Dividends (net of foreign withholding
taxes of $75,091)................... $ 2,629,544
Interest (net of foreign withholding
taxes of $2,422).................... 413,374
------------
Total income........................ 3,042,918
------------
Expenses
Investment management fee............. 711,039
Custodian's fees and expenses......... 136,000
Reports to shareholders............... 95,000
Independent accountant's fees and
expenses.............................. 57,000
Administration fee.................... 40,090
Directors' fees and expenses.......... 40,000
Legal fees and expenses............... 30,000
Transfer agent's fees and expenses.... 16,000
Insurance expense..................... 4,000
Miscellaneous......................... 6,240
------------
Total operating expenses.............. 1,135,369
------------
Net investment income before excise
tax................................... 1,907,549
Excise tax............................ 9,672
------------
Net investment income................... 1,897,877
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currencies
Net realized gain on investment
transactions.......................... 2,062,385
Net realized loss on written option
transactions.......................... (696,310)
Net change in unrealized appreciation on
investments........................... (17,262,953)
Net change in unrealized appreciation on
written options....................... 3,353
------------
Net loss on investments................. (15,893,525)
------------
Net decrease in net assets resulting
from operations before net foreign
exchange losses....................... (13,995,648)
Net realized and unrealized foreign
exchange losses....................... (4,056,104)
------------
Net Decrease In Net Assets
Resulting From Operations............... $(18,051,752)
------------
------------
</TABLE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA FUND, INC.
Statement of Changes
in Net Assets
(Unaudited)
- - ----------------------------------------------------------
<TABLE>
<CAPTION>
Six months
ended Year ended
Increase (Decrease) April 30, October 31,
in Net Assets 1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment income... $ 1,897,877 $ 2,130,888
Net realized gain on
investment and written
options
transactions.......... 1,366,075 15,710,004
Net change in unrealized
depreciation on
investments and
written options....... (17,259,600) (7,008,431)
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations before net
foreign exchange gains
(losses).............. (13,995,648) 10,832,461
Net realized and
unrealized foreign
exchange gains
(losses).............. (4,056,104) 10,405,302
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ (18,051,752) 21,237,763
Dividends to shareholders
from net investment
income.................. (1,637,105) (1,282,560)
Distributions to
shareholders from net
realized capital gains.. (14,893,100) (1,505,043)
Net proceeds from rights
offering of Fund
shares.................. 220,812 57,172,242
Net asset value of shares
issued to shareholders
in connection with
distribution paid in
stock................... 7,107,913 --
------------ ------------
Total increase
(decrease).............. (27,253,232) 75,622,402
Net Assets
Beginning of period....... 186,851,921 111,229,519
------------ ------------
End of period............. $159,598,689 $186,851,921
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
8
<PAGE>
<PAGE>
- - ----------------------------------------------------------
THE FIRST AUSTRALIA FUND, INC.
Notes to Financial Statements
(Unaudited)
- - ----------------------------------------------------------
The First Australia Fund, Inc. (the ``Fund'') was incorporated in Maryland
on
September 30, 1985 as a closed-end, diversified investment company. The Fund's
principal investment objective is long-term capital appreciation through
investment primarily in equity securities of Australian companies listed on
Australian stock exchanges. The Fund's secondary investment objective is current
income. It is expected that normally at least 65% of the Fund's total assets
will be invested in equity securities listed on Australian stock exchanges and
that current income will be derived primarily from dividends and interest on
Australian corporate and governmental securities. The ability of issuers of debt
securities, including foreign currency balances on deposit with the Fund's
Australian subcustodian bank, held by the Fund to meet their obligations may be
affected by economic or political developments in a specific industry or region.
Note 1. Accounting The following is a summary of
Policies significant accounting policies
followed by the Fund in the preparation of its
financial statements.
Basis of Presentation: The financial statements of the Fund are prepared in
accordance with United States generally accepted accounting principles using the
United States dollar as both the functional and reporting currency.
Security Valuation: Investments are stated at value. Investments for which
market quotations are readily available are valued at the last reported sales
prices. If there is no sales price on the date of valuation, then investments
are valued at the most recently available sales price or at fair value as
determined in good faith by or under the direction of the Fund's Board of
Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian take possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the collateral is
valued on a daily basis to determine its adequacy. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Fund may be delayed or limited.
Foreign Currency Translation: Australian dollar (``A$'') amounts are translated
into United States dollars on the following basis:
(i) market value of investment securities, other assets and liabilities
at
the exchange rates at the end of the fiscal period;
(ii) purchases and sales of investment securities, income and expenses at
the rate of exchange prevailing on the respective dates of such
transactions.
The Fund isolates that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of securities held at fiscal period end.
Similarly, the Fund isolates the effect of changes in foreign exchange rates
from the fluctuations arising from changes in the market prices of portfolio
securities sold during the fiscal period.
Net realized and unrealized foreign exchange losses of $4,056,104 includes
realized foreign exchange gains and losses from sales and maturities of
portfolio securities, sales of foreign currencies, currency gains or losses
realized between the trade and settlement dates on securities transactions, the
difference between the amounts of dividends, interest and foreign withholding
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid and changes in unrealized foreign exchange gains and
losses in the value of portfolio securities and other assets and liabilities
arising as a result of changes in the exchange rate.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin, including
unanticipated movements in the value of the foreign currency relative to the
U.S. dollar.
The exchange rate for the Australian dollar at April 30, 1995 was US$.7275
to
A$1.00.
Option Writing: The Fund may either purchase or write options in order to hedge
against adverse market movements with respect to securities which the Fund
currently owns or intends to purchase. When the Fund purchases an option, it
pays a premium and an amount equal to that premium is recorded as an investment.
When the Fund writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The investment or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Fund realizes a gain or loss to
9
<PAGE>
<PAGE>
the extent of the premium received or paid. If an option is exercised, the
premium received or paid is an adjustment to the proceeds from the sale or the
cost of the purchase in determining whether the Fund has realized a gain or
loss. The difference between the premium and the amount received or paid on
effecting a closing purchase or sale transaction is also treated as a realized
gain or loss. Gain or loss on purchased options is included in net realized gain
(loss) on investment transactions. Gain or loss on written options is presented
separately as net realized gain (loss) on written option transactions.
The Fund, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Fund bears the market risk of an unfavorable change in the price of the security
or currency underlying the written option. The Fund, as purchaser of an option,
bears the risk of the potential inability of the counterparties to meet the
terms of their contracts.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses from
security and currency transactions are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
Dividends and Distributions: It is the Fund's current policy to pay dividends
semi-annually from accumulated net investment income. The Fund will also declare
and pay distributions annually from net realized gains on investment
transactions and net realized foreign exchange gains, if any. Dividends and
distributions are recorded on the ex-dividend date. Income distributions and
capital and currency gains distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currencies.
Taxes: For federal income and excise tax purposes, substantially all of the
Fund's transactions are accounted for using the Australian dollar as the
functional currency. Accordingly, only realized currency gains and losses
resulting from the repatriation of Australian dollars into US dollars are
recognized for tax purposes.
No provision has been made for United States income taxes because it is the
Fund's policy to continue to meet the requirements of the United States Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to shareholders. Australia imposes a withholding tax of
15% on certain dividends and 10% on certain interest.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with AICPA Statement of Position
93-2: Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
During the period ended April 30, 1995, the Fund increased undistributed net
investment income by $21,760, increased accumulated net realized gains on
investments by $538,449 and decreased accumulated realized and unrealized
foreign exchange gains by $560,209. Net investment income, net realized gains
and net assets were not affected by this change.
Note 2. Agreements The Fund has agreements
with EquitiLink International Management Limited
(the ``Investment Manager''), EquitiLink Australia Limited (the ``Investment
Adviser''), The Prudential Insurance Company of America (the ``Consultant''),
and Prudential Mutual Fund Management, Inc. (the ``Administrator''). The
Investment Manager and the Investment Adviser are affiliated companies; the
Administrator is an indirect wholly-owned subsidiary of the Consultant.
The Investment Manager makes investment decisions on behalf of the Fund on
the basis of recommendations and information furnished to it by the Investment
Adviser and the Consultant, including the selection of and the placement of
orders with brokers and dealers to execute portfolio transactions on behalf of
the Fund.
The management agreement provides the Investment Manager with a fee, computed
weekly and payable monthly, at the following annual rates: 1.10% of the Fund's
average weekly net assets up to $50 million, 0.90% of such assets between $50
million and $100 million and 0.70% of such assets in excess of $100 million. The
administration agreement provides the Administrator with a fee at the annual
rate of the greater of $25,000 or 0.05% of the Fund's average weekly net assets.
The Investment Manager pays fees to the Investment Adviser and the Consultant
for their services rendered. The Investment Manager informed the Fund that it
paid $182,902 to the Investment Adviser and $56,187 to the Consultant during the
six months ended April 30, 1995.
Note 3. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for
10
<PAGE>
<PAGE>
the six months ended April 30, 1995 aggregated $22,289,512 and $21,201,619,
respectively.
Transactions in options written during the six months ended April 30, 1995
were as follows:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received
--------- --------
<S> <C> <C>
Options outstanding at October 31,
1994............................... 200 $ 11,492
Options expired...................... (200) (11,492)
--------- --------
Options outstanding at April 30,
1995............................... 0 0
--------- --------
--------- --------
</TABLE>
The United States federal income tax basis of the Fund's investments at April
30, 1995 was $150,051,133 and accordingly, net unrealized appreciation for
United States federal income tax purposes was $1,738,320 (gross unrealized
appreciation--$17,413,950; gross unrealized depreciation--$15,675,630).
Note 4. Capital There are 20 million shares of
$.01 par value common stock authorized. Of the
16,743,156 shares issued and outstanding at April 30, 1995, the Investment
Manager owned 37,026 shares. The Fund issued 848,706 shares in connection with
a
cash dividend paid in stock. In addition, during the fiscal year ended October
31, 1994 the Fund issued 6,113,250 shares of common stock (net proceeds
$57,172,242) in connection with a rights offering of the Fund's shares.
Note 5. Transactions During the fiscal period ended
with Affiliates April 30, 1995, Prudential
Securities Incorporated, an affiliate of the
Administrator, earned approximately $2,000 in brokerage commissions as a result
of executing transactions in portfolio securities on behalf of the Fund.
Note 6. Dividend On June 8, 1995 the Board of
and Distribution Directors of the Fund declared
a dividend of $.12 per share from net investment
income payable on July 14, 1995 to shareholders of record on June 30, 1995.
Note 7.
Quarterly Data
<TABLE>
<CAPTION>
Net
realized and Net increase
unrealized (decrease) in net
gains
(losses) on assets
Net investment
investments resulting from
Quarterly Total income and
foreign currency operations
period income Amount Per share Amount
Per share Amount Per share
- - ------------------ ---------- --------------------------
- - ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
<C> <C> <C>
November 1, 1992
to
January 31, 1993 $ 317,470 $ 34,169 $ .01 $ 893,318
$ .15 $ 927,487 $ .16
February 1, 1993
to
April 30, 1993 435,484 136,907 .02 8,967,916
1.49 9,104,823 1.51
May 1, 1993 to
July 31, 1993 463,837 155,830 .03 8,750,965
1.45 8,906,795 1.48
August 1, 1993 to
October 31, 1993 1,050,562 682,648 .09 10,147,322
1.00 10,829,970 1.09
November 1, 1993
to
January 31, 1994 778,997 346,855 .02 24,763,134
1.99 25,109,989 2.01
February 1, 1994
to
April 30, 1994 998,199 524,438 .04 (15,731,983)
(1.26) (15,207,545) (1.22)
May 1, 1994 to
July 31, 1994 1,053,151 458,480 .03 6,832,032
.55 7,290,512 .58
August 1, 1994 to
October 31, 1994 1,468,642 801,115 .05 3,243,692
.28 4,044,807 .33
November 1, 1994
to
January 31, 1995 1,685,643 1,095,111 .07 (22,899,566)
(1.41) (21,804,455) (1.34)
February 1, 1995
to
April 30, 1995 1,357,275 802,766 .05 2,949,937
.18 3,752,703 .23
<CAPTION>
Share price on
Dividends the American
Quarterly and distributions Stock Exchange
period Amount Per share High Low
- - ------------------ -------------------------- ----------------
<S> <C> <C> <C> <C>
November 1, 1992
to
January 31, 1993 $ 559,786 $ .09 $ 8 1/4 $ 7 1/4
February 1, 1993
to
April 30, 1993 -- -- 10 3/8 8
May 1, 1993 to
July 31, 1993 421,294 .07 10 1/4 9
August 1, 1993 to
October 31, 1993 -- -- 10 1/2 9 1/8
November 1, 1993
to
January 31, 1994 880,310 .09 14 10
February 1, 1994
to
April 30, 1994 -- -- 14 3/8 10 1/2
May 1, 1994 to
July 31, 1994 1,907,293 .12 10 7/8 10 1/8
August 1, 1994 to
October 31, 1994 -- -- 11 3/8 10
November 1, 1994
to
January 31, 1995 16,530,205 1.04 9 1/4 8 1/4
February 1, 1995
to
April 30, 1995 -- -- 8 15/16 7 3/8
</TABLE>
11
<PAGE>
<PAGE>
- - --------------------------------------------------------------------------------
THE FIRST AUSTRALIA FUND, INC.
Financial Highlights
(Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six
months
ended
Years ended October 31,
April 30,
- - ---------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1995 1994
1993 1992 1991 1990
--------- --------
- - -------- ------- ------- -------
<S> <C> <C>
<C> <C> <C> <C>
Net asset value, beginning of period........... $ 11.76 $ 11.37
$ 8.46 $ 11.03 $ 9.14 $ 10.56
--------- --------
- - -------- ------- ------- -------
Net investment income.......................... 0.12 0.14
0.15 0.19 0.30 0.47
Net realized and unrealized gain (loss) on
investments
and foreign currencies....................... (1.23) 1.84(D)
4.09 (2.50) 2.02 (1.27)
--------- --------
- - -------- ------- ------- -------
Total from investment operations............. (1.11) 1.98
4.24 (2.31) 2.32 (0.80)
--------- --------
- - -------- ------- ------- -------
Dividends from net investment income........... (0.10) (0.10)
(0.16) (0.26) (0.42) (0.59)
Distributions from net capital and currency
gains........................................ (0.94) (0.11)
-- -- (0.01) (0.03)
--------- --------
- - -------- ------- ------- -------
Total dividends and distributions............ (1.04) (0.21)
(0.16) (0.26) (0.43) (0.62)
--------- --------
- - -------- ------- ------- -------
Capital reduction with respect to issuance of
Fund shares.................................. (.08) (1.38)
(1.17) -- -- --
--------- --------
- - -------- ------- ------- -------
Net asset value, end of period................. $ 9.53 $ 11.76
$ 11.37 $ 8.46 $ 11.03 $ 9.14
--------- --------
- - -------- ------- ------- -------
--------- --------
- - -------- ------- ------- -------
Market price per share, end of period.......... $ 8.75 $ 10.13
$ 10.38 $ 7.75 $ 9.75 $ 7.38
--------- --------
- - -------- ------- ------- -------
--------- --------
- - -------- ------- ------- -------
TOTAL INVESTMENT RETURN BASED ON#:
Market value................................... (2.76)% (0.56)%
36.39% (18.24)% 39.66% (10.98)%
Net asset value................................ (8.82)% 5.39%
36.93% (21.11)% 27.48% (8.61)%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........ 1.44%* 1.45%
1.87% 1.90% 2.25% 2.14%
Ratio of net investment income to average net
assets....................................... 2.38%* 1.42%
1.50% 1.86% 3.11% 4.68%
Portfolio turnover rate........................ 14% 46%
108% 39% 82% 68%
Net assets, end of period (000 omitted)........ $ 159,599 $186,852
$111,230 $50,946 $66,374 $55,042
Average net assets (000 omitted)............... $ 160,535 $149,801
$ 67,341 $61,645 $57,762 $60,147
</TABLE>
<TABLE>
<C> <S>
- - ---------------
* Annualized.
# Total investment return is calculated assuming a purchase of common stock
on the first day and a sale
on the last day of each period reported. Dividends and distributions are
assumed, for purposes of this
calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Total
investment return does not reflect brokerage commissions. Total returns
for periods of less than a full
year are not annualized.
(D) Due to the timing and magnitude of the rights offering, the amount
reported herein is not proportional
to the aggregate value reported in the Statement of Changes in Net Assets
and Note 7 to the financial
statements.
NOTE: Contained above is operating performance for a share of common stock
outstanding, total investment
return, ratios to average net assets and other supplemental data for each
of the periods indicated.
This information has been determined based upon financial information
provided in the financial
statements and market value data for the Fund's shares.
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
<PAGE>
OTHER INFORMATION
Dividend Reinvestment and Cash Purchase Plan. Shareholders may elect to have
all distributions of dividends and capital gains automatically reinvested in
Fund shares pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan
(the Plan). Shareholders who do not participate in the Plan will receive all
distributions in cash paid by check in United States dollars mailed directly to
the shareholders of record (or if the shares are held in street or other nominee
name, then to the nominee) by the custodian, as dividend disbursing agent.
Shareholders who wish to participate in the Plan should contact the Fund at
(800) 451-6788.
State Street Bank & Trust Co. (the Plan Agent) serves as agent for the
shareholders in administering the Plan. If the Fund declares a dividend or
capital gains distribution payable either in cash or in shares of the Fund and
the market price of shares on the payment date equals or exceeds the net asset
value, the Fund will issue new shares to Plan participants at the higher of (i)
net asset value on the payment date or (ii) market value on the payment date
less a discount not to exceed 5% of the market price of the shares on the
payment date. If the market price is lower than net asset value on the payment
date, then Plan participants will receive shares purchased on the American or
Pacific Stock Exchanges, or otherwise on the open market. If the market price
exceeds net asset value before the Plan Agent has completed its purchases, the
average purchase price may exceed net asset value resulting in fewer shares
being acquired than if the Fund had issued new shares. All reinvestments are in
full and fractional shares, carried to three decimal places.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage commissions
charged with respect to shares issued directly by the Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. The automatic reinvestment of
dividends and distributions will not relieve participants of any federal income
tax that may be payable on such dividends and distributions.
The Plan also allows participants to make optional cash investments in Fund
shares through the Plan Agent on the open market.
The Fund reserves the right to amend or terminate the Plan upon 90 days'
written notice to shareholders of the Fund.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Shares and cash for
fractional Shares.
All correspondence concerning the Plan should be directed to the Plan Agent,
State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200.
13
<PAGE>
<PAGE>
Supplemental Proxy Information
The Annual Meeting of Shareholders of The First Australia Fund, Inc. (Fund)
was held on Thursday, March 16, 1995 at the offices of Prudential Securities
Incorporated, One Seaport Plaza, New York, New York. The meeting was held for
the following purposes:
<TABLE>
<C> <S>
To elect the following four Directors to serve as Class I Directors for
a three-year term
(1) expiring in 1998:
- Anthony E. Aaronson
- Roger C. Maddock
- John A. Calvert-Jones
- John T. Sheehy
Directors whose term of office continued beyond this meeting are as
follows:
Sir Roden Cutler, David L. Elsum, Rt. Hon. Malcolm Fraser, Laurence S.
Freedman, Michael R.
Horsburgh, Harry A. Jacobs, Jr., Howard A. Knight, Richard H. McCoy,
William J. Potter, and
Brian M. Sherman.
(2) To ratify the selection of Price Waterhouse LLP as independent public
accountants of the
(3) Fund for the fiscal year ending October 31, 1995;
To transact such other business as may properly come before the meeting
or any adjournment
thereof.
</TABLE>
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Votes Votes
Director/Auditor Votes for against withheld
Abstentions
----------------------- --------------- ------------ -------------
-------------
<C> <S> <C> <C> <C>
<C>
(1) Anthony E. Aaronson 8,670,646.0431 -- 257,597.8664
--
Roger C. Maddock 8,671,335.1305 -- 256,908.7790
--
John A. Calvert-Jones 8,670,828.3383 -- 257,415.5712
--
John T. Sheehy 8,671,646.0431 -- 256,597.8864
--
(2) Price Waterhouse LLP 8,774,030.2561 52,282.4429 --
101,931.2105
(3) There was no other business voted upon at the Annual Meeting of
Shareholders.
</TABLE>
14
<PAGE>
<PAGE>
Directors
Anthony E. Aaronson
John A. Calvert-Jones
Sir Roden Cutler
David Lindsay Elsum
Rt. Hon. Malcolm Fraser
Laurence S. Freedman
Michael R. Horsburgh
Harry A. Jacobs, Jr.
Howard A. Knight
Roger C. Maddock
Richard H. McCoy
William J. Potter
John T. Sheehy
Brian M. Sherman
Officers
Brian M. Sherman, President
Laurence S. Freedman, Vice President
David Manor, Treasurer
Roy M. Randall, Secretary
Eugene S. Stark, Assistant Treasurer
Kenneth T. Kozlowski, Assistant Treasurer
Allan S. Mostoff, Assistant Secretary
Margaret A. Bancroft, Assistant Secretary
The accompanying financial statements as of April 30, 1995 were not audited and
accordingly, no opinion is expressed on them.
This report, including the financial statements herein, is transmitted to the
shareholders of The First Australia Fund, Inc. for their information. This is
not a prospectus, circular or representation intended for use in the purchase
of
shares of the Fund or any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, shares of its
common stock in the open market.
<PAGE>
<PAGE>
- - -------------------------------------------------------------------
- - -------------------------------------------------------------------
Investment Manager
EquitiLink International Management Limited
Union House, Union Street
St. Helier, Jersey, Channel Islands
Investment Adviser
EquitiLink Australia Limited
44 Pitt Street
Sydney, NSW 2000, Australia
Consultant
The Prudential Insurance Company of America
Prudential Plaza
Newark, New Jersey 07101
Administrator
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, New York 10292
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
Legal Counsel
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
Freehill, Hollingdale and Page
19-29 Martin Place
Sydney, NSW 2000, Australia
One Seaport Plaza
New York, NY 10292
for information call toll-free (800) 451-6788
collect (212) 214-5572
or for information regarding net asset value
(800) 451-6788
Shares of The First Australia Fund, Inc. are traded on the
American Stock Exchange and on the Pacific Stock Exchange under the
symbol ``IAF''. Information about the Fund's net asset value and
market price is published weekly in Barron's and in the Monday
edition of The Wall Street Journal.
For a weekly update of the Fund's net asset value
and share price, or to receive more information on the Fund, call
toll-free:
1-800-323-9995
318652104
<PAGE>
